Changes in Table 4 of GSTR-3B

Changes in Table 4 of GSTR-3B

Table 4 of GSTR-3B is the ITC audit trail that GSTN now reads line by line. The 2022 redesign replaced a single net-ITC figure with five disclosure rows: gross ITC available (4A), permanent reversals (4B(1)), temporary reversals (4B(2)), net ITC flowing to your credit ledger (4C), reclaimed credits (4D(1)), and ineligible ITC disclosure (4D(2)). In 2026, GSTN auto-populates 4A from your GSTR-2B and issues DRC-01C intimations automatically when your 3B claim exceeds the 2B figure beyond the Rule 88D tolerance threshold. A wrong classification — not just a wrong number — now triggers scrutiny.

The Redesigned Table 4 Architecture — What Each Sub-Row Actually Requires

Understanding what belongs in each row is not optional. Every sub-row carries a distinct legal basis, and misclassifying between them signals something specific to GSTN's matching engine.

Table 4A — Gross ITC Available

Table 4A breaks down gross ITC by source across five categories:

• 4A(1) — IGST paid on import of goods (linked to the Bill of Entry number)
• 4A(2) — IGST paid on import of services (usually supported by the overseas vendor invoice plus a foreign currency remittance record)
• 4A(3) — ITC on inward supplies under Reverse Charge Mechanism (RCM) other than imports — Goods Transport Agency (GTA) freight, security manpower agencies, legal fees from individual advocates, and similar notified categories
• 4A(4) — Credits distributed through an Input Service Distributor (ISD) and reflected in your GSTR-2B from the ISD's GSTR-6 filing
• 4A(5) — All other ITC: the bulk of domestic purchase credits auto-populated from GSTR-2B monthly

The critical discipline here is gross means gross. Section 17(5) blocked credits, disputed credits, and Rule 42 credits must all appear in 4A and then flow through to the reversal rows. Silently excluding an ineligible credit from 4A and reporting a lower gross figure does not remove the scrutiny risk — it creates a discrepancy between your 4A and GSTR-2B that invites a worse question.

Table 4B — ITC to Be Reversed

The split between 4B(1) and 4B(2) is the single most consequential classification decision in the form.

4B(1) — Permanent reversals are non-recoverable and include:

• Rule 38: ITC reversal by banking companies and NBFCs on either the 50% standard method or the actual-attribution method
• Rule 42: Proportionate reversal for inputs and input services used partly for exempt supplies or non-business purposes
• Rule 43: Proportionate reversal for capital goods used partly for exempt supplies
• Section 17(5): Blocked credits — motor vehicles used for personal purposes, food and beverages for employees, club memberships, health insurance (beyond statutory obligation), works contract services for construction or repair of immovable property, and goods or services for personal consumption

4B(2) — Temporary reversals are credits you expect to reclaim once conditions are satisfied, including:

• Credits reversed under Rule 37 for invoices where the supplier remains unpaid beyond 180 days
• Credits reversed pending Section 16(2)(aa) satisfaction — i.e., a supplier who has not yet filed GSTR-1 for an older period and whose invoices do not yet appear in your GSTR-2B
• Any ITC reversed under Rule 37A (for the period when a supplier's GSTIN has been suspended or cancelled)

Booking a Section 17(5) credit as 4B(2) instead of 4B(1) is one of the most frequently flagged errors in GST assessments. The implicit communication to GSTN is that you plan to reclaim a blocked credit — which immediately invites a query about on what legal basis.

Table 4C — Net ITC Available for Utilisation

Net ITC = 4A − 4B(1) − 4B(2). This is the amount that flows to your electronic credit ledger and becomes available for offset against output tax liability. After every 3B filing, verify your credit ledger balance on the portal matches this figure plus any opening carried-forward amount.

Table 4D — Reclaim and Ineligible Disclosure

4D(1) captures ITC reclaimed in the current period that was previously reversed under 4B(2). A 4D(1) entry does not stand alone — the reclaim amount must simultaneously appear in 4A(5) of the same return so the credit actually flows to the ledger. GSTN tracks whether a 4D(1) reclaim has a matching 4B(2) entry in a prior period; a reclaim without that audit trail is flagged.

4D(2) is a pure disclosure row for ineligible ITC — specifically ITC barred by Section 16(4)'s time limit or restricted under place of supply (PoS) rules. Amounts declared here were never credited to your ledger and should never appear in 4A as claimed ITC.

Why GSTN Re-Architected Table 4

Before 2022, Table 4 required only a net ITC figure. A taxpayer claiming Rs. 10 lakh gross and reversing Rs. 2 lakh would report Rs. 8 lakh — and GSTN had no automated visibility into the gross figure, the reason for reversal, or whether the reversal was permanent or recoverable.

