ITC Reversal & Reclaim Update

This statement pertains to recent adjustments made in the GSTR 3B returns to help taxpayers accurately report information regarding Input Tax Credit availed, ITC reversal, ITC re-claimed, and ineligible ITC. It is associated with Notification No. 14/2022 – Central Tax dated July 5, 2022, in conjunction with Circular 170/02/2022-GST, dated July 6, 2022.

According to this notification, Input Tax Credit that was previously reversed in Table 4(B)(2) but can now be reclaimed under certain conditions should be reported in Table 4(A)5. Additionally, this reclaimed ITC in Table 4(A)5 must also be explicitly disclosed in Table 4D(1).

Purpose:

The primary objective is to monitor the correct reclaiming of ITC previously reversed in GSTR 3B under Table 4(B)(2) and ensure it is accurately reported in Table 4A(5) and Table 4D(1), beginning with the return period of August 2023. This process aims to enhance the overall consistency and accuracy of transactions related to ITC reversal and re-claims.

What should be included in the Electronic Credit and Re-claimed Statement?

Taxpayers are required to declare the cumulative ITC reversed but not yet reclaimed in any previous GSTR 3B returns as the opening balance in the “Electronic Credit Reversal and Re-claimed Statement” under the respective tax headings. Taxpayers can manually input the opening balance of pending Input Tax Credit reversal claims and must maintain accurate records of this amount.

To report the ITC reversal balance:

• Log in to your account.
• Find the option to “Report ITC Reversal Opening Balance,” which will be visible on the dashboard or under Services >> Ledger >> Electronic Credit Reversal and Re-claimed Statement >> Report ITC Reversal Opening Balance.

Impact on GSTR 3B Filings:

• For monthly taxpayers, these changes apply to the August 2023 return. For quarterly taxpayers, this corresponds to the Q2 of the financial year 2023-24, covering the months from July to September 2023.
• Once the opening cumulative ITC reversal balance is reported, the amounts in Table 4B(2) and Table 4D(1) will be automatically populated in the Electronic Credit and Re-claimed Statement, and the closing balance will be calculated accordingly.
• Subsequently, in the following GSTR 3B returns, ITC reclaims reporting under Table 4D(2) must not exceed the closing balance indicated in the Electronic Credit and Re-claimed Statement.

Deadline for reporting Opening Balance in the Electronic Credit and Re-claimed Statement:

• The last date for reporting the opening balance of reversed ITC not yet reclaimed is November 30, 2023.
• Monthly filers should consider Input Tax Credit reversal up to the return period of July 2023 which remains unreclaimed.
• Quarterly taxpayers should report their opening balance up to Q1 of the financial year 2023-24, considering ITC reversals made up to the April-June 2023 return period but not yet reclaimed.
• After November 30, the portal will automatically show the balance as NIL. When attempting to reclaim prior-period reversed ITC, a warning will appear indicating no opening balance available for credit reclamation.

Can amendments be made, and what is the last date?

• If any errors or inaccuracies occur while reporting the opening cumulative ITC reversal balance, taxpayers have the opportunity to amend it up to a maximum of three times.
• The final date for amending the opening balance entered in the Electronic Credit and Re-claimed Statement is December 31, 2023.
• After this date, no further amendments will be allowed, and the balance will be sent to jurisdictional officers for review.

Validation Procedure:

• After reporting the accumulated ITC reversal balance, the portal will maintain a record of reversal and re-claimed amounts on a return period basis, aligning with the GSTR 3B Returns filed.
• If a taxpayer attempts to reclaim more ITC in Table 4D(1) than the available ITC reversal balance in the statement, along with the Input Tax Credit reversal made in the current return period in Table 4B(2), a warning message will be triggered to ensure accurate reporting. However, taxpayers will still have the option to proceed with filing.
• It is advisable not to reclaim ITC exceeding the closing balance of the “Electronic Credit Reversal and Re-claimed Statement.”

Initiation of Cautionary Notices:

Monthly taxpayers should file their returns for the August 2023 period, while quarterly taxpayers should begin with the filing period encompassing July through September 2023.