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