Important Update on ITC Reversal as per Rule 37A - Insights and Examples


Important Update on ITC Reversal as per Rule 37A - Insights and Examples
Nov, 2023
By Vikash Dhanania


Namaste DOST!

We have an important update from the Goods and Services Tax Network (GSTN) regarding the reversal of Input Tax Credit (ITC) as per Rule 37A of the Central Goods and Services Tax (CGST) Rules, 2017, which is crucial for maintaining compliance with GST provisions.

As per the latest notification available on the GST Portal, businesses are required to reverse the ITC availed on invoices for which their suppliers have filed GSTR-1 but have not filed the corresponding GSTR-3B by September 30 following the end of the financial year in which the ITC was availed.

To provide a comprehensive understanding, we bring you insights and examples to better understand this rule.

Insights and Examples:

1. Supplier Compliance:

Regularly verify whether your suppliers are filing their GSTR-3B returns timely. For instance, if Company A has availed ITC based on the GSTR-1 return filed by its supplier Company B in March 2023, Company A must ensure that Company B has filed its GSTR-3B return by September 30, 2023.

2. Timely Reversal:

In case of non-compliance by your supplier, reverse the ITC before the deadline to avoid interest and penalties. The reversal of ITC should be done while filing your GSTR-3B return on or before November 30, 2023. This should be mentioned in Table 4(B)(2) of your GSTR-3B form. For instance, if Company B fails to file their GSTR-3B return by September 30, 2023, Company A must reverse the ITC claimed in their GSTR-3B return filed on or before November 30, 2023.

3. Re-availment of ITC:

If your supplier files the pending GSTR-3B after the reversal, you can re-avail the ITC. For example, if Company B files their GSTR-3B in December 2023, Company A can re-avail the ITC in its December 2023 GSTR-3B return.

4. Interest Payment:

If you fail to reverse the ITC by November 30, 2023, you will be required to pay the ITC amount along with interest as per GST regulations.

Source of Information: The information is sourced from the official GST Portal, where the notification regarding Rule 37A was published.

In conclusion, these insights and examples aim to prepare you for the implications of Rule 37A and to ensure that your business remains compliant with the GST laws. It is advisable to take note of these expert opinions and act accordingly to avoid any disruptions to your ITC claims.

We hope this guide helps you understand and comply with the requirements of Rule 37A.

For further assistance, feel free to contact your tax consultants or the GST DOST team.

Warm Regards,

DOST Vikash Dhanania