GST Input Tax Credit Calculator

What is input tax credit in GST?

Input tax credit (ITC) is the GST a business has already paid on its purchases, which it can use to reduce the GST it owes on its sales.

Without ITC, a business would pay GST on its inputs and again on its output — tax on tax. ITC breaks that chain. Only the value added at each stage gets taxed, not the full transaction amount each time.

Under Section 16 of the CGST Act, 2017, a registered taxpayer can claim ITC on goods or services used in the course of business, subject to conditions.

How is input tax credit calculated?

ITC works by offsetting your output tax liability against the GST you've already paid on purchases.

Formula

Net GST payable = Output tax liability − Input tax credit available

The set-off follows a mandatory order under Section 49A, Section 49B, and Rule 88A of the CGST Act:

• IGST credit is used first, against IGST liability, and then against CGST or SGST/UTGST in any order.

• CGST credit is used next, against CGST liability first, then IGST (only after IGST credit is fully exhausted); cannot offset SGST.

• SGST/UTGST credit is used next, against SGST/UTGST liability first, then IGST (only after IGST credit is fully exhausted); cannot offset CGST.

Any ITC remaining after set-off carries forward to the next tax period.

Worked example:

A manufacturer files GSTR-3B for the month. Their position is:

Step 1: Apply IGST credit (₹5,000)
IGST ITC of ₹5,000 clears the ₹3,000 IGST liability in full.
The ₹2,000 surplus spills over — ₹1,000 goes to CGST, ₹1,000 goes to SGST.

Step 2 — Apply CGST credit (₹1,000)
CGST liability after IGST set-off is ₹3,000. CGST ITC of ₹1,000 reduces it to ₹2,000.
CGST ITC balance: ₹0.

Step 3 — Apply SGST credit (₹2,000)
SGST liability after IGST set-off is ₹5,000. SGST ITC of ₹2,000 reduces it to ₹3,000.
SGST ITC balance: ₹0.

Result

Cash payable: ₹5,000 (₹2,000 CGST + ₹3,000 SGST)

What ITC can you claim and what is blocked?

Not all GST paid on purchases qualifies as ITC. Section 17(5) of the CGST Act lists categories where credit is blocked regardless of business use.

Eligible ITC — common examples:

• Raw materials and inputs used in manufacturing or trading

• Capital goods used in the course of business (subject to Rule 43 apportionment if also used personally)

• Input services such as professional fees, freight, IT services

• Goods and services for export — eligible and refundable if unutilised

Blocked ITC — credit not available on:

• Motor vehicles for transportation of persons (unless used for renting, driving training, or passenger transport business)

• Food, beverages, and outdoor catering (unless in the same line of business)

• Works contract services for construction of immovable property

• Club memberships and recreational facilities for employees

• Personal consumption — goods or services not used for business

If blocked credit is included while calculating ITC, it will overstate the credit available and result in a short payment when you file GSTR-3B.

Conditions to claim ITC

Claiming ITC is subject to four conditions under Section 16 of the CGST Act:

• Valid tax invoice: you must hold a GST-compliant invoice or debit note from a registered supplier.

• Receipt of goods or services: ITC can be claimed only after the supply is actually received; for goods received in instalments, only after the last lot.

• Supplier has paid GST: the supplier must have paid the tax to the government — reflected in GSTR-2B.

• Return has been filed: GSTR-3B must have been filed for the period in which the credit is claimed.

ITC must be claimed by the earlier of: 30th November following the end of the relevant financial year, or the date of filing the annual return (GSTR-9) for that year.