You open your monthly GSTR-2B statement and notice that an invoice from a hotel stay or a conference venue appears in the ITC Not Available section. Even though the supplier filed GSTR-1 on time and quoted your company GSTIN, the portal marks the credit as restricted under place of supply rules.
Why place of supply restricts ITC in GSTR-2B
Under GST, Input Tax Credit operates on state jurisdiction. You can only claim credit of CGST and the SGST of the specific state where your GSTIN is registered. When employees travel out of state for work, hotel accommodation and event services are governed by special statutory rules.
According to Section 12(3) of the IGST Act 2017, the place of supply for services directly related to immovable property, including lodging accommodation by a hotel or guest house under Section 12(3)(b), is the location where the property is situated. Similarly, under Section 12(3)(c), the place of supply for organising official, social, or business functions in an immovable property is the location of that property.
Because the hotel and the place of supply are in the supplier state, the transaction is treated as an intra-state supply. The vendor charges local CGST and local SGST. When the GST portal generates GSTR-2B per Section 38 and Section 16(2) of the CGST Act, it detects that the recipient state code differs from the place of supply state code. Because your entity has no registration in the supplier state, GSTR-2B flags the tax under ITC Not Available.
Common mistake: Asking an out-of-state hotel to charge IGST against your home state GSTIN. The hotel cannot do this legally. Section 12(3) mandates that the place of supply is the immovable property location. Charging IGST when the supplier and place of supply are in the same state violates statutory rules.
Statutory conditions under Section 16(2)
To understand the credit restriction, review the core conditions for taking credit under Section 16(2) of the CGST Act:
- Possession of a tax invoice: The buyer must hold a valid tax invoice or debit note issued under Section 31 per Section 16(2)(a).
- GSTR-1 and GSTR-2B communication: The supplier must furnish the invoice details in GSTR-1 so they are communicated to the recipient in GSTR-2B per Section 16(2)(aa).
- No statutory restriction: The credit communicated under Section 38 must not be restricted per Section 16(2)(ba).
- Receipt of services: The recipient must have actually received the service per Section 16(2)(b).
- Tax payment: The supplier must pay the tax charged to the Government per Section 16(2)(c).
- Return filing: The recipient must furnish the regular return under Section 39 per Section 16(2)(d).
For an out-of-state hotel invoice, even when conditions (a), (aa), (b), (c), and (d) are satisfied, clause (ba) stops the credit. The CGST and SGST belong to another state treasury, making the credit unclaimable in your home state return. Read our detailed guide on input tax credit under GST and how GSTR-2B decides it for the complete statutory framework.
Worked example: Bangalore company with hotel stay in Mumbai
Consider an IT firm registered in Karnataka (state code 29) sending its senior team for a client meeting in Mumbai, Maharashtra (state code 27). The team stays at a hotel in Mumbai.
| Field | Transaction details | Statutory basis |
|---|---|---|
| Supplier location | Maharashtra (27) | Hotel physical location |
| Place of supply (POS) | Maharashtra (27) | Section 12(3)(b) IGST Act |
| Recipient GSTIN | 29ABCDE1234F1Z5 (Karnataka) | Home state registration |
| Room tariff | ₹1,00,000 | Taxable base value |
| CGST charged (9%) | ₹9,000 | Central tax |
| SGST charged (9%) | ₹9,000 | Maharashtra state tax |
| Total invoice value | ₹1,18,000 | Amount paid to hotel |
| GSTR-2B classification | ITC Not Available | POS (27) differs from Recipient State (29) |
The hotel files its GSTR-1 declaring POS as Maharashtra (27) and reports ₹9,000 CGST plus ₹9,000 SGST. When the Karnataka company downloads its GSTR-2B, this invoice appears in the B2B Ineligible table with the reason flagged as place of supply restriction.
How to report ineligible POS credit in GSTR-3B
Because the credit is not available, you cannot take it in Table 4(A) of GSTR-3B. The GST portal automatically populates this data into Table 4(D)(2) of Form GSTR-3B.
Per the GSTN user manual for Form GSTR-3B, Table 4(D)(2) is titled Ineligible ITC under section 16(4) and ITC restricted due to PoS rules. This entry is an informational reporting field. It does not reduce your valid credit pool and does not add to your tax liability. In your financial accounting books, book the entire invoice value of ₹1,18,000 (including the ₹18,000 tax) directly to business travel expenses.
Accounting workflow for POS restricted invoices
Frequently asked questions
Why is ITC marked as not available in GSTR-2B for hotel bills?
Under Section 12(3)(b) of the IGST Act, the place of supply for hotel accommodation is the state where the hotel is located. When a business travels to another state, the hotel charges local CGST and SGST of that state. Because the recipient is registered in a different state, the recipient holds no registration in the supplier state to take credit of that state's taxes.
Can an out-of-state hotel charge IGST so that the recipient can claim credit?
No. Section 12(3) fixes the place of supply at the location of the immovable property. The hotel supplier cannot legally charge IGST because both the supplier and the place of supply are in the same state, making it an intra-state supply under GST law.
Where does this ineligible ITC appear in GSTR-3B?
It auto-populates into Table 4(D)(2) of GSTR-3B, labelled as Ineligible ITC under section 16(4) and ITC restricted due to PoS rules. It is an informational disclosure and does not form part of your usable credit pool.
Check your own GSTR-2B
Our free reconciliation tool parses your GSTR-2B JSON or Excel file instantly, highlighting invoices marked as ineligible due to place of supply rules so your GSTR-3B reporting stays accurate. Your GSTR-2B and purchase register files are read in your browser and never uploaded to any server.
Last checked: 26 October 2026. Sources: CBIC IGST Act Repository, GSTN Form GSTR-3B Manual.