Context
Input tax credit is the mechanism that stops GST from cascading — it lets a registered buyer offset the tax paid on purchases against the tax collected on sales. But the credit is not automatic. Section 16 of the CGST Act[1] sets five conditions, and the credit is available only when *all* of them hold. The checklist above lays them out in order, because failing any one disallows the claim.
The first condition (Section 16(2)(a)) is that the buyer must hold a valid tax invoice or debit note — a Rule 46[2]-compliant document from a registered supplier. This is where a kaccha bill fails at the door: no valid invoice, no credit, ever. The second (Section 16(2)(aa)) is the one that has tightened the most: the invoice must **appear in the buyer's auto-drafted statement, GSTR-2B[3], because the supplier furnished it. If the supplier has not filed and the credit is not reflected, the buyer cannot claim it — which makes the buyer dependent on the supplier's compliance discipline. The third (Section 16(2)(b)) is that the buyer must have actually received the goods or services** — an invoice without delivery does not support a claim.
The fourth condition (Section 16(2)(c)) is that the tax must have been actually paid to the government by the supplier; the buyer's credit is contingent on the supplier discharging the liability. The fifth (Section 16(2)(d)) is that the buyer must have filed their own relevant GST return for the period — the claim is made through that return, so an unfiled return is an unclaimed credit. Separate from these five is the 180-day payment rule — the second proviso to Section 16(2) — which is a reversal rule, not a claim condition. It bites after a valid claim: if the buyer does not pay the supplier the invoice value plus tax within 180 days of the invoice date, the credit already taken is reversed and added back with interest, and can be reclaimed once the payment is eventually made.
For a business the operational reading is that ITC hygiene is partly about your own paperwork — hold the right invoice, confirm receipt, file your return — and partly about vendor selection: a supplier who does not file returns silently destroys your credit even when your own records are perfect. Reconciling purchases against GSTR-2B every period is how the second condition gets caught early, and clearing supplier dues within 180 days is how you avoid the reversal that follows a valid claim. The first condition is why insisting on a pakka bill rather than a kaccha bill is, for a registered buyer, a direct cash decision.