ITC under RCM: Significant Changes Coming to GSTR-3B

GSTR-3B is about to get a reverse twist, as new restrictions on Input Tax Credit (ITC) are going to be levied.

Significant changes are coming to GSTR-3B regarding the claiming of Input Tax Credit under the reverse charge mechanism.

To avoid excess ITC claims, taxpayers will be prohibited from claiming ITC (RCM) that exceeds the tax liability paid under reverse charge plus the balance of the reverse charge ledger, i.e. ITC (RCM) previously paid but not claimed.

Ledger of Reverse Charge

1. The initial balance for the start period will be zero. Taxpayers can report their initial balance.

2. The closing balance from the previous return period will be used as the opening balance for the next period.

3. After implementing error mode, the closing balance cannot be negative.