GST Advisory: Electronic Credit Reversal & Re-claimed Statement and RCM Liability/ITC Statement – What Businesses Need to Know

The Goods and Services Tax Network(GSTN) has issued an advisory and FAQ on Electronic Credit Reversal and Re-claimed Statement and RCM Liability/ITC Statement. These FAQs are very important for businesses and it is better for business to ensure correct reporting of ITC Reversals so that they can make the reclaimed accordingly.

Key Highlights of the Advisory

1. Introduction of the Ledgers
   • Electronic Credit Reversal & Re-claimed Statement (Reclaim Ledger): Introduced from August 2023 for monthly taxpayers and July-September 2023 for quarterly filers, this ledger tracks ITC temporarily reversed (Table 4(B)2) and subsequently reclaimed (Table 4(A)5 and 4(D)1) to avoid clerical mistakes.
   • RCM Liability/ITC Statement (RCM Ledger): Introduced from August 2024 for monthly filers and July–September 2024 for quarterly filers. It captures Reverse Charge Mechanism (RCM) liabilities reported in Table 3.1(d) of GSTR-3B and the corresponding ITC claimed in Table 4A(2) and 4A(3).
2. Validation Mechanism
   • Taxpayers will receive warning messages if claimed ITC exceeds available balances in the respective ledgers.
   • Negative balances in either ledger will prevent filing of GSTR-3B until excess ITC is reversed or RCM liabilities are settled.
3. Accessing the Statements
   • Reclaim Ledger: Dashboard › Services › Ledger › Electronic Credit Reversal and Re-claimed
   • RCM Ledger: Dashboard › Services › Ledger › RCM Liability/ITC Statement
4. Upcoming Changes
   • Filing GSTR-3B will no longer allow claiming excess ITC over available balances.
   • Excess ITC or negative balances must be corrected in the current period before filing, ensuring stricter compliance and preventing errors.

What Businesses Should Do

• Regularly monitor both Electronic Credit Reversal and Re-claimed Statement and RCM Liability/ITC Statement.
• Ensure ITC claimed in GSTR-3B aligns with available balances in the ledgers.
• Reverse excess ITC or pay additional RCM liabilities to resolve negative balances before filing.

Examples:

• If your ITC reclaim ledger shows - ₹10,000, you must reverse this excess ITC in Table 4B(2) of GSTR-3B or it will add to current period liability.
• If your RCM ITC ledger shows - ₹5,000, you can either pay ₹5,000 RCM liability in Table 3.1(d) or reduce your ITC claimed in Table 4A(2)/4A(3) accordingly.

How SEPFUST Helps

At SEPFUST, our SAP and ERP-integrated GST automation solutions simplify compliance with these new GST validation mechanisms:

• Automated ITC Reversal & RCM Tracking: Ensures your GSTR-3B aligns with ledger balances.
• Negative Balance Alerts: Detects discrepancies and guides corrective action.
• Comprehensive Reporting: Provides dashboards to monitor Electronic Credit Reversal and RCM ITC statements in real-time.

With SEPFUST, businesses can reduce manual errors, ensure timely compliance, and avoid penalties related to excess ITC claims or RCM misreporting.

Explore SEPFUST Auto ITC Reco Solution

You can Read the full FAQ in - https://www.gst.gov.in/newsandupdates/read/643