Submission for Expert Opinion on Rectification of Incorrect ITC Reporting

[Rajagopal K]

 During August 2023 to May 2026, supplier-uploaded credit notes were auto-populated in GSTR-2B but were inadvertently reported under Table 4(B)(2) of the respective GSTR-3B returns as temporary reversals.

This treatment did not appropriately consider the reporting mechanism applicable from 1 September 2022, under which the impact of such credit notes was required to be considered while determining net ITC under Table 4(A)(5) - All Other ITC. Consequently, CGST Rs. 99,986 and SGST Rs. 99,986 were reflected in the Electronic Credit Reversal and Re-claimed Statement.

Pursuant to the applicable GSTN advisory, the above amounts were reported in the July 2026 GSTR-3B under Table 4(A)(5) - All Other ITC and Table 4(D)(1) - ITC reclaimed which was reversed earlier under Table 4(B)(2). The amounts consequently became available in the Electronic Credit Ledger. CGST Rs. 99,986 and SGST Rs. 99,986 have remained completely unutilised and have not been used towards any output tax liability.

The error was subsequently identified. Since the July 2026 GSTR-3B cannot be revised, correction is required in the August 2026 GSTR-3B.

Kindly advise the legally and procedurally appropriate method of rectification.

Option A: Reduce CGST Rs. 99,986 and SGST Rs. 99,986 from eligible ITC under Table 4(A)(5). If sufficient ITC is not available, kindly advise whether a negative figure may be reported or another mechanism should be followed.

Option B: Report CGST Rs. 99,986 and SGST Rs. 99,986 as positive figures under Table 4(B)(1) as a voluntary reversal/correction.

Kindly advise which option, or any other prescribed treatment, is appropriate.

Since the amounts remained unutilised in the Electronic Credit Ledger, kindly advise whether interest, penalty or any other consequential liability arises. Please also advise the documentation and reconciliation to be maintained, including GSTR-2B/GSTR-3B reconciliation, Electronic Credit Ledger reconciliation, the relevant GSTN advisory and workings evidencing non-utilisation.

AI Summary

Input tax credit rectification requires reversal through Table 4(B)(2), while unutilised erroneous credit may avoid interest exposure.
Inadvertently availed or reclaimed ITC arising from incorrect reporting of supplier credit notes should be separately reversed through Table 4(B)(2) of GSTR-3B. Table 4(B)(1) is unsuitable because it applies to permanent or non-reclaimable reversals, and an artificial negative entry in Table 4(A)(5) should not be used merely to offset an earlier error. Interest should not arise if the disputed ITC remained wholly unutilised, subject to Electronic Credit Ledger reconciliation. Credit-note-wise return reconciliation, net-ITC workings, reversal and reclaimed-credit reconciliation, and records evidencing non-utilisation should be maintained.