GSTN Flags ITC Mismatch: Rule 37A Triggers Major ITC Reversal Drive for FY 2024-25

Infosys GSTN has sent notices to taxpayers under Rule 37A of the CGST Rules, 2017, regarding Input Tax Credit (ITC) reversal for the financial year (FY) 2024-25.

Rule 37A of the CGST Rules, 2017, says that if you take ITC (Input Tax Credit) from your supplier based on the invoices uploaded by him/her in GSTR-1 / 1A / IFF, then you should reverse the ITC if your supplier has not furnished GSTR-3B for the corresponding tax period by September 30 of the next financial year.

So let’s discuss what exactly the case is:

• GSTN examines your ITC first and then searches for the suppliers who upload invoices in GSTR-1, so that you claim your ITC, but then simultaneously do not furnish their GSTR-3B for those months.
• Non-Filing of GSTR-3B clearly means that the supplier has not paid tax to the government.
• To curb this activity and mismatch, GSTN has asked taxpayers to reverse their ITCs in these cases.

When ITC Must Be Reversed

Rule 37A says that a taxpayer must reverse his/her ITC in Form GSTR-3B filed on or before November 30 following the end of the financial year.

For the financial year 2024-25, the reversal of ITC must be done on or before November 30, 2025.

What You Need to Do

You have to check the list of suppliers mentioned in the notices sent and identify the ITC you took from these suppliers. If your supplier still does not furnish their GSTR-3B, then reverse your ITC. If the supplier later files their GSTR-3B, they will be able to reclaim your ITC; hence, you do not need to worry about the ITC.