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Input tax credit (ITC)

Credit for GST paid on purchases, set off against GST collected on sales.

A pharmacy pays GST to its distributor on purchases and collects GST from patients on sales. Input tax credit is the mechanism that prevents the same value being taxed twice: the tax paid on the purchase is set off against the tax collected on the sale, and only the difference is remitted.

Credit is not available on everything. Section 17(5) of the CGST Act lists blocked credits, and clause (h) is the one that matters most in pharmacy: credit is blocked on goods lost, stolen, destroyed or written off. Expired medicine that is destroyed therefore requires the credit to be reversed.

Where the expired stock is returned to the distributor instead, the position is different: the supplier issues a credit note and the reversal follows that document. The distinction is easy to miss because the destruction path has no incoming paperwork to prompt it.

Claiming credit depends on the supplier having reported the invoice, so reconciliation against the auto-populated purchase data is part of monthly hygiene rather than an optional extra.

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Related terms

GSTR-3BThe summary GST return through which tax is paid and input tax credit is claimed. Credit noteA document issued by a supplier reducing the value of an earlier invoice. Expiry returnSending near-expiry or expired stock back to the distributor for credit. HSN codeThe Harmonised System of Nomenclature code that determines a product's GST treatment.

All terms

Batch numberBreakage and damageCDSCOCGST, SGST and IGSTCold chainCredit noteDPCO (Drugs Prices Control Order)Drug licence (Form 20 / Form 21)Expiry returnFEFO (First Expiry First Out)Generic vs branded medicineGSTR-1GSTR-3BHSN codeInput tax credit (ITC)Loose sale (cut strip)MRP (Maximum Retail Price)Narcotic registerNear-expiry stockNPPAPack factor (units per pack)Pharmacist registrationPTR (Price to Retailer)PTS (Price to Stockist)Purchase invoiceRed-border warning labelReorder levelRetail vs wholesale drug licenceReturn to vendor (RTV)Rule 65Rx symbolSalt compositionSchedule HSchedule H1Schedule XScheme goods (free goods)Shortbook (short book)Stock rotationStockist

This glossary is a practical reference for Indian retail pharmacy, not legal, tax or clinical advice. Requirements under the Drugs & Cosmetics Rules are enforced by state drug control authorities and vary; GST treatment should be confirmed with your CA. Verify anything you intend to rely on against the current notified position. As of August 2026.