Understanding ITC Reversal and Reclaim under GSTR-3B: FAQs

FAQ- Understanding ITC Reversal and Reclaim Mechanism under Table 4(B)(1), 4(B)(2) and 4(D)(1) of GSTR-3B

The content explains the distinction between ITC reversals reported in Tables 4(B)(1) and 4(B)(2) of Form GSTR-3B. Table 4(B)(1) covers permanent or non-reclaimable reversals under Rules 38, 42 and 43 of the CGST Rules and Section 17(5), while Table 4(B)(2) covers temporary or reclaimable reversals, including specified Rule 37 situations, certain Section 16(2)(b)/(c) situations and inadvertent ITC reversals. Reclaimable ITC reversed under 4(B)(2) may subsequently be claimed in 4(A)(5) and disclosed in 4(D)(1), with the Electronic Credit Reversal and Re-claimed Statement tracking such reversals. The ICAI Practical FAQs state that ITC inadvertently reversed under 4(B)(1), instead of 4(B)(2), may be re-claimed subject to Section 16(4), although it is not reflected in the electronic statement. The supplied material describes an adjustment mechanism against genuine permanent reversals in a subsequent GSTR-3B, illustrated through a January ₹1,00,000 inadvertent reversal and March ₹1,50,000 genuine permanent reversal, resulting in ₹50,000 reported under 4(B)(1).

Question: What about Table 4(B)(1) & (2) in Form GSTR-3B?

Answer: It is to be noted that Table 4(B) – ITC Reversed in Form GSTR-3B is divided into two categories:

• 4(B)(1) is for reversals attributable to the specified statutory provisions—Rules 38, 42, 43 and Section 17(5).
• 4(B)(2) is the residual category for other ITC reversals, including reversals which may subsequently become reclaimable and reclaimed in 4(D)(1)

Table 4(B) – ITC Reversed is specifically provided in the GSTR-3B utility, and the Excel file confirms the following structure:

The utility then calculates Table 4(C) – Net ITC Available as: 4(C) = 4(A) – 4(B)

Question: What is the important point to be considered regarding ITC reversals reported under Table 4(B)(2) of Form GSTR-3B?

Answer: The same utility has a separate field under Table 4(D)(1):

“ITC reclaimed which was reversed under Table 4(B)(2) in earlier tax period”

This is important because 4(B)(2) is not necessarily a permanent reversal of ITC.

For example:

• January: ITC ₹1,00,000 is temporarily reversed in 4(B)(2).
• February: the condition for taking the ITC is fulfilled.
• February: ₹1,00,000 is reclaimed in 4(A) and reported in 4(D)(1) as ITC reclaimed which was earlier reversed under 4(B)(2).

So, the Excel utility itself clearly distinguishes ITC reversed under 4(B)(2) from ITC subsequently reclaimed.

The Government deliberately divided ITC reversals into two categories:

GSTN’s own advisory expressly says that all non-reclaimable ITC reversals should be reported in 4(B)(1), while reclaimable ITC reversals may be reported in 4(B)(2).

This is also consistent with the GST Council’s explanation that reversals which are not permanent in nature and can be reclaimed in future after fulfilment of conditions are to go into 4(B)(2).

Question: What ITC reversals are required to be reported under Table 4(B)(1) of Form GSTR-3B?

Answer: 4(B)(1) is essentially for ITC which is not available to the taxpayer and is not expected to become available merely because some future condition is fulfilled.

The Government specifically identifies:

• Rule 38 – reversal applicable to banking companies/financial institutions;
• Rule 42 – reversal relating to inputs/input services used for exempt supplies/non-business purposes;
• Rule 43 – reversal relating to capital goods;
• Section 17(5) – blocked/ineligible ITC.

These are the statutory categories expressly mentioned in the heading of 4(B)(1).

Question: What ITC reversals are required to be reported under Table 4(B)(2) of Form GSTR-3B?

Answer: This is the temporary/reclaimable reversal bucket. The GST Council specifically gives examples such as:

(a) Rule 37 – 180-day payment condition

Suppose:

• ITC taken = ₹1,00,000
• Supplier has not been paid within the prescribed period.

The ITC is reversed.

That reversal goes into:

4(B)(2) = ₹1,00,000

Later, when payment to the supplier is made and the statutory conditions are satisfied, the ITC can be reclaimed. The Government therefore treats this as a temporary reversal, not a permanent loss of ITC.

(b) Section 16(2)(b)/(c)-type situations

Where ITC is reversed because the relevant statutory conditions have not yet been fulfilled and the credit can subsequently become available, the reversal falls into the reclaimable category.

The Government’s own GST Council material describes reversals under Sections 16(2)(b) and 16(2)(c) as examples of ITC that can be reported in 4(B)(2) and subsequently reclaimed upon fulfilment of conditions.

(c) Wrong/inadvertent ITC taken earlier

This is particularly important. GSTN says that ITC inadvertently availed in 4(A) in an earlier tax period because of clerical or other inadvertent mistakes may also be reversed in 4(B)(2).

So 4(B)(2) isn’t restricted only to Rule 37.

Question: What happens when the temporarily reversed ITC becomes available again?

Answer: This is where 4(A)(5) and 4(D)(1) become important.

Suppose: In January, ITC available = ₹1,00,000. You temporarily reverse ₹1,00,000 because the supplier has not been paid within the prescribed period. You report:

4(B)(2) = ₹1,00,000

Therefore, the ₹1 lakh does not remain available as net ITC in that return.

