Table 4 of GSTR-3B - New Changes to Format, Reporting Procedure, Impact on Taxpayers

In July 2022, the government made certain changes to the format of the GSTR-3B return, notably changing the procedure for reporting data in Table 3 and Table 4 of the form. The changes were first announced in July via Notification No. 14/2022 – Central Tax, and thereafter, in September, the GSTN released the format for reporting data in Table 4 of the GSTR-3B. 

The new format of Table 4 of the GSTR-3B has now been updated to include a more detailed split of input tax credit (ITC) that is eligible and ineligible, restricted, reversed and reclaimed, along with other similar ITC information. In this article, we discuss the new changes to the Table 4 format and how taxpayers need to report their ITC in the GSTR-3B going forward.

Contents of Table 4 of GSTR-3B and Applicability 

Table 4 of the GSTR-3B return contains the break-up of all ITC-related information for a particular return period. This includes ITC available on the import of goods and services, capital goods, inward supplies liable to reverse charge, ITC distributed by an Input Service Distributor (ISD), etc. It also includes data on ineligible ITC and ITC reversals under the various rules and sections of the Central Goods and Services Tax (CGST) Act and Rules, ITC unavailable, and ITC reclaimed.

Declaring the right amounts of ITC is extremely important here as it determines the net tax liability and total GST due to the government. Failure to report accurate values in this table could result in notices and penalties.

The new format of Table 4 applies from the August 2022 return period.

Old format of Table 4 of GSTR-3B

The old format of Table 4 of GSTR-3B required that taxpayers report all available ITC in Table 4(A). This part was auto-populated from the GSTR-2B and excluded the ineligible ITC. 

In Table 4(B), taxpayers reported all ITC that was reversed as per Rules 42 and 43 of the CGST Rules, and other reversals, if any. 

• Rule 42 restricts ITC availability on supplies used partly for business purposes and exempt supplies.
• Rule 43 restricts ITC on capital goods based on the same reasons. The net ITC that could be claimed was displayed in Table 4(C).

Finally, ineligible ITC as per Section 17(5), such as ITC on goods/services used for personal use, motor vehicles (with some exceptions), certain insurance premiums, club memberships, etc., was to be reported in the last part of the table, i.e. Table 4(D). 

The table below displays the OLD format of Table 4 of the GSTR-3B.

New format of Table 4 of GSTR-3B

Effective the August 2022 return period, the government revamped Table 4, making ITC reporting in GSTR-3B a bit more challenging. The new Table 4 has four sections 4(A), 4(B), 4(C), and 4(D).

Every tax period, the total ITC figure gets auto-populated in Table 4(A) from the GSTR-2B statement (except for unavailable ITC due to the period of limitation or place of supply rules). Taxpayers will need to bifurcate their ITC into eligible and ineligible ITC accurately for GSTR-3B reporting. It allows the ineligible ITC to be deducted from the auto-populated total ITC figure. 

The next part is bifurcating ineligible ITC into temporary and permanent reversals. Temporary reversals refer to ITC that can be reclaimed at a later date. 

In Table 4(B) of the GSTR-3B form, there are again two parts – 4(B)(1) and 4(B)(2). Taxpayers will now need to report all non-reclaimable reversals of input tax credit in Table 4(B)(1). This includes reversals as per- 

• Rule 38 of the CGST Rules, i.e. ITC restrictions applicable to a banking company
• Rule 42 and 43 of the CGST Rules – explained above 
• Section 17(5) of the CGST Act – explained above 

Note here that the new additions to this section for reporting are Rule 38 and Section 17(5). 

Coming to Table 4(B)(2), taxpayers need to report all reclaimable reversals here, such as ITC restricted as per- 

• Rule 37 of the CGST Rules – Non-payment of the sale consideration within 180 days 
• Section 16(2)(b) of the CGST Act  – Where the goods/services have not been received yet
• Section 16(2)(c) of the CGST Act – Where the suppliers have not paid their GST dues 
• Auto-populated credit notes

In this section, taxpayers can also report ITC availed in Table 4(A) in any previous tax period due to an inadvertent error. The net ITC will be displayed in Table 4(C), based on the formula 4(A) – 4(B) = 4(C).

Note: Any ITC previously reversed under Table 4(B)(2) can be reclaimed in Table 4(A)(5) in the GSTR-3B return of the appropriate tax period. The break-up of such reclaimed ITC is shown in Table 4(D)(1) of the same return. 

Finally, coming to Table 4(D), there are two sections – 4(D)(1) and 4(D)(2). Taxpayers need to use 4(D)(2) to report ITC, which is not available by law. For instance, ITC restricted by Section 16(4) for being reported by the supplier after 30th November of the following financial year or after the filing of the annual GST return, whichever is earlier. Another instance is where ITC is restricted due to the place of supply (POS) rules. For example, CGST/SGST on hotel rooms in another state. 

What is the procedure to be followed by taxpayers while filing their GSTR-3B?

1. The total ITC (both eligible and ineligible) is auto-populated from the GSTR-2B in Table 4(A), except for unavailable ITC limited by Section 16(4) or POS rules. 
2. The taxpayer reports the non-reclaimable (permanent) reversals of ITC in Table 4(B)(1). 
3. The taxpayer reports reclaimable (temporary) reversals of ITC in Table 4(B)(2). If such ITC is reclaimed in future, the same is to be done in Table 4(A)(5) on fulfilling the relevant conditions. In this part, taxpayers may also reverse ITC claimed in a previous tax period due to an inadvertent error. 
4. Any reclaimed ITC should also be reported in Table 4(D)(1). 
5. The net ITC available will be displayed in Table 4(C) and credited to the Electronic Credit Ledger of the taxpayer. 
6. ITC not available on account of the limitation of the time period as per Section 16(4) or POS rules should be reported in Table 4(D)(2). 

Why is ineligible ITC under section 17(5) now reported in Table 4(B) and not Table 4(D)? 

After the update of the Table 4 format, Table 4(A) now gets auto-populated with the total figure from the GSTR-2B, including ineligible ITC. If the ineligible ITC is not properly bifurcated and reversed in Table 4(B), the same will accumulate in the net ITC balance of the taxpayer. This is incorrect and unlawful. Hence, ineligible ITC should be accurately reversed and deducted, and reclaims corrected reported, in order to arrive at the exact net ITC figure.

The aim of the government is to ensure that taxpayers report accurate values of ineligible ITC and claim only the eligible amounts. It helps the government in correlating the data reported in GSTR-3B with GSTR-2B and GSTR-9 with GSTR-3B. 

How does this change impact taxpayers?

Taxpayers now need to maintain a separate ledger in their books of accounts for the accounting of ineligible ITC. The new changes warrant invoice-wise tracking to bifurcate ITC into eligible, ineligible, unavailable, permanently reversible, and temporarily reversible categories, respectively. All reclaimable ITC must be carefully tracked so that it can be accurately claimed in the relevant tax period. This applies to credit notes as well.

Further, these changes heighten the need for frequent reconciliations of all transactions of the GSTR-2B with the Purchase Register (PR), preferably automated and in real-time. Last but not least, taxpayers need to keep a  trail of all ITC-related information (at a section and document level) for any future audits or notices.