Document and Forms for Claiming ITC Under GST

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    Input Tax Credit

    Under GST, the concept of an input tax credit is not new. It is equivalent to refusing under the current taxation system, but GST’s rules are entirely different. Input credit allows you to deduct the tax you already paid on inputs when you pay the output tax.

    Documents For Claiming ITC Under GST

    Every applicant who wants to claim an ITC under GST must provide the following documents:

    • An invoice issued by the supplier in accordance with the GST law for the supply of goods and services, or both.
    • Suppose the taxable value or tax due specified in the invoice is less than the taxable value of tax payable on such supply of goods and services or both. In that case, the applicable ITC must be included in the recipient’s GSTR-2B.
    • Bill of Entry
    • An invoice that is issued under specific conditions, such as when a tax invoice would not be appropriate because the amount is less than Rs. 200 or when the GST law’s reverse charge is in effect.
    • According to the GST invoice requirements, an invoice or credit note must be issued by the input service distributor (ISD).
    • A bill of supply that is issued by the provider of goods and services, or both, in accordance with the GST invoicing regulations.

    When submitting form GSTR-2, the above relevant documents must be provided. They were all prepared in accordance with the GST invoicing rules. Due to the order for the demand raised due to fraud, intentional falsification, or suppression of facts, ITC cannot be claimed on the tax paid on goods or services or both.

    ITC Claim By a Banking Company or Financial Institution

    The GST regulations state that a person requesting ITC on such goods and services or both that are utilised in part for taxable supplies (including 0-rated products) and exempted supplies shall be permitted to request ITC for only taxable supplies (including 0-rated goods).

    Banking firms and other financial institutions can claim the ITC on deposits, loans, and advances per the aforementioned regulations, or they can claim only half of the monthly ITC allotment, with the remaining 50% expiring after that. Form GSTR-2 must be filled out in full with the necessary information to claim the 50% ITC.

    Forms Required to Claim ITC

    To claim Input Tax Credit (ITC) under GST, businesses must ensure that the claim is made through the correct return forms and in compliance with GST rules. The primary form used for claiming ITC is GSTR-3B, and the eligible credit must also match details available in GSTR-2B.

    Key scenarios and related form considerations:

    • Blocked Credits (Section 17(5): ITC on motor vehicles, food, club memberships, or personal expenses must be excluded while filing GSTR-3B. Claiming such credits can lead to penalties.
    • Non-Reconciliation with GSTR-2B: ITC must be claimed only if the supplier’s invoice appears in GSTR-2B. Filing GSTR-3B with unmatched or excess ITC leads to scrutiny or reversal.
    • Delay Beyond Time Limit: As per GST rules, ITC must be claimed on or before 30th November of the following financial year or before filing the annual return—whichever is earlier. Claims made after this via GSTR-3B are not permitted and may be rejected.
    • Mismatch Between GSTR-3B and GSTR-2A/2B: If ITC claimed in GSTR-3B does not match with GSTR-2A or 2B, tax authorities may issue notices. Reconciliation before filing is essential.

    BUSY Accounting Software automates GSTR-2B matching, flags blocked credits, and tracks claim deadlines—ensuring that all ITC entries in GSTR-3B are accurate and legally compliant.

    Steps For Claiming ITC In Special Circumstances

    In the following circumstances, certain different steps are to be followed for claiming or claiming the ITC:

    • The day before the day on which he becomes liable to pay tax as a normal taxpayer, an applicant transitioning from the composition scheme to a normal taxpayer under GST may claim ITC on the input held in stock, capital goods, semi-finished and finished goods in stock.
    • When an exempt product or service becomes a taxable supply, the applicant may claim ITC on the input in stock, capital goods, and semi-finished or finished products used for such supply.

    From the invoice date or other documentation indicating when the taxable person got the capital goods, the ITC on those items must be decreased by 5% per quarter or a part thereof.

    A registered person must submit form GST ITC-01 on the common portal within 15 days of becoming eligible to claim ITC under the conditions above. If the total ITC for CGST, SGST, and IGST exceeds Rs. 2 Lakh, the information supplied in form GST ITC -01 must be duly attested by a chartered accountant or a cost accountant.

    Common Mistakes to Avoid While Claiming ITC

    Many businesses lose out on legitimate Input Tax Credit or face penalties due to avoidable mistakes. Here are the most common errors and how to avoid them:

    • Claiming ITC on ineligible expenses like motor vehicles, food, and entertainment, which fall under blocked credits
    • Claiming ITC before supplier uploads invoice in GSTR-1, leading to mismatch in GSTR-2B
    • Not reconciling GSTR-2B and purchase register before filing GSTR-3B
    • Missing invoices or incorrect GSTINs in supplier data
    • Claiming ITC after the deadline, which makes it ineligible
    • Not paying vendors within 180 days, which requires ITC reversal
    • Incorrect bifurcation of CGST, SGST, and IGST amounts

    With BUSY Software, you can avoid these mistakes through real-time invoice validation, automatic reconciliation with GSTR-2B, and intelligent alerts that notify you of errors before return filing—helping you claim ITC with full confidence and accuracy.

    Conclusion

    ITC allows a taxpayer to deduct the tax paid on inputs when paying the output tax. To claim ITC under GST, the following documents must be provided: supplier’s invoice, bill of entry, credit note issued by the input service distributor (ISD), bill of supply issued by the supplier of goods or services. ITC cannot be claimed on tax paid due to fraud, intentional falsification, or suppression of facts.

    Banking companies and financial institutions can claim ITC on deposits, loans, and advances for taxable supplies (including 0-rated products), or 50% of monthly ITC allotment if used for taxable and exempt supplies. In special circumstances such as transitioning from the composition scheme, becoming liable to pay tax as a normal taxpayer, or when an exempt product or service becomes taxable, certain steps need to be followed to claim ITC.

    The ITC on capital goods needs to be decreased by 5% per quarter or part thereof, from the invoice date or documentation indicating when the taxable person got the capital goods. A registered person must submit Form GST ITC-01 within 15 days of becoming eligible to claim ITC, and if the total ITC exceeds Rs. 2 lakh, the information must be duly attested by a chartered accountant or cost accountant.

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