Tax & Compliance
GST Input Tax Credit (ITC) is the mechanism that allows a registered Indian business to reduce its output GST liability by the GST paid on inputs (purchases). Effectively, you only pay GST on the value-add at each stage, avoiding tax-on-tax.
Under India's GST regime, every registered business charges GST on outward supplies (sales) and pays GST on inward supplies (purchases). ITC is the credit you can claim for GST paid on purchases used in your business. To claim ITC, four conditions must be met: (1) you have a valid tax invoice, (2) the supplier has filed GSTR-1 reflecting your invoice, (3) the invoice appears in your GSTR-2B, (4) you have actually received the goods/services. ITC must be claimed in the same return period or by 30 November of the next financial year, whichever is earlier.
Industries served: SaaS, IT Services, Manufacturing, Retail, Hospitality, Logistics, Finance, Healthcare, Real Estate
Related terms: GSTR-2B, Reverse Charge Mechanism (RCM), OIDAR, GSTR-3B, GSTR-1, E-invoicing
Yes. Domestic SaaS (Zoho, Freshworks, GreytHR) charges 18% GST on invoice — direct ITC. Foreign SaaS (AWS US, Microsoft Ireland, Slack) requires reverse-charge mechanism: self-pay 18% IGST in GSTR-3B and claim same IGST as ITC in same return. Net cash effect zero.
GSTR-2B is the auto-drafted statement of ITC available to you each month, generated from invoices your suppliers filed in their GSTR-1. ITC is only claimable for invoices appearing in 2B. Reconcile your purchase register against 2B monthly — flag missing invoices and follow up with suppliers.
Blocked credits include: motor vehicles (except for transport business), food and beverages for employees, health insurance and travel for employees, club memberships, goods given as gifts, works contract for immovable property. Goods used for personal consumption also blocked.
For a typical 30-50 employee SME with ₹40 lakh/year on rent, SaaS, telecom, professional services, and supplies, GST paid is roughly ₹6-7 lakh/year (18% on ~₹38 lakh taxable). All of this is claimable as ITC if you maintain proper invoices and reconcile against GSTR-2B. This is real money back in your business.
Missing reverse-charge GST on foreign SaaS. Most Indian SMEs use AWS, Microsoft direct, Slack, Notion — and forget to self-assess 18% IGST in GSTR-3B. Result: lose the ITC and effectively pay 18% extra. Fix: monthly review of foreign-currency SaaS invoices and post RCM entry.
Maximise your GST input tax credit — free ITC audit for Indian SMEs.