Input Tax Credit (ITC): Definition, Meaning & Guide for Indian Businesses

ITC is the GST you paid to your suppliers that you can deduct from the GST you owe on your sales. It prevents tax-on-tax cascading.

What is Input Tax Credit (ITC)?

Input Tax Credit (ITC) is one of the foundational concepts of GST. When you buy goods or services for your business, you pay GST to the supplier. That GST is your input tax. When you sell goods or services, you collect GST from the buyer. That is your output tax. ITC means you can offset the input tax against the output tax, so you only deposit the net difference with the government. Without ITC, GST would cascade (tax on tax) at every stage. To claim ITC, you need a valid tax invoice with your GSTIN, the goods/services must be used for business, and the supplier must have actually deposited the GST with the government (visible in your GSTR-2B).