ITC is cash — treat it like cash
For a business with ₹2 crore of annual purchases, even a 3% ITC leak is ₹1 lakh of working capital gone. The leaks below are the six we find most often in books during GSTR-9 season — every one of them is detectable months earlier with a simple monthly reconciliation.
Leak 1 & 2: vendors who don't file, and 2B mismatches
Under Section 16(2)(aa), you can only claim ITC that appears in your GSTR-2B — which means a vendor who files GSTR-1 late, or not at all, blocks your credit even though you paid them the tax. Reconcile purchases against 2B every month, not annually, and chase defaulting vendors while the invoice is fresh.
The second leak is subtler: invoices that appear in 2B under the wrong GSTIN (head office vs branch), with clerical errors, or in the wrong period. These need vendor-side amendments, and amendment windows close — the deadline for a financial year's corrections is effectively 30 November of the next year.
AXAON note — The IMS changes the workflow
With the Invoice Management System, you now accept, reject or keep invoices pending before they land in 2B. Set a monthly IMS review, or deemed acceptance will quietly lock in someone else's errors.
Leak 3: the 180-day payment rule
If you don't pay a vendor within 180 days of the invoice date, the ITC you claimed must be reversed with interest, and can only be reclaimed after payment. Long credit-period arrangements with vendors routinely trip this rule. Flag every payable ageing past 150 days and either pay or plan the reversal.
Leaks 4, 5 and 6: blocked, ineligible and forgotten
Section 17(5) blocks credit on a specific list — and claiming blocked credit is worse than missing eligible credit, because it surfaces as a demand with interest and penalty in scrutiny.
The common misses
- Blocked credits claimed in error: employee personal-use vehicles, food and catering, club memberships, construction of immovable property
- Common-credit reversals under Rules 42/43 not computed where there are exempt supplies
- Eligible credits simply never claimed: bank charges, insurance on business assets, RCM invoices where tax was paid but credit not taken
The one-hour monthly routine
Download 2B, reconcile against the purchase register, action the IMS queue, review payables ageing for the 180-day rule, and log every mismatch with a vendor owner and follow-up date. One hour a month, and annual return season stops producing surprises.