GST Update No 338 on Circular by Kerala Government regarding amended GSTR-3B

Since the introduction of GST regime, the GSTR-3B underwent substantial changes of which one of the significant changes was methodology of making declaration regarding input tax credit which was introduced after 43^rd GST Council meeting vide Notification No. 14/2022-Central Tax dated 05.07.2022. To put an end to confusions and discussions on this issue and bring uniformity, recently Kerala GST Wing issued a Trade Circular No. 1/2022 dated 21.11.2022. The detailed analysis of this Circular is subject matter of our present update.

It is well known that in Table 4(A) of GSTR-3B pertaining to input tax credit, auto-populated input tax credit gets reflected from auto-drafted inward statement i.e. GSRT-2B. Further, the utilization of input tax credit against output tax liabilities as shown in Table 6 of GSTR-3B gets auto-populated from electronic credit ledger and also from Table 4(C)- Net ITC Available of GSTR-3B. However, with the amendment in method of declaring input tax credit, it is often observed that the taxpayers are facing confusions which results into wrong declaration of input tax credit in GSTR-3B. There had been instances wherein the taxpayers deduct the amount of ineligible input tax credit directly be editing the total input tax credit amount which is auto-populated in Table 4(A) of GSTR-3B. While in some cases it is observed that the taxpayers fail to declare ineligible input tax credit under Table 4(B) of GSTR-3B. This results into wrong utilization of ineligible credit and hence, the taxpayers shall be liable to reverse such credit along with interest at the rate of 18% p.a.

To put an end to all the tug-of-war between the department and the assessee, it is now stated that the total ITC (eligible and ineligible) which is auto-populated in Table 4A of GSTR-3B shall not be deducted with the amount of ineligible input tax credit. Hence, out of the input tax credit as shown under Table 4(A) of GSTR-3B, if input tax credit needs to be reversed on account of Rule 38, Rule 42 and 43 and Section 17(5) of CGST Act, 2017, the same shall be declared in Table 4(B) (1) of GSTR-3B. Furthermore, in case of reversal of ITC which are not permanent in nature and is reclaimable in future such as Rule 37, Section 16(2)(b), 16(2)(c) and input tax credit which was wrongly availed in any previous tax period due to inadvertent mistake shall be displayed in Table 4(B)(2) of GSTR-3B. The same may be reclaimed in future in n Table 4 (A) of GSTR-3B. All such reclaimed input tax credit shall also be shown in Table 4 (D) (1) of GSTR-3B. Hence, under Table 4(C) of GSTR-3B, “Net ITC available” shall be displayed which shall be 4A-[4B(1)+4B(2)]. Furthermore, input tax credit available as per Section 16(4) of CGST Act, 2017 or where recipient is located in a different State / UT than that of place of supply shall be displayed in Table 4D(2) of GSTR-3B. However, in case ineligible or blocked input tax credit is availed wherein the time limit of filing rectification in GSTR-3B is expired, the reversal of input tax credit in such a case shall be made by filing GST DRC-03.

The above clarification is a welcoming clarification by the taxpayers wherein all the disputes and discussions are ended. However, it seems that now the taxpayers need to be more vigilant before filing GSTR-3B failing which adverse repercussions will be faced by them. It is highly anticipated that other state Governments shall also address this issue and issue suitable clarifications in this respect at the earliest possible.

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GST Update No 338 on Circular by Kerala Government regarding amended GSTR-3B

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