GSTN releases Advisory and FAQs on E-Credit Reversal and Re-claimed Statement & RCM Liability/ITC

The Goods and Services Tax Network ( GSTN ) has released an advisory with FAQs with regards to the reversed and reclaimed Input Tax Credit ( ITC ) and Reverse Charge Mechanism (RCM) liability and ITC.

The network claimed that to assist the taxpayers, the portal has now introduced a new statement called "RCM Liability/ITC Statement”. It was claimed that this will improve the transparency for the RCM transactions by getting the RCM liability provided in the Table 3.1(d) of GSTR-3B and its corresponding ITC claimed in Table 4A(2) and 4A(3) of GSTR-3B for a return period.

The advisory also details how to report the RCM ITC opening balance. When you login to your GST port, go to report RCM ITC Opening Balance or Services, then navigate to Ledger where you can see the RCM Liability/ITC Statement and finally Report RCM ITC Opening Balance.

This statement has been available since August 2024 for monthly filers and from the July- September 2024 quarter for quarterly filers.

If a taxpayer claims RCM ITC in excess of the available balance in the RCM ledger, along with the current period RCM liability, the system issues a warning message, says the GSTN. It has also informed that strict system validations will soon be enforced.

The GSTN added that “Now, the taxpayers are hereby informed that, shortly, negative values or availment of excess ITC over and above available balance, shall not be allowed in both the ledgers. Both the statements shall have a below mentioned validation for regulation of ITC:

a. The reclaimed ITC in Table 4(D)(1) shall be lesser than or equal to the combined values of closing balance of Electronic Credit Reversal and Re-claimed Statement and ITC being reversed in Table 4(B)(2) of current period GSTR-3B. and,

b. The RCM ITC claimed in Table 4(A)2 & 4(A)3 shall be equal to or less than the combined values of RCM liabilities paid in Table 3.1(d) of the same GSTR-3B and closing balance of RCM Liability/ITC Statement.”

The GST system will not allow the submission of GSTR-3B until the disparity is corrected if a taxpayer already shows a negative closing balance in the Electronic Credit Reversal and Re-claimed Statement or the RCM Liability/ITC Statement.

Also, the taxpayer is required to reverse any excess ITC in Table 4(B)(2) of the current period GSTR-3B if the negative amount relates to excess ITC reclaimed. The amount reversed in Table 4(B)(2) will be added to the tax due for that return period if there is no qualifying ITC available in the present year.

Similar to this, if the RCM Liability/ITC Statement shows a negative balance, the taxpayer must either reduce the ITC claimed in Table 4(A)(2) or 4(A)(3) to the extent of the negative closing balance in the current return period, or discharge the additional RCM liability equal to the negative balance in Table 3.1(d). Only then will the return filing be permitted, GSTN stated.

FAQs related to Electronic Credit Reversal and Re-claimed Statement and RCM Liability/ITC Statement

How to view my Electronic Credit Reversal and Re-claimed Statement?

You can view the statement by navigating to the Dashboard › Services › Ledger › Electronic Credit Reversal and Re-claimed.

How to view my RCM Liability/ITC Statement?

You can view the RCM Liability/ITC Statement by navigating to the Dashboard › Services › Ledger › RCM Liability/ITC Statement.

3. What will be changed in the GSTR-3B in respect of Electronic Credit Reversal and Re-claimed Statement?

Shortly, taxpayer will not be able to file their GSTR-3B in case the ITC claimed in Table 4D(1) exceeds the closing balance in the Electronic Credit Reversal and Re-claimed Statement (ITC reclaim ledger) and the ITC reversed in Table 4B(2) of the current return period putting together.

4. How to file GSTR-3B if the closing balance of Electronic Credit Reversal and Re-claimed Statement (ITC reclaim ledger) is already Negative?

If the closing balance of the ITC reclaim ledger is negative, it indicates that excess ITC was reclaimed earlier. Therefore, to file GSTR-3B, you must reverse the excess claimed ITC in Table 4B(2) of the respective return period, up to the amount of the negative closing balance. This will allow you to correct the discrepancy and proceed with filing the return. In case there is no ITC available, this reversal declared in table 4(B)2 will be added to your liability in the current period while filing GSTR-3B.

Example: The closing balance of the ITC reclaim ledger for the current return period is -₹10,000, which means ₹10,000 of excess ITC has been reclaimed in earlier periods. To file your GSTR-3B, you would need to reverse this earlier excess reclaimed ITC of ₹10,000 in Table 4B(2) for the current period.

5. How will the validation mechanism work in GSTR-3B for RCM Liability/ITC Statement?

The taxpayers will not be able to file GSTR-3B in case the claimed RCM ITC in Table 4A(2) or 4A(3) exceeds the available balance in the RCM Liability/ITC Statement and the RCM liability reported in Table 3.1(d) for the current return period put together.

6. How to file GSTR-3B if the closing balance of RCM Liability/ITC Statement is Negative?

If the closing balance of the RCM Liability/ITC Statement is negative, it indicates that excess RCM ITC has been claimed earlier. To proceed with filing, you must either pay the outstanding RCM liability in Table 3.1(d) or reduce the ITC being claimed in Table 4A(2) or 4A(3) in the current return period, equivalent to the amount of the negative closing balance. Once the discrepancy is corrected, you will be able to file your return.

Example: Let’s assume that the closing balance of the RCM Liability/ITC Statement is -₹5,000. This means that ₹5,000 of excess RCM ITC has been claimed earlier. To resolve this and file your GSTR-3B, you can:

1. Pay the RCM liability: You can pay additional ₹5,000 in Table 3.1(d) for the current return period to cover the excess ITC claimed.

OR

2. Reduce the ITC claimed: You can reduce ₹5,000 from the RCM ITC in Table 4A(2) or Table 4A(3) for the same period, if RCM ITC is available more than ₹5,000 in the current period.

Once either the excess RCM liability is paid or the requisite ITC is reduced from available ITC to match the available negative closing balance, the discrepancy will be resolved, and you can proceed with filing your return.

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