GST Circular 170 of 2022: How to report interstate URD sales and ITC in GSTR-3B?

The Central Board of Indirect Taxes and Customs(CBIC) has issued Circular 170 to mandate the correct reporting of interstate supplies, ineligible or blocked input tax credit (ITC), and reversal of ITC in Form GSTR-3B.

Information auto-populated in Form GSTR-3B

From December 2020, Form GSTR-3B is getting auto-populated with details of ITC from Form GSTR-2B (inward supply statement). Further, the details of liability get auto-populated from the filed Form GSTR-1. However, the taxpayer is given an option to edit these details.

Importance of GSTR-3B matching with GSTR-1

GSTR-3B is a monthly summary return containing details of sales made, ITC claimed, purchases on which reverse charge is applicable, GST to be paid, etc. On the other hand, GSTR-1 contains details of only outward supplies along with tax liability on the same. Reconciliation of both these returns is essential to-

• Ensure that no invoice is missed out or recorded twice in either of the returns.
• Ensure that the taxpayer arrives at the correct tax liability as any late declaration of liability may attract interest.
• It helps the government to allocate the right share of tax revenue to the respective state.

GSTR-1 is the base for the recipient to claim ITC. It, therefore, becomes essential on the part of the taxpayer to provide correct details in Form GSTR-3B and GSTR-1 to ensure accuracy and consistency in returns filed. Also, there are chances of getting notices from GST Authorities in case of mismatches. Thus, it becomes necessary on the part of the taxpayer to reconcile GSTR-1 and GSTR-3B.

Reporting of interstate supplies made to unregistered persons, composition taxpayers and UIN holders

As per this Circular, a registered taxpayer shall report interstate supplies to:

1. Unregistered persons: Report details of interstate supplies in place of the supply-wise manner in Table 3.2 of Form GSTR-3B and Table 7B or Table 5 or Table 9/10 in GSTR-1 as the case may be.  
2. Composition taxpayers: Report details of interstate supplies in place of the supply-wise manner in Table 3.2 of Form GSTR-3B and Table 4A/4C/9 of Form GSTR-1 as the case may be.
3. UIN holders: Report details of interstate supplies in place of the supply-wise manner in Table 3.2 of Form GSTR-3B and Table 4A/4C/9 of Form GSTR-1 as the case may be.

Also, the customer database should be updated correctly with the correct state name and correct PoS to ensure that the tax reaches the correct consumption state as per GST principles.

Reporting of ITC availed, reversal thereof and ineligible ITC in GSTR-3B

Taxpayers follow different practices to report ineligible ITC or reversal of ITC in Form GSTR-3B. Table 4A of Form GSTR-3B gets auto-populated from Form GSTR-2B. However, Table 4B on reversals of ITC need to be updated by the taxpayer as per his ascertainment. The net ITC in Table 4C gets credited into the electronic credit ledger(ECL) of the taxpayer. Thus, the department needs to ensure that any ineligible ITC or reversal of ITC does not get credited to the ECL of the taxpayer.

GSTR-2B provides invoice-wise details of ITC available, which are auto populated in GSTR-3B. But, as per the current change, the entire set of data will be auto-populated in GSTR-3B except:

• The details regarding ITC which is not available to the registered person due to time limitation or;
• Where the recipient of the interstate supply is located in a different State or Union Territory other than the place of supply. 

Thus, the ineligible ITC, which was not part of the calculation earlier, is now part of the calculation in Table 4A of GSTR-3B. Now, the taxpayer has to identify ineligible ITC as well as reversal of ITC to arrive at net ITC, which gets credited to ECL.

As per Notification 14/2022, the taxpayer has to provide the following details as well:

1. The aggregate value of ITC reversal which was availed in the previous financial year but reversed in returns filed for April 2022 to September 2022, shall be declared in Table 4(B) of GSTR-3B.
2.  Details of ITC on goods/ services received in the previous financial year, but ITC on the same are claimed in returns filed for the months April 2022 to September 2022 shall be declared in Table 4(A) of GSTR-3B.

The taxpayer shall follow the below procedure for correct reporting of information:

Step 1: The taxpayer will have to identify ITCs which are absolute and not reclaimable such as:

• Rule 38: Reversal of credit by a banking or a financial institution
• Rule 42: Reversal of input related to exempted goods or services
• Rule 43: Reversal of input on capital goods related to exempted goods or services
• Any other ineligible ITC as per section 17(5) of the CGST Act in Table 4(B)(1) of GSTR-3B 

Step 2: The taxpayer will have to identify the ineligible ITC, which is not permanent in Table 4(B)(2), such as ineligible ITC due to non-payment of consideration to the supplier within 180 days. Such ITC can be reclaimed in Table 4(A)(5) on fulfilment of required conditions. Such reclaimed ITC shall be shown in Table 4(D)(1).

Step 3: The net ITC available will be calculated in Table 4(C) as per the formula (4A- [4(B)(1)+ 4(b)(2)]. This will get credited to the ECL of the registered person.

Step 4: As the details of ineligible ITC are provided in Table 4(B), no further details will be required to be provided in table 4(D)(1).

Step 5: ITC unavailable due to limitation of period or where the recipient is located in a different place than the place of supply. Then such details should be reported in table 4(D)(2).