ITC Reversal and Reclaim: Maintaining the Electronic Credit Reversal and Re-claimed Statement

ITC Reversal and Reclaim: Maintaining the Electronic Credit Reversal and Re-claimed Statement

Most finance teams handle ITC reversal and reclaim on a spreadsheet: one tab for invoices reversed, another for reversals reclaimed, and a manual total carried forward each month. That worked until GSTN introduced a statement on the portal that tracks the same balance. Now your spreadsheet and the portal can disagree, and the portal decides what you can reclaim.

This guide explains which reversals are temporary and which are permanent, how the GSTR-3B tables connect to the reclaimed statement, and a monthly process to keep the two in step. It is written for tax heads and CAs who file GSTR-3B for many GSTINs.

Temporary vs permanent ITC reversal

Not every reversal can be claimed back. GSTR-3B splits reversals into two rows, and the row you pick decides whether the amount enters the reclaimed statement.

Reason for reversal Legal basis Can it be reclaimed? GSTR-3B row Supplier not paid within 180 days of invoice date Section 16(2), second proviso; Rule 37 Yes, once you pay the supplier 4(B)(2) Supplier has not filed GSTR-3B for the period by 30 September of the next year Rule 37A Yes, once the supplier files the return 4(B)(2) ITC availed but goods or services not yet received Section 16(2)(b) Yes, on receipt 4(B)(2) Tax on the invoice not yet paid to the government by the supplier Section 16(2)(c) Yes, once tax is paid 4(B)(2) Blocked credits (motor vehicles, food, personal use and similar) Section 17(5) No 4(B)(1) Common credit for exempt or non-business use Rules 42 and 43 No (annual true-up aside) 4(B)(1) Credit on capital goods or inputs for exempt supplies under special rules Rule 38 (banks/NBFCs, 50% option) No 4(B)(1)

The two rules behind most temporary reversals

Rule 37: payment to supplier not made within 180 days

If you do not pay a supplier the value of the supply plus tax within 180 days from the invoice date, you must reverse the ITC taken on that invoice and pay interest under section 50. You report the reversal in GSTR-3B for the tax period immediately after the 180 days end. When you later pay the supplier, you can reclaim the ITC.

Payments for supplies made without consideration, and deemed supplies under Schedule I, are excluded from the 180-day rule.

Rule 37A: supplier has not filed GSTR-3B

Rule 37A was introduced with effect from 1 October 2022. If a supplier reported your invoice in GSTR-1 (so it appeared in your GSTR-2B) but did not file GSTR-3B for that period by 30 September of the following financial year, you must reverse the ITC in a return filed on or before 30 November of that year. If the supplier files the return later, you can reclaim the ITC.

Example: a supplier's July 2025 invoice appears in your GSTR-2B and you claim the ITC. The supplier does not file GSTR-3B for July 2025 by 30 September 2026. You reverse the ITC in a GSTR-3B filed by 30 November 2026. If the supplier files in January 2027, you can reclaim it in the return for that period or later.

This makes 30 November 2026 a date to plan for now: the Rule 37A check for FY 2025-26 invoices should be complete before the October 2026 GSTR-3B (due 20 November) is filed.

How the Electronic Credit Reversal and Re-claimed Statement works

GSTN introduced the statement on the GST portal in 2023, for the August 2023 return period for monthly filers and the July–September 2023 quarter for quarterly filers. It works as a running balance for each GSTIN:

When you reclaim ITC, you report the amount twice in the same return:

1. In Table 4(A)(5) "All other ITC", so it is added to the credit you claim; and

2. In Table 4(D)(1) "ITC reclaimed which was reversed under Table 4(B)(2) in earlier tax period", so the portal reduces the reclaimed-statement balance.

If the amount in 4(D)(1) is more than the closing balance of the statement plus the reversal in 4(B)(2) of the same return, the portal shows a warning or blocks filing.

The statement is kept separately for IGST, CGST, SGST/UTGST and cess, so a reclaim must match the tax head of the original reversal.

