Also called ITC, GST input credit
Input tax credit lets a GST-registered business reduce its tax bill by the GST it paid on purchases used for the business. Tax is paid only on the value you add, not again on what your supplier already paid. It is the reason GST does not pile tax on top of tax at every step.
To claim it, you need a valid tax invoice, the goods or services must have been received, the supplier must have reported the invoice so it appears in your GSTR-2B, and the tax must have been paid to the government. Some items are blocked, such as food and drinks for staff in most cases. Composition dealers cannot claim it at all.
A stationery shop sells ₹3,00,000 of goods at 18%, collecting ₹54,000 of GST. It bought stock for ₹2,20,000 plus ₹39,600 GST from registered suppliers who all filed. It pays ₹54,000 minus ₹39,600, which is ₹14,400. If one supplier with ₹6,000 of GST on its bills had not filed, the shop could only claim ₹33,600 for now.