Changes in GSTR-3B w.e.f 01.09.2022 -Simplified

You must be conscious of a crucial update as you get ready to file GSTR-3B in August 2022. Table 4 of the form, as recently revised, will be applicable beginning with the GSTR-3B of August 2022. Central Tax Notification No. 14/2022, which was made public on July 5, 2022, informed monthly and quarterly filers of specific changes to Table 4 of the form GSTR-3B. Both permanent and transient categories of ineligible Input Tax Credits are included in GSTR-2B. (ITC). You must now treat each differently for GSTR-3B reporting requirements. We will talk about Changes in GSTR-3B   in this article.

Short Glimpse

When ITC entries found in GSTR-2B from one tax period must be recorded in books of accounts from either earlier or later tax periods, the situation gets complicated. As a result, you need to submit ITC in GSTR-3B and reconcile GSTR-2B with your accounts each tax quarter.

The ITC stated in Table 4(A) shall be subtracted from the total of the reversals supplied in Tables 4(B)(1) and 4(B)(2) to determine your qualifying ITC (2). This means that all ITC categories, both eligible and temporarily ineligible, will be covered by Table 4A (5). The permanently ineligible ITC that cannot be recovered at any moment, such as Section 17(5), must be recorded in Table 4(B) following the GSTR-3B format adjustments (1). However, before we analyze the changes in GSTR-3B, let’s first quickly go through the idea of Input Tax Credit under GST.

Input Tax Credit under GST

A tax that has already been paid when goods and services are acquired and is allowed as a tax deduction is referred to as an “Input Tax Credit” (ITC).

As an example, let’s say a merchant spends 100 Rupees (Rs.) on an item and adds a 10% tax on it. And now, the same vendor has sold these items for Rs. 150 while also charging the customer Rs. 15 in taxes. The dealer now has to pay the government 15 rupees. The dealer will be recognized as a taxpayer and will be required to pay a total of Rs. 5 in tax because he has already paid Rs. 10, and this Rs. 10 is his ITC.

Conditions for Receiving an Input Tax Credit under the GST

To claim an Input Tax Credit under the GST, one must be registered. A registered person may also request an Input Tax Credit if the following criteria are satisfied:

• He is in possession of a Tax Invoice or other proof of tax payment.
• The items or services are already in his possession. Additional instances of “bill to ship” exist.
• Taxes are the responsibility of the provider.
• He completed the GST Return.
• If the inputs are provided in lots or installments, the taxpayer is only qualified for the ITC following the delivery of the final lot or installment.
• After the invoice’s issue date, payment must be received within 180 days. The recipient’s output tax liability will increase by the credit amount plus interest if the payment is not received within 180 days. However, the recipient will be able to use the credit once more once the cash has been paid. Credit will be given in proportion to any partial payments that have been made.

Changes in GSTR-3B w.e.f 01.09.2022 –Simplified

To guarantee accurate reporting in compliance with the updated form GSTR 3B, the assessees must evaluate their technique of ITC recording in their books once again. In accordance with notice number 14/2022, Table 4(B) and (D) of form GSTR 3B were modified, and in accordance with Circular 170/02/2022, further information was provided on reporting of the changes.

The update below provides further information on the operational implications of the aforementioned change and clarification.

Effects of Table 4 of the GSTR 3B Form changes

The following are the results of the GSTR 3B Table 4 modification:

