Input tax credit dies quietly

Most of the input tax credit that businesses lose is not lost to a dispute. It is not disallowed in an assessment, and nobody argues about it. It simply expires, in a month when nobody was looking, and the first anyone hears of it is a year later.

Two provisions do almost all of the damage.

Section 16(4): the deadline that does not move

Credit for an invoice cannot be claimed after the 30th of November following the end of the financial year to which it relates, or the date of filing the annual return, whichever is earlier.

That is a hard stop. There is no condonation, no rectification, and no argument about intent. An invoice from May that surfaces the following December is a cost, not a credit.

The practical consequence is uncomfortable: a vendor invoice that reaches your accounts team late — filed in a drawer, sent to the wrong address, held back over a payment dispute — becomes permanently more expensive on a date nobody diarised.

GSTR-2B: the ceiling

Since the amendment to section 16(2)(aa), credit is available only where the invoice appears in your GSTR-2B. Your books are no longer the operative record. Your vendor's filing is.

Which means a vendor who files late, files wrong, or does not file at all is quietly spending your money. You paid the tax to them. Whether you can recover it from the Government depends entirely on whether they told the Government they collected it.

What a monthly reconciliation is for

The exercise is not bookkeeping tidiness. It is identifying, every month, the invoices that appear in your purchase register and not in your 2B — while there is still time to act on them.

The list that comes out of it is short and it is actionable:

• Vendor has not filed. Chase them. A polite note in month one is more effective than a legal one in month eleven.
• Vendor filed against the wrong GSTIN. Common in multi-state groups. Fixable, if it is found early.
• Invoice is in 2B and not in your books. You are under-claiming, which nobody notices because it does not hurt.
• Amounts do not agree. Usually a rate or a rounding difference. Occasionally something worse.

The number worth knowing

Ask your finance team a single question: what is the rupee value of invoices in the purchase register that did not appear in last month's 2B?

If the answer takes more than a day to produce, that is the finding. The reconciliation is not being run, and the credit is expiring on schedule.