Understanding ITC Reporting and Reversal in GSTR-3B: Table 4(A)(5), 4(B)(1) and 4(B)(2) — Impact on GST Assessment

In GSTR-3B, ITC must match GSTR-2B to avoid audit issues. Table 4(A)(5) shows eligible ITC (net of credit notes), 4(B)(1) records permanent reversals that cannot be reclaimed, and 4(B)(2) captures temporary reversals that can be reclaimed later. Correct classification and regular reconciliation prevent ITC loss, mismatches, and penalties during GST assessments.

🏷️ ITC Reversal

Understanding ITC Reporting and Reversal in GSTR-3B: Table 4(A)(5), 4(B)(1) and 4(B)(2) Impact on GST Assessment

1. Recording ITC Under 4(A)(5): "All Other ITC" (Net of Credit Notes)

This field reflects the total eligible ITC as auto-populated from GSTR-2B, which includes:

B2B inward supplies
Supplier-issued credit notes
Supplier-issued debit notes

The amount is net of credit notes accepted and reflected by the supplier in their returns. Taxpayers must report ITC here as per GSTR-2B, avoiding any separate adjustment of credit notes elsewhere.

2. 4(B)(1): Permanent ITC Reversals (Non-Reclaimable)

This table captures permanent ITC reversals that are irreversible, including:

ITC blocked under Section 17(5)
Proportionate reversals under Rules 42 and 43
Reversal due to non-payment beyond 180 days (that cannot be reclaimed)
Audit-detected excess or wrong ITC claims
Credit notes resulting in permanent reduction of ITC

Once reversed here, ITC cannot be reclaimed in future periods.

3. 4(B)(2): Temporary ITC Reversals (Reclaimable Later)

Introduced following Circular No. 170/02/2022-GST, 4(B)(2) reflects temporary reversals of ITC, which can be reclaimed when conditions are met. Examples include:

ITC reversed because invoices do not yet appear in GSTR-2B but expected later
Reversals due to non-receipt of goods or services
Invoice mismatches or supplier upload delays
Temporary reversal due to non-payment within 180 days (Rule 37) where payment is made subsequently

Such ITC is to be re-claimed in 4(A)(5) of the month when eligibility is restored.

4. Impact on GST Audit and Assessment

Incorrect reporting in these tables leads to:

Mismatches between GSTR-2B and 4(A)(5) causing automated scrutiny.
Misclassifying reversals as permanent instead of temporary leads to denial of credit reclaim and audit notices.
Treating temporary reversals as permanent causes unnecessary loss of credit.
Ensures interest and penalties under Section 50 are correctly applied on wrongly availed ITC.

5. Best Practices

Align 4(A)(5) ITC monthly with GSTR-2B without manual overrides.
Use 4(B)(1) strictly for permanent reversals with supporting documentation.
Use 4(B)(2) only for temporary reversals and maintain proper ledgers for reclaiming.
Pay interest timely on wrongly availed ITC, irrespective of later reversal.
Reconcile ITC as per books, GSTR-2B, and GSTR-3B to avoid discrepancies.

Summary Table

Table	Description	Nature	Reclaimable?
4(A)(5)	Eligible ITC (net of Credit Notes)	Eligible ITC Amount	Not Applicable
4(B)(1)	Permanent ITC Reversal	Permanent	No
4(B)(2)	Temporary ITC Reversal	Temporary	Yes, when conditions met

This precise segregation is critical to maintain compliance, prevent disputes, and ensure smooth GST assessments.

Frequently Asked Questions

What is reported in Table 4(A)(5) of GSTR-3B?

Table 4(A)(5) captures the total eligible Input Tax Credit (ITC) as per GSTR-2B, including B2B inward supplies, reverse charge transactions, import of services, and debit notes, net of accepted credit notes. No further manual adjustment of credit notes is needed; the amount should exactly match GSTR-2B.

What type of ITC reversals are disclosed in Table 4(B)(1)?

Table 4(B)(1) is for permanent ITC reversals, such as credits blocked under Section 17(5), proportionate reversals under Rules 42 and 43, reversals due to non-payment of consideration within 180 days (non-reclaimable), audit-detected excess claims, and credit notes resulting in permanent reduction of ITC. These reversals cannot be reclaimed in future periods.

What is the purpose of Table 4(B)(2) in GSTR-3B?

Table 4(B)(2) covers temporary ITC reversals, which can be reclaimed once eligibility is restored. Examples include credits reversed for invoices missing from GSTR-2B, non-receipt of goods/services, invoice mismatches, and payment delays within 180 days (Rule-37) when payment is subsequently made.

Can ITC reversed in Table 4(B)(2) be reclaimed, and how?

Yes, ITC temporarily reversed in Table 4(B)(2) may be reclaimed when conditions are fulfilled (e.g., invoice reflects in GSTR-2B or payment made within 180 days). Reclaimed ITC should be added in 4(A)(5) of the relevant month.

What are the consequences of misreporting ITC in these tables?

Incorrect reporting leads to automated scrutiny, audit notices, denial of credit reclaims, potential loss of ITC, interest, and penalties under Section 50. It is critical to correctly segregate permanent and temporary reversals and align 4(A)(5) with GSTR-2B.