The redesign was driven by two enforcement objectives.

First, Section 16(2)(aa) enforcement. Added by the Finance Act 2021 and effective from January 2022, this clause conditions ITC admissibility on the supply being reflected in the recipient's GSTR-2B. To run that check, GSTN needed the gross 4A figure for comparison against GSTR-2B — a net figure gave them nothing to match.

Second, reversal classification for systemic red-flagging. Distinguishing permanent from temporary reversals allows GSTN to automatically identify taxpayers who have a 4B(2) balance with no subsequent 4D(1) reclaim and no DRC-03 payment — a pattern that indicates either a lapsed credit or an unreconciled liability.

Section 16(2)(aa) and the GSTR-2B Matching Engine in 2026

Section 16(2)(aa) of the CGST Act 2017 states that ITC on a supply is admissible only when: (a) the supplier has furnished the invoice details in their GSTR-1 or Invoice Furnishing Facility (IFF), and (b) those details appear in the recipient's GSTR-2B.

GSTR-2B is a static, auto-generated statement available by the 14th of the following month. It reflects all GSTR-1 filings made by your suppliers up to the defined cut-off date for that period. Unlike GSTR-2A — which refreshes dynamically — GSTR-2B does not change after generation. A supplier who files their GSTR-1 after the GSTR-2B cut-off will appear in next month's GSTR-2B, not the current one.

For FY 2026-27, the operating rules are:

• Do not claim ITC in a 3B where the underlying invoice is absent from that month's GSTR-2B. If the supplier missed the GSTR-1 cut-off, wait for next month's 2B.
• Your GSTR-2B reconciliation against the purchase register must happen before 3B filing — not after.
• GSTN auto-populates Table 4A on the portal from your GSTR-2B draft. You may edit this figure, but every edit is logged. An upward edit that pushes 4A above the GSTR-2B value is the trigger for DRC-01C under Rule 88D.

Section 16(4) cut-off for FY 2025-26: ITC on invoices from FY 2025-26 must be claimed in a GSTR-3B filed by 30 November 2026, or the date of filing the GSTR-9 annual return for FY 2025-26, whichever is earlier. A missed supplier invoice discovered after this date cannot be claimed — there is no relief mechanism outside a GST Council amnesty. For FY 2026-27 credits, the equivalent cut-off is 30 November 2027 or the GSTR-9 filing date for that year.

How DRC-01C Works — and What Happens If You Miss the 7-Day Window

Rule 88D of the CGST Rules creates an automated intimation — DRC-01C — when ITC claimed in GSTR-3B exceeds GSTR-2B by more than the tolerance limit notified by CBIC. The intimation is system-generated, appears on your GST portal dashboard under Services > User Services > My Applications, and is simultaneously sent to your registered email.

The 7-day response process:

1. Log in to gst.gov.in and open the DRC-01C from the dashboard.
2. Download the GSTR-2B for the flagged tax period and compare it line-by-line against your Table 4A filing.
3. Categorise every rupee of difference into one of four buckets:
4. Supplier GSTR-1 filing lag — the invoice exists but the supplier filed after the 2B cut-off; it will appear next month. Provide the supplier's GSTIN and invoice details.
5. Pending amendment — the supplier is correcting an earlier GSTR-1. Provide the amendment details and expected timeline.
6. Eligibility dispute — you believe the credit is valid but GSTN has restricted it; provide legal reasoning and documents.
7. Your own error — you over-claimed or misclassified. You must reverse the excess and pay interest.
8. File your reply using Part B of DRC-01C on the portal. Attach your reconciliation workings as a supporting document.
9. Where the difference is due to your error, pay the excess ITC amount plus interest at the applicable rate under Section 50 of the CGST Act using Form DRC-03 before or alongside your Part B reply.

If you do not reply within 7 days: future GSTR-1 and GSTR-3B filings are blocked, the excess ITC is treated as inadmissible, and the matter may escalate to a demand under Section 73 or 74 with penalties. The 7-day window is not extendable by a simple written request — monitor your portal notifications actively during every 3B filing cycle.

Worked Example: Table 4 for Precision Components Pvt. Ltd. — April 2026

Precision Components Pvt. Ltd. manufactures taxable auto components (90% of turnover) and sells exempt agricultural springs (10% of turnover). Here is how their April 2026 GSTR-3B Table 4 is built.