In March- You satisfy the relevant condition. The ₹1 lakh becomes reclaimable. You now take the ITC again in:

4(A)(5) – All other ITC = ₹1,00,000

And simultaneously disclose:

4(D)(1) – ITC reclaimed which was reversed under 4(B)(2) in an earlier tax period = ₹1,00,000

This is precisely the mechanism prescribed by GSTN.

So the trail becomes:

Original ITC → 4(B)(2) reversal → temporary reversal balance → 4(A)(5) reclaim + 4(D)(1) disclosure

Question: Why was Table 4(D)(1) introduced by Government in Form GSTR-3B?

Answer: This is actually very important. 4(D)(1) is not another ITC claim. The actual ITC claim is made through 4(A)(5).

4(D)(1) is essentially a disclosure/tracking mechanism identifying how much of the ITC reported in 4(A)(5) represents ITC that had previously been reversed under 4(B)(2).

GSTN subsequently introduced the Electronic Credit Reversal and Re-claimed Statement to maintain this electronic trail. GSTN explains that the statement tracks ITC reversed under 4(B)(2) and subsequently reclaimed through 4(A)(5)/4(D)(1).

Question: What is the important distinction between ITC reversals reported under Table 4(B)(1) and Table 4(B)(2)?

Answer: It would be wrong to interpret 4(B)(2) as simply “all reversals other than 4(B)(1)”.

The real conceptual test is:

Is the reversal permanent/non-reclaimable, or is it temporary/reclaimable?

The Government’s advisory actually says “All reclaimable ITC reversals may be reported in table 4(B)(2)”.

That distinction becomes especially significant when dealing with Rule 37A, Section 16(2)(c), supplier tax-payment issues, 180-day reversals, credit notes, and subsequent reclaim.

In short:

4(B)(1) = ITC lost/blocked permanently

4(B)(2) = ITC put on hold temporarily

4(A)(5) = ITC becomes available and is reclaimed

4(D)(1) = disclosure of the amount reclaimed from earlier 4(B)(2) reversals

This is the Government’s intended architecture of Table 4.

If your real question is whether a particular reversal—especially ITC reversal under Section 16(2)(c) / Rule 37A—should go into 4(B)(1) or 4(B)(2), that requires a more careful analysis because Rule 37A has its own specific treatment.

Question: Whether a registered person can re-claim Input Tax Credit (ITC) which was inadvertently reversed in Table 4(B)(1) instead of Table 4(B)(2) of FORM GSTR-3B, considering that such reversal is not reflected in the Electronic Credit Reversal and Re-claimed Statement?

Answer: This question with answer has been given in Practical FAQs on filing of Form GSTR-3B by The Institute of Chartered Accountants of India.

Yes- The registered person is eligible to re-claim such ITC, subject to the statutory time limits under Section 16(4) of the CGST Act, 2017.

However, attention is drawn to the standard reporting mechanism on the common portal:

Table 4(B)(1) of FORM GSTR-3B is earmarked exclusively for permanent/non-reclaimable reversals (e.g., blocked credits under Section 17(5) of the CGST Act, or apportionments under Rules 38, 42 & 43 of the CGST Rules, 2017).

Table 4(B)(2) is designated for temporary/reclaimable reversals (e.g., reversals under Rules 37/37A or inadvertent mistakes where the invoice is not yet accounted for in the books).

The Electronic Credit Reversal and Re-claimed Statement on the common portal tracks only those reversals reported in Table 4(B)(2). Reclaimed amounts are ordinarily reported in Table 4(A)(5) and disclosed in Table 4(D)(1). Since the reversal in the present case was erroneously reported under Table 4(B)(1), the Reclaim Ledger was not updated, and the re-claim route through Table 4(D)(1) is not available directly.

To rectify this inadvertent error the registered person may adjust the erroneously reversed amount in a subsequent month’s FORM GSTR-3B by netting it off against actual, genuine permanent reversals. Specifically, the taxpayer may reduce the equivalent erroneously reversed amount from the total permanent reversals to be reported in Table 4(B)(1) for that subsequent tax period.

Example- Suppose:

• In January, the taxpayer inadvertently reversed ₹1,00,000 of reclaimable ITC in Table 4(B)(1) instead of Table 4(B)(2).
• As a result, the ₹1,00,000 reversal was not reflected in the Electronic Credit Reversal and Re-claimed Statement.
• In March, the taxpayer has ₹1,50,000 of genuine permanent ITC reversal, which is correctly reportable under Table 4(B)(1).

Normally:

March 4(B)(1) = ₹1,50,000

However, since ₹1,00,000 was already inadvertently reversed under 4(B)(1) in January, the taxpayer may adjust that amount against the genuine permanent reversal in March:

Actual permanent reversal: ₹1,50,000
Less: Earlier inadvertent reversal: ₹1,00,000
Net amount reported in March under 4(B)(1): ₹50,000

In simple terms

January:
Incorrectly reported under 4(B)(1) → ₹1,00,000

March:
Actual permanent reversal → ₹1,50,000

March 4(B)(1):
₹1,50,000 − ₹1,00,000 = ₹50,000

Thus, the earlier inadvertent reversal of ₹1,00,000 is effectively adjusted against the genuine permanent reversal arising in the subsequent tax period.

Important: This approach should be used only where there is an actual and genuine permanent reversal available for adjustment. A taxpayer should not create a fictitious 4(B)(1) reversal merely to correct the earlier reporting error.

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