Reversal of Input Tax Credit (ITC) Rule 37A & Reclaim: How to comply for FY 23-24

Important Update: Reversals under Rule 37A Compliance for 2023-24

Introduction to Rule 37A:

Rule 37A was introduced through Notification No. 26/2022 – Central Tax, dated 26th December 2022. This rule mandates the reversal of ITC by the recipient where the supplier has not discharged their tax liability by filing GSTR-3B by the 30th of September of the subsequent financial year. In such instances, the recipient must reverse the availed ITC on or before the 30th of November of the following year.

Reclaim:

For the reversal under Rule 37A, after the supplier files GSTR-3B, the recipient may reclaim the reversed ITC, subject to the availability of the same in GSTR-2B.

Steps for ITC Reversal for FY 2023-24:

1. Have a regular dialogue with suppliers to ensure that any pending GSTR-3B for the relevant period is filed promptly.

2. In case the supplier has not filed GSTR-3B by the time you file your GSTR-3B for October 2024, the ITC must be temporarily reversed. This reversal should be disclosed in Table 4B(2) of your GSTR-3B.

3. Reclaim the ITC once the supplier files the GSTR-3B for the relevant period, ensuring compliance.

Illustration:

Suppose X Ltd. purchased goods from Supplier A in December 2023 and availed ITC of ₹1,00,000 for the December invoice. If Supplier A fails to file GSTR-3B for the relevant period by 30th September 2024, X Ltd. must reverse the ₹1,00,000 ITC when filing their GSTR-3B for October 2024 (to be filed by 30th November 2024). The reversal must be shown under Table 4B(2).

If Supplier A files their GSTR-3B by December 2024, X Ltd. may reclaim the ₹1,00,000 ITC in their subsequent GSTR-3B (e.g., for December 2024).

Watch our video which throws light on the provision and guides on how to comply with Rule 37A for FY 203-24

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