When you record a vendor bill in Zoho Books from a GST-registered vendor with a valid GSTIN, the GST component on each line item is automatically posted to the appropriate ITC asset account: CGST ITC, SGST ITC, or IGST ITC. These accounts accumulate during the month and are reported in Table 4 of GSTR-3B as ITC available. Zoho Books tracks each credit separately because the utilisation rules for each ITC type differ.
Not all GST paid is eligible for ITC. Section 17(5) of the CGST Act lists blocked credits that cannot be claimed, including GST on food and beverages, personal travel, motor vehicles (except certain categories), construction of immovable property, and club memberships. When you record an expense in these categories in Zoho Books, you should post the full amount (including GST) to an expense account rather than capturing the GST as ITC. This requires careful account selection when recording bills and expenses.
ITC must be reversed in certain circumstances: if you do not pay the vendor within 180 days of the invoice date, if the goods or services are used for exempt or personal purposes, or if the vendor has not filed their GSTR-1 and the invoice does not appear in your GSTR-2B. Zoho Books supports ITC reversal through journal entries that debit the ITC asset account and credit an expense account. The reversal appears in Table 4B of GSTR-3B.
Input Tax Credit (ITC) is the GST paid on business purchases that you can offset against GST collected on sales, reducing your net cash GST payment. Zoho Books captures ITC automatically from vendor bills and tracks CGST, SGST, and IGST ITC separately.
Every vendor bill with a valid GSTIN automatically captures ITC in separate asset accounts. The GST Summary report shows total ITC available, ITC reversed, and net ITC for each GSTR-3B filing period.
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