At month end the same question comes up for every invoice: claim it, hold it, or write it off as ineligible? A claim that should have been held is excess credit. A hold quietly treated as ineligible loses money. This guide gives a sorting method with five statuses, the test for each from the CGST Act, and a worked month in which six invoices and one old payable land in different places.
For the wider rules, start with input tax credit meaning: the conditions and how GSTR-2B decides it.
Five statuses, not two
“Eligible” and “ineligible” are the two labels the return asks for, but the working paper behind them needs five.
| Status | What puts an invoice here | What happens next |
|---|---|---|
| Eligible now | Section 16(2) conditions met, inside the Section 16(4) date, not on the Section 17(5) list, used wholly for business | Claim it in this GSTR-3B |
| Deferred | Not yet communicated to you in GSTR-2B (Section 16(2)(aa)), kept Pending in IMS, goods or services not yet received (Section 16(2)(b)), or an invoice for goods received in lots with the last lot outstanding | Claim in the month the condition is met, before the Section 16(4) date |
| Ineligible | On the Section 17(5) list, depreciation claimed on the tax component (Section 16(3)), or past the Section 16(4) date | Do not claim; declare as ineligible |
| Restricted | Used partly for business and partly for other purposes (Section 17(1)), or partly for taxable and partly for exempt supplies (Section 17(2)) | Claim only the attributable part |
| Reversal | Credit already availed, but the supplier has not been paid within 180 days of the invoice date (reverse-charge supplies excluded) | Pay an amount equal to the credit with interest; re-avail on payment |
The statuses move. Deferred becomes eligible when the supplier reports, and ineligible if the Section 16(4) date passes first. A reversal is not an ineligible invoice: the credit was taken legitimately and a condition then failed. Keep them in separate columns.
The tests, in the order to run them
Run every invoice through the same sequence. Each step names the part of the Act it comes from, so you can show your reasoning later.
- Is it in GSTR-2B? Section 16(2)(aa) requires that the supplier has furnished the details in the statement of outward supplies and that they have been communicated to you. Rule 36(4) says the same from the claim side. If not, status is deferred. If you kept it Pending in IMS, it is also outside GSTR-2B until you accept it and recompute.
- Have you received the goods or services? Section 16(2)(b). Where goods against an invoice come in lots or instalments, credit is available upon receipt of the last lot or instalment. If not received, status is deferred.
- Is it on the Section 17(5) list? Motor vehicles, food and catering, club memberships, construction of immovable property on own account and the other listed items are blocked, subject to the exceptions in the section. If blocked, status is ineligible. The full list is in Section 17(5).
- Is it used wholly for business, and for taxable supplies? Section 17(1) restricts credit to the part attributable to business purposes. Section 17(2) does the same for exempt supplies against taxable supplies. If only part qualifies, status is restricted. The method of attribution is for you and your CA; we have not covered the prescribed manner here.
- Is it a capital item on which you claim depreciation on the tax component? Section 16(3) says the credit on that tax component shall not be allowed. If so, status is ineligible.
- Is it inside the time limit? Section 16(4): after 30 November following the end of the financial year, or the annual return if earlier, you are not entitled to take the credit. For invoices of financial year 2025-26, that is 30 November 2026 at the latest. Past it, status is ineligible.
- Has the supplier been paid within 180 days? The second proviso to Section 16(2), and Rule 37. If not, status is reversal, not ineligible.
Two Section 16(2) conditions are not on that list because you cannot test them from your own files: clause (c), that the tax charged has actually been paid to the Government, and clause (d), that you have furnished the return under Section 39. GSTR-2B is built on the supplier's reporting, so for clause (c) and for the Section 16(2)(ba) restriction check the portal and ask your CA about anything unusual. If an invoice fails step 1 because of the supplier, what to do when a supplier has not filed GSTR-1 has the follow-up.
Deferred is not ineligible, until the date passes. Writing a deferred invoice off as ineligible loses the credit by choice. Leaving it on a hold list with no date loses it by default. Sort the hold list by invoice date every month; items from the previous financial year go first. The Section 16(4) guide has the year-end sweep.
What GSTR-2B and GSTR-3B do and do not sort for you
- GSTR-2B settles step 1. It is generated on the 14th of every month for monthly filers, and the portal drafts GSTR-3B from it. Table 4(A)(5) is described as “ITC available (whether in full or part) - All other ITC” and is populated on a net basis.
- The ineligible line covers part of step 6 only. GSTN describes Table 4D(2) as ineligible ITC under Section 16(4) and ITC restricted due to place-of-supply rules, auto-populated from GSTR-2B. It does not name Section 17(5), Section 17(1) or Section 16(3), so those three are yours to carry out. Because Table 4(A)(5) is filled from GSTR-2B, a blocked or non-business invoice that sits in 2B is first counted there and then taken out: CBIC Circular 170/02/2022-GST puts permanent reversals (Section 17(5), rules 38, 42 and 43) in Table 4(B)(1), and reversals you can re-claim later, such as Rule 37, in Table 4(B)(2).
- Declare the result. The GSTN FAQ says only eligible and ineligible ITC need to be declared in Table 4, and that the pre-filled ITC values are editable as of now, with a warning if Table 4A is edited upwards. If your claim goes above 2B, see the DRC-01C reply guide.
