GSTR-3B Changes and ECRS Overvie

GSTR-3B Changes and ECRS Overview

During its 47th meeting on June 28-29, 2022, the GST Council recommended clarifications on the mandatory reporting of accurate information regarding the amount of ineligible or blocked input tax credit (ITC) in Form GSTR-3B. These changes were formally notified in Notification No. 14/2022-CT on July 5, 2022, and further clarified in Circular No. 170/02/2022-GST on July 6, 2022.

The revised format for Form GSTR-3B, effective from the August 2022 return period, requires taxpayers to accurately report their eligible and ineligible ITC, including restricted, reversed, and reclaimed ITC.

In this article, we will delve into the modifications to Table 4 and provide guidance on how taxpayers should approach their ITC reporting going forward.

Understanding the New Structure of Table 4

Table 4 of GSTR-3B is integral for reporting ITC details for each return period. The table captures various aspects such as:

ITC available from imports, capital goods, and inward supplies subject to reverse charge.
ITC distributed by an Input Service Distributor (ISD).
Information on ineligible ITC and any reversals in compliance with the CGST Act and Rules.
ITC that is unavailable or reclaimed.

Proper reporting in this table is critical for determining the net tax liability and ensuring the correct GST amount is due. Incorrect reporting could lead to scrutiny and penalties.

Key Updates to Table 4 Format

Here is a summary of the changes to Table 4:

Table No.	As per Old Form GSTR-3B	As per Amended Form GSTR-3B
4(A) ITC available (whether in part or full)
4(A)(1)	Import of goods	Import of goods
4(A)(2)	Import of services	Import of services
4(A)(3)	Inward supplies liable to reverse charge (other than 1 &2 above)	Inward supplies liable to reverse charge (other than 1 &2 above)
4(A)(4)	Inward supplies from ISD	Inward supplies from ISD
4(A)(5)	All other ITC	All other ITC
4(B) ITC Reversed
4(B)(1)	As per rules 42 & 43 of CGST Rules	As per rules 38, 42 and 43 of CGST Rules and subsection (5) of section 17
4(B)(2)	Others	Others
	4(D) Ineligible ITC	Other Details
4(D)(1)	Ineligible ITC: As per section 17(5)	Other Details: ITC reclaimed which was reversed under Table 4(B)(2) in earlier tax period
4(D)(1)	Ineligible ITC: Others	Other Details: Ineligible ITC under section 16(4) and ITC restricted due to PoS provisions

Revised Reporting Guidelines for Table 4

(a) Effective from August 2022, the updated Table 4 format introduces four distinct sections: 4(A), 4(B), 4(C), and 4(D).

(b) Auto-Populated Data: Table 4(A) will auto-populate ITC data from GSTR-2B, excluding ITC that is unavailable due to limitation periods or place of supply rules.

(d) Reversals: The next part is reporting the ineligible portion of ITC included in Table 4A which is then required to be reversed in Table 4(B). This is further bifurcated in two parts: Permanent reversals [Table 4(B)(1)] and temporary reversals [Table 4(B)(2)].

Reversals which are permanent in nature and cannot be reclaimed are to be reported in Table 4(B)(1). These include 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, Section 17(5) of the CGST Act (i.e. blocked credit). Note here that the new additions to this section for reporting are Rule 38 and Section 17(5).
Reversals of temporary nature which can be reclaimed at a later date to be reported in Table 4(B)(2). These include ITC restricted as per Rule 37 of the CGST Rules (i.e. non-payment of the sale consideration within 180 days), Section 16(2)(b), Section 16(2)(c) of the CGST Act.

(e) Net ITC: The net ITC will be reflected in Table 4(C), based on formula 4(A) – 4(B) = 4(C).

(f) Table 4(D) which has been redefined entirely. It contains two sections – 4(D)(1) and 4(D)(2).

Table 4(D)(1)- Any ITC which was previously reversed in Table 4(B)(2), being in the nature of temporary reversal and is being reclaimed in the current tax period, is required to be disclosed in Table 4(D)(1). This table was introduced to keep a track of ITC being reclaimed out of the temporary reversal pool of ITC. This could ensure the difference in ITC as per GSTR-2B viz a viz ITC claimed in GSTR-3B can clearly be identified by the portion of ITC which is claimed in the current month, though the same had already been reflected in GSTR-2B in prior month(s).
Table 4(D)(2)- Taxpayers need to report in eligible ITC which is reflected in GSTR-2B but restricted by Section 16(4) or due to place of supply (POS) rule (i.e. where recipient is located in a State/ UT other than that of the supplier).

Compliance Tips

(1) Ensure all ITC, whether eligible or ineligible, in the current month’s GSTR-2B is accurately shown in Table 4(A) in the respective tables.

(2) Table 4(A) would additionally include reclaimed ITC which should match to disclosure in Table 4D(1), balance value would be the auto-populated value. Non-disclosure in table 4(D)(1) could lead to inquiries from the department as the value disclosed in 4A(5) would be higher than value reflecting in GSTR 2B.

(3) Report permanent ITC reversals in Table 4(B)(1) and temporary reversals in Table 4(B)(2)

Introduction of the Electronic Credit Reversal and Reclaimed Statement (ECRS)

In response to recent changes, the government has introduced the Electronic Credit Reversal and Reclaimed Statement (ECRS) vide a Portal related update dated 31.08.2023, a new ledger designed to streamline the tracking of ITC reversals and reclaims. The ECRS aims to simplify the previously manual and complex process of managing ITC adjustments, offering a clearer view of ITC balances and enhancing reporting accuracy.

The ECRS enables taxpayers to track ITC that has been reversed in Table 4(B)(2) and subsequently reclaimed in Tables 4(D)(1) and 4(A)(5) for each return period. This feature, launched in August 2023, addresses the challenges associated with managing ITC reversals and reclaims by providing a structured method to ensure that reclaimed ITC is consistent with previously reversed amounts.

The primary function of the ECRS is to ensure that the reclaimed ITC reported in GSTR-3B corresponds accurately with the ITC that was reversed. The ECRS is available to:

Monthly taxpayers from the August 2023 return period onwards.
Quarterly taxpayers from the Q2 (July to September 2023) return period onwards.

To access the ECRS, taxpayers can log into the GST portal and navigate to the 'Services' section.

Conclusion: This new tool is essential for effective ITC management, helping taxpayers stay compliant with GST regulations by facilitating accurate reconciliation of ITC records. Even though the deadline for reporting the ITC reversal opening balance has passed, understanding and utilizing the ECRS is vital for ongoing compliance and precise GST reporting. By regularly reviewing and adjusting their records in accordance with GSTN guidelines, taxpayers can avoid discrepancies and ensure their ECRS ledger reflects accurate ITC balances.

Disclaimer: The information given in this article is solely for purpose of understanding the law. It is completely based on the interpretation of the author and cannot be constituted as a legal advise, the author of this article and Lawcrux team is not responsible for any legal issues if arises on the basis of the interpretation given above.