Accurate reporting of Input Tax Credit (ITC) has always been a cornerstone of the GST compliance framework. Over time, the GST ecosystem has evolved to reduce manual errors, mismatches, and unintended excess credit availment. In line with this objective, GSTN has introduced system-driven statements to monitor two sensitive areas of GST compliance – reversal and re-claim of ITC, and ITC under the Reverse Charge Mechanism (RCM).

The Electronic Credit Reversal and Reclaimed Statement (commonly referred to as the Reclaim Ledger) and the RCM Liability/ITC Statement (RCM Ledger) are aimed at ensuring transparency, accuracy, and discipline in reporting ITC in Form GSTR-3B. With stricter system validations now announced, it becomes critical for taxpayers to understand how these ledgers work and how they affect return filing.

Electronic Credit Reversal and Re-claimed Statement: Purpose and Scope

The Electronic Credit Reversal and Re-claimed Statement was introduced on the GST portal from August 2023 onwards for monthly taxpayers and from the July–September 2023 quarter for quarterly taxpayers.

The primary objective of this statement is to track:

  • ITC temporarily reversed in Table 4(B)(2) of GSTR-3B, and

  • Subsequent re-claim of such ITC in Table 4(A)(5) and Table 4(D)(1).

This ledger acts as a cumulative record of ITC reversals and re-claims, thereby reducing clerical errors and ensuring that re-claimed ITC does not exceed what was earlier reversed.

At present, if a taxpayer attempts to re-claim ITC in excess of the available balance reflected in the Reclaim Ledger, the system generates a warning message. However, filing of GSTR-3B is currently allowed despite the warning.

To facilitate smooth transition, taxpayers were provided multiple opportunities to declare opening balances of ITC that had been reversed earlier but not reclaimed as on the date of introduction of the ledger.

The statement can be accessed on the GST portal by navigating to:
Dashboard → Services → Ledger → Electronic Credit Reversal and Re-claimed Statement.

RCM Liability/ITC Statement: Tracking Reverse Charge Credits

To address reporting challenges relating to ITC under Reverse Charge Mechanism, GSTN introduced the RCM Liability/ITC Statement from:

  • August 2024 for monthly filers, and

  • July–September 2024 period for quarterly filers.

This statement captures and tracks:

  • RCM liability reported in Table 3.1(d) of GSTR-3B, and

  • Corresponding ITC claimed in Table 4(A)(2) and Table 4(A)(3).

The system generates a warning if the ITC claimed under RCM exceeds the combined value of:

  • Closing balance available in the RCM Ledger, and

  • RCM liability reported in Table 3.1(d) of the same return period.

As with the Reclaim Ledger, taxpayers were provided opportunities to declare and amend opening balances relating to excess RCM liability or ITC pertaining to periods prior to implementation.

The RCM Liability/ITC Statement can be accessed via:
Services → Ledger → RCM Liability/ITC Statement.

Upcoming System Validations: A Shift from Warnings to Restrictions

GSTN has now informed taxpayers that negative balances or excess availment of ITC will shortly not be permitted in both ledgers. This marks a significant shift from advisory warnings to hard system validations.

The proposed validations are as follows:

1. Re-claimed ITC Validation

The ITC re-claimed in Table 4(D)(1) shall be less than or equal to:

  • Closing balance of the Electronic Credit Reversal and Re-claimed Statement, plus

  • ITC being reversed in Table 4(B)(2) of the current GSTR-3B.

2. RCM ITC Validation

The ITC claimed in Table 4(A)(2) and 4(A)(3) shall be equal to or less than:

  • RCM liability paid in Table 3.1(d) of the same return period, plus

  • Closing balance available in the RCM Liability/ITC Statement.

Impact of Negative Balances on GSTR-3B Filing

If a taxpayer already has a negative closing balance in either ledger, the system will block filing of GSTR-3B until corrective action is taken.

For Negative Balance in Reclaim Ledger:

  • The excess ITC must be mandatorily reversed in Table 4(B)(2) of the current GSTR-3B.

  • If sufficient ITC is not available, the reversal amount will be added to output tax liability for the current period.

For Negative Balance in RCM Ledger:

  • The taxpayer must either:

    • Pay additional RCM liability equivalent to the negative balance in Table 3.1(d), or

    • Reduce ITC claimed in Table 4(A)(2) or 4(A)(3) to the extent of the available balance.

Key Takeaway for Taxpayers

The introduction of these ledgers and the upcoming enforcement of strict validations reflect GSTN’s move towards system-driven compliance. Taxpayers must proactively:

  • Review opening balances,

  • Reconcile ITC reversals and re-claims, and

  • Ensure RCM ITC is aligned with liability payments.

Failure to address mismatches in these ledgers can directly impact the ability to file GSTR-3B, making timely review and correction essential.

For detailed guidance, GSTN advisory dated 17 September 2024 on the Reclaim Ledger and the advisory on the introduction of the RCM Liability/ITC Statement may be referred.