As per the decision of the Council the Central Government had inserted Rule 37A in Central Goods and Services Tax Rules, 2017 to prescribe the mechanism for reversal of Input Tax Credit (ITC) by a registered person in the event of nonpayment of tax by the supplier by a specified date and mechanism for re-availment of such credit, if the supplier pays tax subsequently.
As per Rule 37A, if a registered person claims input tax credit in their GSTR-3B return for a certain tax period based on an invoice or debit note, and the supplier reports the details in GSTR-1 or through the invoice furnishing facility, but the corresponding GSTR-3B isn’t submitted by the supplier by the 30th of September following the end of the financial year, the registered person must reverse the credited amount by the 30th of November following that financial year. Failure to do so means the person has to pay the amount along with interest.
Reversing Input Tax Credit means adding previously claimed credits to the output tax liability, nullifying the earlier claim, and interest may apply depending on when the reversal is done.
GSTN Advisory of November 14, 2023
“Vide Rule 37A of CGST Rules, 2017 the taxpayers have to reverse the Input Tax Credit (ITC) availed on such invoice or debit note, the details of which have been furnished by their supplier in their GSTR-1/IFF but the return in FORM GSTR-3B for the said period has not been furnished by their supplier till the 30th day of September following the end of financial year in which the Input Tax Credit in respect of such invoice or debit note had been availed.
The said amount of ITC is required to be reversed by such taxpayers, while furnishing a return in FORM GSTR-3B on or before the 30th day of November following the end of such financial year, as part of this legal obligation.
To facilitate the taxpayers, such amount of ITC required to be reversed on account of Rule 37A of CGST Rules for the financial year 2022-23 has been computed from the system and has been communicated to the concerned recipient. The email communication to this effect has been sent on the registered email id of the taxpayer.
The taxpayers are advised to take note of it and to ensure that such ITC, if availed by them, is reversed as per Rule 37A of Central Goods and Services Tax Rules before 30th of November, 2023 in Table 4(B)(2) of GSTR-3B while filing the concerned GSTR-3B.”
Implications on non-reversal of ITC
Where the said amount of input tax credit is not reversed by the registered person in a return in FORM GSTR-3B on or before the 30th day of November following the end of such financial year during which such input tax credit has been availed, such amount shall be payable by the said person along with interest thereon under Section 50.
As per Section 50, the interest shall be calculated from the day succeeding the day on which such tax was due to be paid.
Return GSTR-3B subsequently filed by Supplier
Where the said supplier subsequently furnishes the return in FORM GSTR-3B for the said tax period, the said registered person may re-avail the amount of such credit in the return in FORM GSTR-3B for a tax period thereafter.