What is Input Tax Credit (ITC) under GST?

Input Tax Credit (ITC) is the credit a registered taxpayer can claim for GST paid on purchases used for business purposes. It is set off against the GST payable on sales, reducing the net tax liability.

Which purchases are blocked under Section 17(5)?

Section 17(5) of the CGST Act blocks ITC on: motor vehicles (for personal use), food and beverages, beauty treatment, health services, membership of clubs, travel benefits to employees, works contract for immovable property (own use), and construction of immovable property.

How is net ITC calculated?

Net ITC = Total GST paid on purchases − Blocked ITC under Section 17(5). The net ITC is then set off against output GST liability: Net GST payable = Output tax − Net ITC.

Can ITC be claimed on motor vehicles?

ITC on motor vehicles is blocked unless the vehicle is used for: supply of motor vehicles, transportation of passengers (taxi service), imparting driving training, or transportation of goods.

What is the time limit to claim ITC?

ITC must be claimed by the earlier of: the due date for filing the September return of the next financial year, or the date of filing the annual return (GSTR-9).

ITC Calculator — Input Tax Credit Eligibility

Step 1 — Purchases (Input)

Total GST Paid on All Purchases (₹)

Sum of CGST+SGST or IGST on all purchase invoices

Section 17(5) — Blocked Credits

Motor Vehicles (personal use) ₹

Cars, bikes not used for business transport/goods

Food, Beverages & Outdoor Catering ₹

Canteen, restaurant expenses for employees

Health / Beauty Services ₹

Gym, spa, cosmetic treatments

Club Memberships ₹

Golf club, business club fees

Travel Benefits to Employees ₹

Holiday travel, LTC, personal travel

Works Contract (own immovable property) ₹

Construction, renovation of own building

Step 2 — Output Tax Liability

Total Output GST Collected on Sales (₹)

ITC Summary

Total GST Paid on Purchases —

Blocked Credits (Sec 17(5)) —

Eligible ITC Available —

Output GST (Tax on Sales) —

ITC Set-off Against Output —

Net GST Payable in Cash —

ITC Surplus (Carry Forward) —

Summary:

Section 17(5) — Blocked Credits Reference

Item / Service	ITC Status	Exception (ITC Allowed)
Motor vehicles (≤13 passengers)	Blocked	Taxis, driving schools, goods transport, resale of vehicles
Food, beverages, outdoor catering	Blocked	Same category is your business outward supply, or obligatory under law for employees
Beauty treatment, health services	Blocked	Same category is your outward supply (spa business etc.)
Membership of clubs, health centres	Blocked	None — fully blocked
Travel benefits to employees	Blocked	None — fully blocked
Works contract for immovable property (own)	Blocked	Plant & machinery; further supply of works contract
Construction of immovable property (own)	Blocked	Plant & machinery only
Insurance for motor vehicles (personal)	Blocked	Vehicles used for taxable supply of transport
Rent-a-cab services	Blocked	Obligatory under law; same business activity
Life insurance, health insurance (employees)	Blocked	Obligatory under law/contract; same business activity
Office goods for personal consumption	Blocked	None
Goods/services for CSR activities	Blocked	None — fully blocked
Raw materials, capital goods	Allowed	Used for taxable business supply
Business travel, freight, professional fees	Allowed	For business purposes
Computers, office equipment, machinery	Allowed	Used in business operations

About Input Tax Credit Under GST

Input Tax Credit (ITC) is one of the most valuable features of GST. It allows registered businesses to claim credit for the GST paid on purchases, capital goods, and input services used in their business operations. This eliminates the cascading effect of taxes that existed under the pre-GST regime.

How ITC works: When you purchase goods worth ₹1,00,000 and pay 18% GST (₹18,000), and then sell the same goods for ₹1,50,000 collecting 18% GST (₹27,000), your net GST liability is ₹27,000 − ₹18,000 = ₹9,000. The ₹18,000 you paid earlier becomes your ITC.

Section 17(5) — Blocked Credits: Not all GST paid on purchases is claimable. The CGST Act specifically blocks ITC on certain categories including motor vehicles for personal use, food and beverages, club memberships, and construction of immovable property for own use. These are commonly called "ineligible ITC."

This calculator is for reference only. Consult a qualified CA or tax professional for official ITC claims. Rules under Section 17(5) are subject to CBIC amendments.

Frequently Asked Questions

Can I claim ITC on capital goods?

Yes, ITC is available on capital goods used exclusively for business purposes. If the capital goods are used partly for business and partly for personal use, ITC must be reversed proportionately as per Rule 43 of the CGST Rules.

What happens if output tax is less than ITC?

If your eligible ITC exceeds output tax, the surplus can be carried forward to the next tax period. In certain cases (exports, inverted duty structure), you can apply for a GST refund.

Is ITC available on GST paid under RCM?

Yes. GST paid under Reverse Charge Mechanism (RCM) is eligible for ITC, but only in the same period when the RCM tax is paid in cash — not when the invoice is received.

Can composition dealers claim ITC?

No. Taxpayers registered under the Composition Scheme cannot claim Input Tax Credit on their purchases. This is one of the trade-offs of the simplified composition scheme.

What records are needed to claim ITC?

You need a valid tax invoice or debit note from a registered supplier, proof that goods/services have been received, tax has been paid to the government by the supplier, and the return for such tax has been filed by the supplier.