Monthly process for ITC reversal and reclaim

1. 1

   Build the 180-day list

   From the payables ledger, list every invoice where ITC was taken and the invoice is more than 180 days old with an unpaid balance. Partial payments need a proportionate reversal.

2. 2

   Run the Rule 37A check (annually, before 30 November)

   Match invoices in your GSTR-2B for the previous financial year against suppliers' GSTR-3B filing status for each period. Flag suppliers who still have not filed by 30 September.

3. 3

   Report reversals in 4(B)(2)

   Put temporary reversals in 4(B)(2) and permanent reversals in 4(B)(1). Keep an invoice-level list behind each figure: GSTIN, invoice number, date, tax head, amount and reason code.

4. 4

   Identify what can be reclaimed

   Each month, check which reversed invoices have now been paid (Rule 37) or whose suppliers have now filed (Rule 37A). These are your reclaim candidates.

5. 5

   Report reclaims in 4(A)(5) and 4(D)(1)

   Enter the same amount in both rows. Check it against the portal's closing balance before filing.

6. 6

   Reconcile your register with the portal statement

   After filing, download the statement and compare its closing balance, by tax head, with your own register. Investigate any difference the same month.

Monthly checklist

• Payables ageing run; invoices over 180 days with unpaid amounts listed
• Reversals classified as temporary (4(B)(2)) or permanent (4(B)(1))
• Invoice-level register updated with reason code and tax head
• Payments made since last month matched to earlier Rule 37 reversals
• Supplier GSTR-3B filing status checked for Rule 37A cases
• Reclaim amounts entered in both 4(A)(5) and 4(D)(1)
• 4(D)(1) checked against the portal statement balance, by tax head
• Interest under section 50 computed where ITC was used before reversal
• Portal statement downloaded and reconciled after filing
• Unpaid or non-filing suppliers sent a follow-up

Common mistakes

• No opening balance, or the wrong one. Reversals made before the statement launched cannot be reclaimed through 4(D)(1) unless they were declared as the opening balance.
• Reclaiming in 4(A)(5) only. If you skip 4(D)(1), the statement balance does not fall, and your books and the portal drift apart.
• Mixing tax heads. A CGST reversal cannot be reclaimed as IGST.
• One register for many GSTINs. The statement is per GSTIN. A group-level spreadsheet hides which state has the balance.
• Forgetting the supplier. A reversal only turns into a reclaim when the supplier is paid or files. Without vendor follow-up, temporary reversals become permanent losses.

How Figment's GSTCPC handles ITC reversal and reclaim

GSTCPC is Figment's GST reconciliation and return filing software. For reversals and reclaims it provides:

• Temporary Reversal & Reclaimed ITC ledger: an invoice-level ledger of every temporary reversal and every reclaim, kept per GSTIN, so the figures in 4(B)(2) and 4(D)(1) can be traced to invoices.
• Auto-computation of GSTR-3B: the return is computed from your data, including the reversal and reclaim rows.
• GSTR-2B reconciliation with vendor follow-up: unreconciled invoices and suppliers who have not filed are flagged, and follow-ups can be sent to the vendor.
• One Excel upload for all states and GSTINs, plus direct SAP and Tally integration, so payables data does not need to be re-keyed for each state.

Your tax team should still review the reversal classification and reclaims before each return is filed. See how GSTCPC manages the reversal and reclaim ledger. If vendor master data is part of the problem, for example missing GSTINs or MSME status, VenCPC verifies vendors at onboarding.

Key takeaways

• Temporary reversals (Rule 37, Rule 37A, section 16(2)(b)/(c)) go in Table 4(B)(2); permanent ones go in 4(B)(1).
• Reclaims go in both Table 4(A)(5) and Table 4(D)(1).
• The portal's Electronic Credit Reversal and Re-claimed Statement caps what you can reclaim, per GSTIN and tax head.
• Plan the Rule 37A check for FY 2025-26 invoices before 30 November 2026.
• Reconcile your own register with the portal statement every month.