- IMS changes the statement. Pending records do not become part of GSTR-2B or GSTR-3B, and after a change of action you can recompute GSTR-2B at the time of filing GSTR-3B. See how to recompute GSTR-2B.
The conditions are set out in the ITC rules guide, the path from the supplier's return to GSTR-3B is in how GSTR-2B decides the ITC you can claim, and what GSTR-2B is explains the statement itself.
Worked example: one month, five statuses
A textile processor in Surat closes the September 2026 tax period. GSTR-2B is generated on 14 October 2026 and GSTR-3B is due on 20 October 2026. Six purchase invoices are open. The amounts are the GST charged on each invoice.
| Invoice | GST charged | Status and reason | Eligible now |
|---|---|---|---|
| Cotton yarn for production | ₹84,600 | Eligible now: in 2B, received, not on the Section 17(5) list | ₹84,600 |
| Dyes and chemicals | ₹29,700 | Deferred: supplier has not reported it, so it is not in 2B | ₹0 |
| Loom spares, first lot received | ₹18,000 | Deferred: last lot is due next month | ₹0 |
| Team dinner at a hotel | ₹5,400 | Ineligible: food and beverages, Section 17(5)(b)(i) | ₹0 |
| Office laptop used for business and personal work | ₹25,000 | Restricted: your documented business share of the GST is ₹17,500 | ₹17,500 |
| Generator set, depreciation claimed on the tax component | ₹12,000 | Ineligible: Section 16(3) | ₹0 |
| Total | ₹1,74,700 | ₹1,02,100 |
The statuses add up as follows. Eligible now is ₹84,600 + ₹17,500 = ₹1,02,100. Deferred is ₹29,700 + ₹18,000 = ₹47,700. Ineligible is ₹5,400 + ₹7,500 (the non-business part of the laptop) + ₹12,000 = ₹24,900. And ₹1,02,100 + ₹47,700 + ₹24,900 = ₹1,74,700, the GST charged on all six invoices.
The ₹47,700 is the money to follow. The dyes supplier gets a reminder before the 14th of next month, and the loom spares go on the hold list with a reminder for the final lot. Neither is lost as long as the Section 16(4) date, 30 November 2026 for FY 2025-26 invoices and 30 November 2027 for FY 2026-27 invoices (or the annual return, if earlier), has not passed.
Separately, the payables ageing shows an invoice dated 12 March 2026 with GST of ₹22,500, still unpaid. It is 216 days old on 14 October 2026, so more than 180 days have passed since the invoice date. Credit on it was availed in an earlier return. The proviso says an amount equal to that credit is to be paid, along with interest under Section 50, and that the credit can be availed again once the supplier is paid. This is a reversal, not an ineligible invoice, and it does not sit in the table above. Which return carries it and how the interest is counted are matters for Rule 37 and your CA; we have not verified them here.
Mistakes that move credit into the wrong box
- Calling every invoice missing from 2B ineligible. Most are deferred. The reason is the supplier's reporting, or your own IMS action.
- Calling every Matched invoice eligible. Matched only clears the first test. Blocked credit and non-business use match perfectly.
- Mixing reversal with ineligibility. A reversal is paid back and can be re-availed on payment. Ineligible credit never comes back by paying anyone.
- Letting the portal sort it. The auto-populated ineligible line names Section 16(4) and place-of-supply restrictions. The Section 17 and Section 16(3) exclusions come from your classification.
Frequently asked questions
What is the difference between eligible and ineligible ITC?
Eligible ITC is credit you may take because the Section 16 conditions are met and no Section 17 restriction applies. Ineligible ITC is credit the Act does not allow, for example credit blocked by Section 17(5), the non-business part of a purchase, or credit claimed after the Section 16(4) date.
Is ITC on an invoice missing from GSTR-2B ineligible?
Not permanently. Until the supplier's details are communicated to you, Section 16(2)(aa) stops you claiming it, but the credit can be taken in a later return once the invoice reaches GSTR-2B, provided the Section 16(4) date has not passed.
Can I claim ITC after the Section 16(4) date?
No. Section 16(4) says a registered person is not entitled to take ITC on an invoice or debit note after 30 November following the end of the financial year to which it pertains, or furnishing of the relevant annual return, whichever is earlier.
Does partly personal use make the whole credit ineligible?
No. Section 17(1) restricts the credit to so much of the input tax as is attributable to the purposes of the business. The business part can be claimed and the rest is ineligible.
Find the invoices that are deferred, not lost
gstr2bmatch.in compares your purchase register with GSTR-2B and lists the invoices that are in your books but missing from 2B, the ones that are only in 2B, value mismatches, and IMS Pending invoices on their own, with the rupee ITC at risk. The missing-from-2B and IMS Pending lists are the starting point for your deferred list. It does not decide blocked, restricted or reversal cases, so those columns stay in your working paper. Your GSTR-2B and purchase register files are read in your browser and never uploaded to any server.
Related guides
- input tax credit meaning: conditions and how GSTR-2B decides it
- blocked credit in GST: the section 17(5) list with examples
Last checked: 21 October 2026. Sources: CBIC Circular 170/02/2022-GST, CGST Act, Section 16, CGST Act, Section 17, Notification 40/2021-CT (Rule 36(4)), CGST Rules, Rule 37, CBIC Circular 237/31/2024-GST (Section 16(4)), GSTN GSTR-3B user guide, GSTR-3B help, Table 4, GSTN IMS FAQ, GSTN return view guide (2B generation).