Table 4A — Gross ITC

Table 4B(1) — Permanent Reversals

Table 4B(2) — Temporary Reversals

Table 4C — Net ITC to Credit Ledger

Rs. 15,60,000 − Rs. 93,000 − Rs. 85,000 = Rs. 13,82,000

Table 4D(1) — Reclaim from January 2026

Precision had reversed Rs. 55,000 under 4B(2) in January 2026 for five unpaid invoices. By April 2026, two of those invoices (Rs. 35,000 ITC) were settled. They add Rs. 35,000 to 4A(5) and declare the same amount in 4D(1) for the April return.

DRC-01C exposure check: GSTR-2B shows Rs. 15,60,000; Precision claimed exactly Rs. 15,60,000 in Table 4A. No excess. DRC-01C not triggered. ✓

Had they instead claimed Rs. 16,40,000 — including Rs. 80,000 ITC from an invoice the supplier had filed in GSTR-1 but which missed the 2B cut-off — the excess of Rs. 80,000 would likely breach the Rule 88D tolerance limit. Interest on that excess if unresolved for 90 days: Rs. 80,000 × 18% × 90/365 = approximately Rs. 3,550, plus the risk of GSTIN filing suspension.

Rule 42 Proportionate Reversal — The Calculation You Cannot Skip

Rule 42 applies whenever inputs or input services are used for both taxable and exempt supplies, or for both business and non-business purposes. It requires a monthly provisional reversal (D1) and an annual final true-up (D2).

Monthly D1 formula:

> D1 = C2 × (E + N) / T

Where:

• C2 = ITC on inputs and input services used for the common pool (both taxable and exempt/non-business)
• E = Value of exempt supplies during the month
• N = Value of non-business supplies during the month
• T = Total turnover in the State for the month

D1 goes to Table 4B(1) — it is a permanent, Rule-based reversal. Do not put it in 4B(2).

Annual D2 true-up: At the close of FY 2026-27, recalculate using actual annual turnover figures. If the sum of monthly D1 entries falls short of the annual D2, pay the shortfall with interest calculated from the first month of the year. If D2 is lower than the cumulative D1, reclaim the excess in the April 2027 GSTR-3B under 4A(5).

What commonly goes wrong with Rule 42:

• Treating the entire input pool as "common" when many inputs are used exclusively for taxable supply — this overstates the reversal and erodes ITC unnecessarily
• Skipping the annual D2 true-up entirely, leaving a reconciling difference that surfaces as a non-reconciliation item in GSTR-9C
• Excluding zero-rated export turnover from the taxable side of the denominator — exports are taxable (zero-rated) and should reduce the exempt proportion

The 180-Day Payment Rule Under Rule 37 — How Temporary Becomes Permanent

Rule 37 of the CGST Rules requires ITC reversal on any invoice where the supplier has not been paid within 180 days of the invoice date. The reversal goes to Table 4B(2) — it is temporary, and the credit is restored as soon as payment is made.

The mechanics in practice:

1. Invoice date: 1 October 2025. The 180-day clock expires: 30 March 2026.
2. If payment has not been made by 30 March 2026, reverse the ITC in the GSTR-3B for March 2026 (filed in April 2026) under Table 4B(2).
3. Interest is payable at the applicable rate under Section 50 from the date of original ITC availment to the reversal date. For an ITC of Rs. 1,20,000 claimed in October 2025 and reversed after 6 months: Rs. 1,20,000 × 18% × 180/365 = approximately Rs. 10,667 in interest.
4. When the supplier is paid, reclaim the ITC in that month's Table 4A(5) and declare the reclaim in Table 4D(1). No interest is refunded on the reclaim.

The permanent conversion trap: If you reverse under 4B(2) and the Section 16(4) cut-off for that financial year arrives before you pay the supplier, the credit lapses permanently. You can still pay the supplier commercially — but you cannot reclaim the ITC. This means payment terms and payment discipline are directly linked to your ITC economics: a 210-day payables cycle on an FY 2025-26 invoice means the reversal period may bridge the November 2026 cut-off and kill the credit.

Common Pitfalls in Table 4 Reporting — and How to Fix Them

1. Claiming ITC in 4A that is absent from GSTR-2B This is the most direct route to a DRC-01C. Fix: download GSTR-2B on the 14th, match every line to your purchase register, and exclude anything not in the 2B. Chase the supplier for GSTR-1 filing rather than claiming ahead of the 2B.

2. Routing Section 17(5) credits to 4B(2) instead of 4B(1) This implies an intent to reclaim a legally blocked credit and immediately draws a query. Fix: identify all Section 17(5) items at the point of invoice booking in your ERP. The common blocked categories — employee canteen, club memberships, health insurance beyond the statutory obligation, works contract for immovable property — should be auto-flagged in your accounting system.