• The following assessees would only currently record ITC on the acceptable incoming supply in their Input Tax Credit GST Guide ledger, even though ITC is needed to be respected in the aforementioned circumstances:
  • • Which ITC must be reversed on the basis of the common incoming supply utilized for the taxable and exempt outbound supply in order to comply with Rules 42 and 43.
    • In the case that suppliers are not paid in full within 180 days of the invoice date, the following options are available: b) Reversal & Reclaim of ITC; or
    • Any reversal brought on by an incorrect ITC claim or previous usage.
• The assessee transfers these ITCs from an inbound supply that comes under 17(5) immediately to the P&L account rather than documenting them.
• The Static ITC statement in Form GSTR 2B and the ITC recorded in books of accounts in the manner described above will be reconciled when claiming ITC in GSTR-3B.
• Following these reconciliations and in compliance with the additional requirements of Sections 16 and 17 of the CGST Act, 2017 read with Rules issued under it, the credit will be reflected in the appropriate fields of table 4 of GSTR 3B.
• However, it is acknowledged that the ineligible declaration of ITC under Section 17(5) in Table 4(D)(1) was merely informative in nature and that the amount of the ineligible ITC under Section 17(5) in GSTR – 3B was not included in the other direct expenses treatment given to these credits in the books of account by various assessees.
• All ITC as available in GSTR 2B form coupled with ITC qualified by section 17(5), Rule 42,43, and 38 and re-availed ITC (previously reversed due to ineligibility according to section 16(2)(c) & (d) and Rule 37) had to have opted to Table 4 following amendment in Table 4(B) of GSTR – 3B. (A). Therefore, any ITC that does not meet the aforementioned criteria must be transferred to Table 4. (B). as a result, the only area where Net ITC, as stated in Table 4(C), i.e., [4(A) – 4(B)], gets credited is the electronic credit ledger.
• It is essential to record all of the ineligible ITCs since they are absolute in nature and cannot be claimed, such as those that fall under Rule 38 or Section 17(5).
• As a result, we think the assessee was obligated to alter the way they recorded ITCs by classifying them in compliance with the various provisions of the applicable GST statute. We would have produced a list of these types, which are as follows, for ease of use:
  • • Ineligible for ITC under Section 17 (5)
    • Not qualified and eligible for ITC recovery under Rule 37 (non-payment of consideration within 180 days)
    • Ineligible for Rule 38 under ITC (reversal of credit by a banking company or a financial institution)
    • Ineligible under Rule 42 for ITC (common credit on inward supply of inputs or input services utilized for outward supply of taxable including the exempted supply)
    • Ineligible under Rule 43 for ITC (common credit on inward supply of capital goods utilized for the outward supply of taxable and exempted supply)
    • ITC is ineligible owing to supply location variance.
    • Input tax credit given to invoices with a deadline renders it ineligible under Section 16 (4)
• The ITC was ineligible for the period of the current tax because the conditions of section 16 were not satisfied, such as when an invoice was received in the current month but the supply was acquired in the next month.
• ITC which is ineligible was utilized only for business by one party.
• Every additional ITC qualifies.
• Form GSTR 2B does in fact automatically identify ITC as ineligible ITC in the following two circumstances:
  • • ITC ineligibility, intra-State supply, the precise location of the beneficiary, and lastly, the supply source.
    • ITC on invoices with a Section 16(4) deadline are not eligible.
• Every assessee will need to review the way they now record ITC in their books of accounts and make the necessary modifications to ensure that accurate data is available for the GSTR-2B ITC reconciliation and Form GSTR-3B reporting. This is to acknowledge the changes made to the ITC reporting in tables 4(B) and (D) of GSTR-3B.

Reversal of ITC in Certain Cases

The supplier has the right to cancel the recipient’s current input tax credit if the receiver doesn’t pay the supplier for the number of goods or services and the tax payable within 180 days. When the credit is returned, the recipient of the input tax credit will also be liable for paying interest on the amount of the deducted credit amount. The recipient might be able to recuperate the input tax credit by paying the value of the goods or services plus the tax owed.

In various situations, such as when the supplier chooses the design process, important assets are sold, registration is canceled, etc., a registered person may also be necessary to alter the ITC. In these circumstances, the creditor makes significant efforts to extend the due date by the specified period of time. If he does not repay that obligation, he will be liable for paying interest and penalties in addition to the ITC amount that will be deducted.

Takeaway

Taxpayers must list both any relevant ITC for the current tax period as well as any unused ITC from previous months on form GSTR-2B. Any ITC that occasionally shows in GSTR-2B but is not shown in the books of accounts must be kept on file by the company. A state fee cannot be adjusted against a central tax credit or vice versa under the previous indirect tax system. We can thus conclude that interstate transactions were not ITC-eligible. In addition, a cascade effect drove up the price of products and services.

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