GSTR-3B is a monthly return in summary form. In GSTR-3B, taxpayers broadly report their outward supplies, RCM supplies & admit GST on the same, make a claim to input tax credit (ITC) and discharge taxes accordingly. Table 4 of GSTR-3B deals with eligible ITC and this table is divided into 4 sub-tables, namely –

A. ITC Available – Here ITC excluding ineligible and blocked credits will be reported

B. ITC Reversed – Here ITC reversals as per R. 42 & 43 (ITC apportionment towards exempt supplies and non-business purposes), R. 37 of the CGST Rules & other reversals will be reported

C. Net ITC Available (A) – (B)

D. Ineligible ITC – Here, blocked credits under S. 17(5) and ineligible ITC under S. 17(4) of CGST Act & others will be reported

Most taxpayers disclose ITC properly in sub-tables A & B in their monthly GSTR-3B, but tend to err in sub-table D which is ineligible credits. As a matter of accounting practice, taxpayers generally expense-off such ineligible & blocked credits by dumping the same in respective expense heads. By doing so, they lose track of it and end up not reporting such ITC in sub-table D. In case of ineligible and blocked credits, ITC chain is broken and result in clear income for the Governments.

We all know GST revenue will be shared between the Centre and the States as per the provisions of GST Settlement of Funds Rules, 2017. The GSTN network periodically provides data on cross utilisation of ITC and funds available for apportionment to the competent authority on the basis of returns furnished by taxpayers. Therefore, it is more important for the GSTN network to have accurate data for proper settlement and apportionment of funds. Else, the revenue shared between the Centre and the States may not be accurate. Incorrect or non disclosure of ineligible and blocked credits by taxpayers in their monthly GSTR-3B is aggravating this problem. Some states have already made a hue and cry in GST Council meetings and States like Maharashtra and Kerala have taken the lead by issuing trade circular instructing trade and industry on reporting requirements in GSTR-3B as regards input tax credits. Other states may follow soon.

Please note incorrect reporting of input tax credits in monthly returns may result in selection of such cases for scrutiny by the Department. Therefore, taxpayers are advised to maintain proper checks & balances and exercise due care and caution while preparing and filing monthly returns.

Taxpayers may ask, is there a recourse available for taxpayers to correct such inadvertent errors in their monthly returns? Of course yes. Such errors can be corrected in the following manner:

1. Errors relating to FY 2018-19 can be corrected in Annual Return (GSTR-9) by reporting the numbers in proper table, table 7 to be precise.

2. Errors relating to FY 2019-20 can be corrected in monthly GSTR-3B for the months of April 2020 to Sept 2020 or in Annual Return (GSTR-9)

3. Errors relating to tax periods April 2020 to July 2020 can be corrected in subsequent months’ GSTR-3B.


DISCLAIMER: The views expressed are strictly of the author and NNR & Co. The contents of this article are solely for informational purpose. It does not constitute professional advice or recommendation of firm. Neither the author nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon.

Author Bio

Qualification: CA in Practice
Company: NNR & Co.,
Location: Bengaluru, Karnataka, IN
Member Since: 20 Jun 2020 | Total Posts: 2
A practicing Chartered Accountant | Partner at NNR & Co., Bengaluru | Specializes in the field of Indirect Tax Laws | Past President of Karnataka State Chartered Accountants Association (KSCAA) | ICAI IDT Faculty View Full Profile

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One Comment

  1. Sachin Goel says:

    Means the taxpayers have to do own accounting as well as the accounting of Government.
    Kudos to CGST Deptt. for such visionary findings.
    The concerned officers’ name should not only be recorded in Guinness Book of Records but they should also be conferred “Bharat Ratna” or even the Noble Prize.

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June 2021