Need to Change Exposure of Reversal & Ineligible ITC in GSTR 3B

With the Notification No. 49/2019 – Central Tax dated 09-10-2019 w.e.f. 01-07-2017 authorities made amendments in Rule 61(5) of CGST Rules. Which now states that If return in form GSTR 3B has been filed by a person referred to in rule 61(1) then he/she doesn’t have to furnish the return in from GSTR 3.

Due to the technical glitches that occurred in the functioning of the Matching System, form GSTR-2 and GSTR-3 never come into action properly. More details are stated in Sec 42 & Sec 43 of the Central Good and Service Tax Act, 2017. And due to it form GSTR 3B Get to know details on GST return 3B form along with the online return filing procedure. Also, we mentioned GSTR-3B due dates, penalty & general queries. Read more which is a summary return has been recognized for Monthly Return filing under Sec 39 of Central Good and Service Tax Act, 2017.

Reversal & Ineligible ITC Required in Table 4 of GSTR 3B

Table 4 of GSTR 3B contains the details on eligible credit and in this table, a taxpayer has to provide the following details

• ITC Available: On supplies (inward) on which ITC was available, like Import of Goods or Services, supplies from ISD, supplies liable to reverse charge, and other inward supplies, as applicable.
• ITC Reversed: On input(s) service(s) or capital good(s) used for non-business purposes or used for exempt supplies. In case of discount has been availed on the tax component of capital goods, machinery, and plant. In these, ITC will be not permitted. These reversals also need to be included in this particular table.
• Eligible ITC: After deducting ITC Reversed from ITC Available.
• Ineligible ITC: GST paid on inward supplies listed details in the negative list, these are not eligible for the ITC. *Required for disclosure purposes only.

However, Most of the taxpayer in the industry follow the following practices:

• Capture only Eligible ITC required to be claimed in GSTR 3B
• ITC Available & ITC reversed if any is captured in GSTR 3B

As per previous records, Ineligible ITC is not usually captured in form GSTR 3B Read an easy guide to GSTR 3B form filing through Gen GST Desktop software version 2.0. Also, we have attached a PDF file of the complete procedure. Read more. It is because most ineligible ITC gets clubbed with expenses in the Book of Accounts and it doesn’t impact Input Tax Credit GL of the taxpayer. Due to a lack of information on such ineligible ITC, taxpayers don’t mention these details in the table.

As per a recently released Circular, Circular No: CT/3626/2020-C1 dated 16th June 2020 SGST Dept., Govt. of Kerala, Thiruvananthapuram in which the issue of Non- disclosure of Ineligible ITC were mentioned and stated that it is resulting in significant revenue loss to the State due to shortage of IGST Fund transfer to the state’s collection.

Fund Transfer Mechanism by Centre to States

The Circular also states that the process of transferring fund in between center and state by cross utilization of IGST and SGST, and allocation of IGST in between Centre, States, and within states is explained in Section 53 of CGST/SGST Act and Section 17 and 18 of IGST Act and considering GST Settlement of Funds rule 2017.

The provided details are made available by GSTN to the Component Authority who is responsible for transferring the funds to state basis the statutory provisions as stated above. The early mentioned fund transfer is mainly based on data presented under GSTR 3B. Hence the success of the mentioned process also depends on whether the disclosed data in GSTR 3B is correct or not.

Correct Mechanism for Reporting ITC in GSTR-3B

The released circular also provide details of the following for Table 4 of form GSTR-3B;

Corrections in Earlier Period Returns

Data disclosed in the GSTR-3B by most of the taxpayers does not get correctly represented, It has been instructed with the circular to make the following corrections, in the case where data in regarding Ineligible ITC and ITC reversal is not been accurately represented.

• Correction in data in respect of FY 2018-19– need to be corrected in Annual Return form GSTR 9 A simple guide to GSTR 9 (GST annual return form) online filing procedure with due dates. We attached all screenshots and divided into 19 sections. Read more of the Financial year 2018-19.
• Correction in data in FY 2019-20. These need to be reported in form GSTR-3B filed in between April to September 2020.
• Correction in data for April 2020 and following period– These will be adjusted in form GSTR-3B of the succeeding period.