3. Omitting the Rule 42 annual true-up Monthly D1 entries are estimates based on the month's turnover split. Without the year-end D2 reconciliation, you risk under-reversing across 12 months and facing a large one-time interest demand when the GSTR-9C auditor identifies it. Fix: build the annual true-up into your March closing checklist, not your post-annual-return review.

4. Reclaiming in 4D(1) without a traceable prior 4B(2) entry GSTN cross-references 4D(1) reclaims against prior 4B(2) reversals. A reclaim without a traceable origin is a red flag for a scrutiny notice. Fix: maintain the reclaim register described in the next section with period-level references.

5. Missing the Section 16(4) cut-off for FY 2025-26 invoices If you discover a missed supplier invoice after 30 November 2026, the credit is permanently lost. Fix: hard-close your FY 2025-26 purchase register by October 2026. Chase suppliers with outstanding GSTR-1 filings every month from April through October.

6. Ignoring Rule 37A reversals when a supplier's GSTIN is cancelled or suspended Rule 37A requires ITC reversal for supplies received from a supplier whose registration has been cancelled with retrospective effect or who is suspended. This is a 4B(2) reversal that is reclaimable if the supplier's status is later restored. Many finance teams miss this entirely because the cancellation or suspension often occurs silently.

Building the Reclaim Register — Connecting 4B(2) to 4D(1)

A reclaim register is the operational tool that prevents reclaimable credits from drifting past the Section 16(4) cut-off. It requires no special software — a structured spreadsheet works — but it must be updated monthly before 3B filing.

Each row in the register should capture:

Review the register before filing every 3B. Any row where the "condition for reclaim" column is satisfied must generate a 4D(1) + 4A(5) entry in that month's return — without exception. Any row approaching the Section 16(4) deadline with the condition unmet should trigger an immediate commercial escalation: can you pay the supplier before the cut-off? If not, write off the credit now rather than discovering the loss at year-end.

Monthly Finance Team Workflow for Table 4 Accuracy

This sequence, followed every month, will keep your Table 4 clean and your DRC-01C dashboard empty:

1. Day 14 — Download GSTR-2B from gst.gov.in > Services > Returns > GSTR-2B. Export to Excel or import into your reconciliation tool.
2. Days 14–16 — Reconcile GSTR-2B to your purchase register line by line. Flag three buckets: (a) in 2B and in books — claimable; (b) in books but not in 2B — follow up with supplier, do not claim; (c) in 2B but not in books — investigate for missing goods receipt notes or unbooked invoices.
3. Days 16–18 — Classify all claimable ITC: which invoices attract Section 17(5)? Which inputs belong to the Rule 42 common pool? Are all RCM liabilities for the month booked and discharged?
4. Days 18–19 — Update the reclaim register. Check for any prior 4B(2) entries where payment has now been made or the supplier has filed GSTR-1.
5. Day 19 — Run the Rule 42 monthly D1 calculation using that month's turnover split. Post the reversal to 4B(1).
6. Day 20 (3B filing deadline) — Populate all Table 4 sub-rows, cross-check 4C against the expected credit ledger movement, file GSTR-3B. Verify the electronic credit ledger balance post-filing.
7. Post-filing (Days 21–27) — Monitor the GST portal dashboard for DRC-01C intimations. A missed DRC-01C is more costly than a timely, honest reply explaining supplier filing lag.

Key Takeaways

• Table 4A must reflect gross ITC — never net of blocked or doubtful credits. Silently excluding an ineligible credit creates a 4A-vs-GSTR-2B mismatch that triggers its own scrutiny.
• 4B(1) and 4B(2) are not interchangeable: Section 17(5) blocked credits and Rule 42/43 reversals are always permanent (4B(1)); Rule 37 unpaid-invoice reversals and Section 16(2)(aa) pending cases are temporary (4B(2)).
• GSTR-2B is the legal ceiling for FY 2026-27 ITC claims; claiming above the 2B figure without a valid documented explanation triggers a DRC-01C under Rule 88D.
• The 7-day DRC-01C reply window is non-negotiable — missing it freezes GSTR-1 and GSTR-3B filings and escalates the matter to a recoverable demand.
• Section 16(4) is a hard cliff: FY 2025-26 ITC expires at 30 November 2026 or the GSTR-9 filing date for FY 2025-26, whichever is earlier. There is no built-in extension.
• Rule 37 reversals carry an interest cost from the date of original ITC availment; a temporary reversal that bridges the Section 16(4) cut-off before payment is made becomes a permanent — and interest-bearing — loss.
• Maintain a reclaim register linking every 4B(2) entry to its target 4D(1) period, the condition that must be met, and the Section 16(4) deadline for that financial year. Without it, recoverable ITC routinely lapses silently.