5 Input Tax Credit Mistakes That Quietly Cost Businesses Lakhs
ITC is where most GST money is lost — not through fraud, but through avoidable reconciliation and timing errors. Here are the five we see most.
CA Karan Desai
Partner — GST & Indirect Tax · · 3 min read
Input tax credit is the mechanism that stops GST from cascading — but claim it wrong and you either lose money or invite a notice. In our GST practice, these five mistakes account for the vast majority of avoidable losses.
1. Not reconciling with GSTR-2B
You can only claim credit that appears in your GSTR-2B. If your supplier hasn't filed, that credit isn't yours yet. Businesses that book ITC from invoices without checking 2B routinely over-claim and face reversals with interest.
2. Claiming blocked credits
Section 17(5) blocks credit on specific items — motor vehicles, personal consumption, and more. Claiming these is a common and expensive error.
3. Missing the time limit
ITC for an invoice must be claimed by the deadline for the relevant financial year. Miss it and the credit lapses permanently.
- Reconcile every month, not once a year
- Follow up with non-compliant suppliers early
- Keep a separate ledger for blocked credits
- Track the annual ITC cut-off date
Most ITC losses aren't dramatic — they're small monthly leaks that add up to lakhs over a year.
A disciplined monthly reconciliation catches all five of these before they cost you. It's the single highest-return habit in GST compliance.
