What is Input Tax Credit and GSTR-2A? Learn From These Examples


GST aims to simplify tax laws in the country and make it easier for businesses to conduct their operations. However, since the implementation of the GST is still new, it can be complicated for taxpayers to understand its various nuances.

Any taxpayer under GST needs to understand both Input Tax Credit and the purpose of Form GSTR-2A. Let’s take a look at both these concepts, along with examples.

What is Input Tax Credit? 

The input tax credit is the amount of GST that you have paid for the purchases that you made from your suppliers. The input tax credit can be set off against the GST that you have to pay when you sell these goods to your customers.

For example, suppose you have a shop, and you sell Paneer for Rs. 20 (which includes Rs. 4 as GST). To make the paneer, you buy milk at the cost of Rs. 10 (which provides for Rs. 2 as GST).

The Rs. 2 that you paid as GST when you bought the milk is known as an input tax credit. Since you have paid Rs. 2 as an input tax credit, you only have to pay a further Rs. 2 for your sale of Rs. 20 worth of paneer.

Hence, the input tax credit is a way for you to reduce your tax liability because of the tax you have already paid to your suppliers. The input tax credit can be claimed by a purchaser of goods based on the invoices of the sale that have been uploaded on the GST portal by the seller.

If the invoice has not been uploaded, then a provisional ITC of 10% is allowed based on the GSTR-2A. Earlier, the buyer could claim ITC from the Government even when the supplier had not paid the required amount of tax to the Government. This resulted in a loss for the Government because they were not receiving the total amount of tax that was due.

Hence, this system was changed. Now, only those buyers can claim an ITC whose sellers have deposited the required amount of GST with the tax authorities. The Government monitors the entire system through the aid of various forms and invoices that need to be uploaded with the tax authorities.

What is GSTR-2A?

The GST portal for each business automatically generates the GSTR-2A. It is a purchase-related tax return. Once a seller uploads a GSTR-1, that information is automatically captured in GSTR 2A.

The GSTR 2A contains information about goods and services that have been purchased from a seller in a given month. This information is collected by collating data available on the GSTR-1 filed by the seller.

As a buyer, you need to verify the information that is contained in the GSTR 2A. In case any changes are required, you will need to make the necessary amendments to the tax return.

For example, suppose you have purchased five scooters from a supplier in one month. The supplier has uploaded the invoices for all five motorcycles on the GST portal.

Now, the tax authorities will compile an information document called the GSTR 2A which will be sent to you, the buyer. As the buyer, you will need to confirm the information that is provided in the GSTR 2A. In case you want to make any amendments to the GSTR 2A, you will need to file a form GSTR 2.

How to Claim ITC Under the New GST Returns System? 

A supplier of goods or services will need to upload invoices relating to all the sales that have been made in a particular month. As soon as these invoices are uploaded, the buyer can view these invoices.

After the 10th of the next month, the buyer can “accept”, “reject”, or keep these invoices as”pending”. If a buyer accepts the invoices, then they can claim an input tax credit based on the amount of GST that has been paid under such invoices.

If the buyer wants to claim the input tax credit during a subsequent month, then they can mark that invoice as pending. After the buyer has accepted these invoices, they will be considered as locked, and no changes can be made to these invoices after they have been locked.

If there are a large number of invoices, then they will be considered to be locked apart from ones that are marked as rejected.


Learning about the processes concerned with filing GST can be complicated. However, the overall process of filing indirect taxes has been simplified. You can find out more about gstr and how to download gst certificate to further your understanding.

Do proper research about these tax-related terms so that you have clarity before proceeding towards a business.

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