Reversal of ITC required where Supplier failed to file GSTR-3B

On 26/12/2022, CBIC brought in a new notification amending CGST Rules 2017 to insert a new rule in the law book, wherein, it has provided that Recipient of Goods or Services or both is liable to reverse ITC on eligible purchases where Supplier has not filed his GSTR-3B.

In this article, we will discuss in detail about this new rule.

CBIC has issued a notification no. CGST-N/N-26/2022 dated 26/12/2022 to amend CGST notification 3/2017 providing CGST Rules 2017.

Among others, a new rule 37A inserted w.e.f. 26/12/2022.

Rule 37A provides that where a supplier supply any goods or services or both to any person with GST and has not filed the GSTR-3B return for the said tax period, the buyer would not be eligible to claim ITC for said purchases.

Earlier, it was a sufficient compliance for buyer to claim ITC if said supply was reported by Supplier in his GSTR-1.

 Now, the new provision is given below :-

• Where a buyer has availed ITC on any purchase on the basis of details filed by supplier in GSTR-1 or in IFF ;
• and, where said supplier has not filed his GSTR-3B for the corresponding period till the 30th day of September following the end of financial year;
• the said amount of ITC shall be reversed by said buyer in GSTR-3B on or before the 30th day of November following the end of such financial year.

Interest on Reversal of ITC

In this provision, one favor has been given by CBIC that where such ITC reversed by buyer on or before 30th November of next financial year, no interest shall be levied on such reversal.

However, if such ITC would be reversed by said buyer after 30th November of next financial year, such amount shall be payable by the said person along with interest thereon under section 50.

Reclaim of reversed ITC :-

It is also being provided that where the said supplier subsequently furnishes the return in FORM GSTR-3B for the said tax period, the said registered person may re-avail the amount of such credit in the return in FORM GSTR-3B for a tax period thereafter.

Points to be noted :-

Prescribed date (i.e. 30th September/30th November of next financial year) is given in reference to date of claim of ITC on any Invoice or Debit Note.

e.g. Supplier Invoice Date 30/03/2023. ITC claimed in April 2023. Now, if supplier has not filed his return in GSTR-3B till 30th September 2024, ITC need to be reversed by said buyer.