Input Tax Credit (ITC)
Input Tax Credit (ITC) is the credit a registered taxpayer takes for GST paid on inward supplies of goods or services, used to offset output tax liability.
Input Tax Credit is the GST a business pays on its purchases that it can subtract from the GST it collects on sales. Under Section 16 of the CGST Act, ITC is allowed only if the taxpayer holds a tax invoice, the supply appears in GSTR-2B, the supplier has paid the tax, and the return is filed.
ITC is the mechanism that keeps GST a tax on value added rather than a cascading tax. When you buy inputs, input services or capital goods for your business, the GST charged by your supplier becomes a credit you can use against the GST you owe on your own outward supplies. The eligibility conditions live in Section 16(2) of the CGST Act, 2017.
For reconciliation, ITC is where the money is. Every rupee of credit you claim in GSTR-3B must be defensible against your purchase records, your supplier's filings and the auto-drafted GSTR-2B. A mismatch invites a DRC-01C intimation, interest under Section 50, and — increasingly — a hard block at the portal. That is why credit reconciliation is no longer a year-end exercise but a monthly discipline tied to each GSTR-3B filing.
The Recoup angle: Recoup ties each ITC line back to the invoice, the bank payment and the GSTR-2B entry, so the credit you claim is the credit you can prove.