New GST Portal Feature: Credit Reversal & ITC Reclaimed Statement

New Feature Launched in the GST Common Portal about Credit Reversal and ITC Reclaimed Statement

Another new feature in GST Common Portal has been introduced by the GSTN in the form of “Credit Reversal and ITC Reclaimed Statement”. This is a powerful tool designed to streamline your ITC reporting process and manage ITC Balances accurately which is of utmost importance to ensure accurate compliances. In this article, I shall dive deep into what this feature entails, how to use it effectively, and the incredible benefits it brings to the table.

Background

The CBIC has notified certain changes in Table 4 of Form GSTR-3B to enable taxpayers in reporting correct information regarding ITC availed, ITC reversal, ITC re-claimed and ineligible ITC vide Notification No. 14/2022 – Central Tax dated 05th July, 2022 (read with circular 170/02/2022-GST, Dated 6th July,2022). Accordingly, the reclaimable ITC earlier reversed in Table 4(B)2 may be subsequently claimed in Table 4(A)5 on fulfilment of necessary conditions. Such reclaimed ITC in Table 4(A)5 also needs to be explicitly reported in Table 4D(1). However, till July,2023 there was no specific ledger was available which can portray the On Hold Balance of ITC and its movement thereof. For your ease of reference, Table 4 of GSTR-3B can be reproduced below:

How ITC Shall be Reported in Table 4 after Notification No. 14/2022-Central Tax dated 05th July, 2022

Now, we can bring our focus only on the All Other ITC portion to be reported in 4(A)(5). How the same needs to be disclosed can be explained with the help of an example.

Suppose, in April,23, X Ltd has an ITC of Rs. 150 as per their books of accounts [ IGST Rs. 70, CGST & SGST Rs. 40/- each].  After matching with GSTR-2B [the auto-populated Static Report] it seems that Rs. 100 Credit can be availed [ IGST Rs 10/-, CGST & SGST Rs. 20/-each] and Rs. 50 [ IGST Rs. 10/- and CGST & SGST Rs. 20/- each] shall be kept on hold as the suppliers have not filed their related GSTR-1 and so the same is not available in GSTR-2B. Therefore, in April,23, X Ltd shall fill the ITC Table in the following way:

This on hold balance of ITC is eligible to be reclaimed in subsequent months subject to availability in GSTR 2B. Now suppose, in May-23, X Ltd observes that out of Rs. 50 kept on hold in April,23, Rs. 25/-[ IGST Rs, 5, CGST & SGST Rs. 10 each]  Credit is reflected in GSTR 2B and again for the current month out of Total ITC of Rs. 200/-[ IGST Rs 100/-, CGST & SGST Rs. 50 each], Rs. 140 [ IGST Rs. 80, CGST & SGST Rs. 30 each ] has appeared in GSTR-2B and Balance Rs. 60 shall be kept on hold. Therefore, in May,2023, the ITC Table of GSTR-3B shall be looked as below:

However, even though the mechanism of reporting of ITC was introduced in GSTR-3B, however, GSTN has not introduced any statement/ledger in order to understand from the portal itself how much ITC is kept on hold which can be reclaimed at later date by the taxpayer. This system is implemented now at the GST Common Portal.

Introduction of ITC Reversed and Reclaimed Statement

GSTN has implemented a new statement in the GST Common Portal namely ITC Reversed and Reclaimed Statement with effect from the return period August,23 wherein the ITC Reversed under Table 4B(2) and ITC Reclaimed as reported in Table 4(D)(1) shall be reflected. Therefore, considering the example given above, the ITC Reversed and Reclaimed Statement shall look like as follows[ if available in the Portal]

April-23

May-23

Due to the aforesaid mechanism, it will be easier for the Tax Payer to track their unclaimed ITC Balance on monthly basis and reconcile the same with their books of accounts. It will also help tax payers to follow up with suppliers who do not file their returns within due time.

As the GSTN has implemented the new statement with effect from the return period August,2023, therefore, it has asked every taxpayer to report their Opening Balance of ITC lying unclaimed as on 31^st July,2023 in the GST Common Portal.

What the GSTN Advisory dated 31.08.2023 Tells about

GSTN has issued an advisory on 31.08.2023 regarding reporting of opening balance of ITC Reversed. The Sailent features of the said advisory can be summarised as follows:

i. ITC Reversed and reclaimed statement shall be maintained in the GST Common Portal from the return period pertains to August,2023[ For monthly filers] or from the return period July to September,23[ For Quarterly filers].

ii. Every taxpayer shall report the Opening Balance of ITC Reversal by clicking on tab Report ITC Reversal Opening Balance. The Said balance shall be the amount eligible Credits which are lying unclaimed due to mismatch with GSTR-2B at the end of July,2023[ For Monthly Filers] or at the end of 1^st Quarter of the FY 22-23 in case of Quarterly Filers. 

iii. The reporting of opening balance can be done within 30^th November,2023. 

iv. Three (3) amendment opportunities will be granted to taxpayers in order to rectify the amount of opening reversal balance. Such amendment can be done within 31^st December,2023. Therefore, upto 30^th November,23, both reporting and amendments in balance can be done. However, from 1^st December,23 to 31^st December,23, only amendments can be done. 

v. If any tax payer does report any opening balance of ITC within the stipulated period, then it shall be presumed that such tax payer does not have any ITC On Hold Balance at the end of July-23 and therefore, no subsequent credit can be taken at a later date.

Our Action Points

So, we shall start to calculate the closing balance of ITC kept on hold/lying unclaimed in our books of accounts as on 31^st July,2023 which are otherwise eligible to be availed as per Section 16 of the CGST Act,2017.In this regard it shall be noted that the aforesaid amount may include any ITC pertaining to Financial Year 2022-23 which was not claimed due to non-uploading by the concerned supplier. These ITCs shall be reported and it can be reclaimed within 30^th November,2023 based upon GSTR-2B reconciliations. In this regard we can follow the following steps:

• Correctly calculate the ITC Kept on Hold but eligible to be reclaimed starting from FY 2022-23 to 31^st July,2023.
• Report the aforesaid balance by 30^th November,2023.
• Make Necessary amendments, maximum 3 times, if required.
• Correctly fill up GSTR-3B from August,2023 onwards based upon the CBIC Notification and Circular as referred above.

Conclusion

The introduction of the Statement of ITC Reversal and Reclaimed is a welcome move on the part of GSTN because it will help the taxpayer to reconcile their books of accounts with the Electronic Credit Ledger maintained in the portal. The exchequer will also get benefitted because from the portal itself it will become possible to identify the amount of credit claimed out of the opening on hold balance and the how much balance remains on hold which can be reclaimed at a later date.