The Goods and Services Tax Network (GSTN) has issued an advisory offering taxpayers one last chance to report their Input Tax Credit (ITC) reversal opening balance. This blog explains the issue in detail, outlines the key changes in reporting ITC reversals, and provides critical dates and steps taxpayers should follow to comply.

What is ITC Reversal Opening Balance?

Input Tax Credit (ITC) allows businesses to reduce the tax paid on inputs from their output tax liability. However, under certain conditions, ITC may need to be reversed and later reclaimed if the taxpayer fulfills the required conditions. This ITC reversal, if not immediately reclaimed, remains as an opening balance that needs to be reported accurately.GST Compliance

ITC Reversal Reporting in GSTR-3B

In July 2022, the Government made significant changes to Table 4 of Form GSTR-3B via Notification No. 14/2022 – Central Tax, dated 5th July 2022, and Circular 170/02/2022-GST, dated 6th July 2022. The changes required taxpayers to not only reverse and reclaim ITC but also to report these reversals and reclaims correctly in Table 4D(1). The complexity of these steps has led to confusion and clerical errors.

To address these challenges, the GSTN introduced a new Electronic Credit Reversal and Re-claimed Statement starting from the return period of August 2023 for monthly taxpayers and July-September 2023 for quarterly taxpayers. This new statement was designed to help taxpayers accurately report their ITC reversals and reclaims.

 

Re-opening of ITC Reversal Reporting Facility

To assist taxpayers in correcting and reporting their cumulative ITC reversal opening balance, the GSTN has introduced a re-opening of the reporting facility. This provides taxpayers a final opportunity to report their cumulative ITC reversal (ITC reversed but not yet reclaimed) before the system hard locks the reversal and reclaim ledger.

Extension of Due Dates for Reporting Opening Balance

The GSTN has extended the due dates for reporting and amending the ITC reversal opening balance. Here are the important deadlines:

  • 15th September 2024 to 31st October 2024: The facility to report the ITC reversal opening balance will be open.
  • Till 30th November 2024: Amendments to the declared opening balance will be allowed.

Key Details for Monthly and Quarterly Taxpayers:

1. Monthly taxpayers must report their opening balance considering the ITC reversal up to July 2023, as balances after this period are already recorded in the ledger.
2. Quarterly taxpayers must report their opening balance for the April–June 2023 period, as subsequent reversals are already available in the ledger.

GST Compliance

Consequences of Non-Compliance

After the hard lock, taxpayers will not be allowed to reclaim excess ITC beyond what was reversed previously. It’s crucial for taxpayers to take advantage of this last opportunity to report accurately and avoid discrepancies in future returns.

Conclusion

Taxpayers should act promptly to ensure that their ITC reversal and reclaim entries are accurate before the system prevents further changes. By utilizing this extended reporting window, businesses can safeguard against future issues and maintain compliance with GST reporting requirements.