ITC Leakage Calculator: Quantify GST Input Tax Credit Loss

ITC leakage is the input tax credit that the buyer is structurally entitled to under GST but does not actually claim — usually because the supplier has not filed GSTR-1 within the relevant tax period, has filed it with errors (wrong GSTIN, wrong invoice number, wrong tax period), or is non-compliant (small supplier outside GST or chronically late). Under Rule 36(4), ITC can only be claimed when the supplier-side invoice appears in GSTR-2B. Anything missing from GSTR-2B is leakage — either permanent or carried in working capital until it eventually reflects.

The calculator multiplies your annual purchases by the effective ITC rate to derive total ITC entitlement. It then applies your indicated supplier-filing-rate to split the ITC into three buckets: claimed-on-time (suppliers filing within the standard GSTR-1 window), claimed-with-lag (suppliers filing late, generating working-capital cost), and permanently leaked (suppliers who do not file at all — typically chronic non-filers or unregistered counterparties whose invoices are not eligible). Working capital interest applies your blended cost of funds to the lagged bucket over the average lag period.

Five recurring reasons. First, supplier files GSTR-1 after the buyer's books are closed for the period — credit appears in a future GSTR-2B and bridges working capital. Second, supplier files with a typo on the buyer's GSTIN or invoice number — the credit lands in nobody's GSTR-2B and has to be reconciled through DRC-01B/01C. Third, supplier is below the GST registration threshold — the buyer cannot claim ITC at all (composition or unregistered supply). Fourth, supplier files but uses the wrong tax period — the credit appears but at the wrong point and may breach Rule 36(4) timing. Fifth, supplier issues a credit note that the buyer has not yet booked — the GSTR-2B shows a net lower than the buyer expects.

Rule 36(4) of the CGST Rules limits ITC claimable in GSTR-3B to the credit reflected in the buyer's GSTR-2B for that tax period. There is no longer a 5% or 10% provisional ITC buffer — the rule is now a hard 100% match. Practically: if the supplier has not filed GSTR-1 by the GSTR-2B cut-off (typically the 14th of the following month), the buyer cannot claim that ITC for that period regardless of whether they hold a tax invoice. The credit moves to a future month or, if the supplier never files, drops out entirely.

TransactIG ingests GSTR-2B from the GST portal and your purchase register from the ERP, matches every supplier-side invoice against your booked invoice on GSTIN, invoice number, tax period, and tax amount, and routes mismatches into a structured supplier-level exception register. Filing-pending exceptions are tagged for follow-up; GSTIN/typo exceptions are routed for DRC-01C action; permanent leakage cases (composition suppliers, non-filers) are surfaced for sourcing review. Match rates improve from 51% baseline to 88% on live customer data after configuration.