Input Tax Credit (ITC): Section 16 Eligibility & Section 17(5) Blocked Credits

इनपुट टैक्स क्रेडिट (आईटीसी) एवं अपात्र क्रेडिट नियम

Comprehensive guide to Input Tax Credit under GST: the four statutory conditions of Section 16(2), reconciling GSTR-2B vs purchase register, 180-day payment rule under Section 16(2) proviso, and blocked credits under Section 17(5).

Written by: Author Profile

Direct Tax & CA Review Panel

Chartered Accountancy Review Panel • Senior Direct Tax Review Desk

Reviewed & Fact-Checked by: Technical Review Panel

Tax Law & Dispute Review Desk

Tax Litigation & Legal Review Panel • Tax Appeal & Procedure Review Desk

Published: 1st April 2026•Last Updated: 15th August 2026•Last Reviewed: 15th August 2026

Key Statutory Highlights (FY 2026-27)

Section 16(2) conditions: Possession of tax invoice, physical receipt of goods/services, tax actually paid by supplier, and return filed u/s 39.

Section 16(2)(aa): ITC can ONLY be claimed if invoice is reflected in recipient's auto-populated Form GSTR-2B.

180-day rule: If buyer fails to pay supplier within 180 days from invoice date, claimed ITC must be reversed with 18% p.a. interest.

Section 17(5) Blocked Credits: Motor vehicles (<13 seats), food/catering, health insurance (unless statutory mandatory), personal consumption, lost/stolen goods, and works contract for immovable property.

Who is Eligible & When Does it Apply?

Applicability #1

All regular GST registered businesses purchasing goods/services for business use.

Step-by-Step Procedure & Compliance Roadmap

Download Form GSTR-2B on 14th

Access the static auto-drafted ITC statement generated by the GST portal.

Reconcile with Purchase Register

Match vendor invoices by invoice number, date, taxable value, and tax amount.

Identify Ineligible & Blocked Credits

Filter out Section 17(5) blocked items (food, personal car repair, health insurance).

Claim Eligible ITC in Table 4 of GSTR-3B

Enter eligible credit under Table 4(A) and reverse ineligible credit under Table 4(B).

Mandatory Documents Checklist

Original Tax Invoices, Debit Notes, Bill of Entry (Imports), Payment bank records

Common Mistakes & Compliance Risks to Avoid

•Claiming ITC for invoices not appearing in GSTR-2B (triggers ASMT-10 notice).

•Not reversing ITC when vendor is unpaid after 180 days.

Frequently Asked Questions

Can I claim ITC on motor vehicle purchase for business travel?

No, under Section 17(5)(a), ITC on motor vehicles with seating capacity of up to 13 persons is blocked, unless used for transportation of goods, driving schools, or passenger transport business.

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Related Tax Knowledge

GST Return Filing (GSTR-3B)GST Notice Help (ASMT-10)

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🛡️ Educational Disclaimer: FinSetu India is an independent educational guidance and calculation platform. Content is published for general citizen awareness based on applicable laws as of FY 2026-27. We do not provide personalized legal/tax advice or file returns directly. Verify current applicable rules on official portals or consult a qualified Chartered Accountant / Tax Lawyer.