GST Advisory Explained: Electronic Credit Reversal, Re-claim & RCM ITC – What Taxpayers Must Know

The GST framework continues to evolve with a clear focus on accuracy, transparency, and disciplined Input Tax Credit (ITC) utilisation. Two important system-led statements—the Electronic Credit Reversal and Re-claimed Statement and the RCM Liability/ITC Statement—have been introduced to address long-standing reconciliation gaps and reduce inadvertent excess ITC claims.

This article explains these developments in a practical, taxpayer-friendly manner and highlights the compliance impact going forward.

1. Electronic Credit Reversal and Re-claimed Statement (Reclaim Ledger)

To ensure precise tracking of ITC that is reversed temporarily and later re-claimed, GSTN introduced the Electronic Credit Reversal and Re-claimed Statement:

• Applicability
• Monthly filers: from August 2023
• Quarterly filers: from July–September 2023
• What it tracks
• ITC reversed in Table 4(B)(2) of GSTR-3B
• ITC re-claimed in Table 4(A)(5) and Table 4(D)(1)

This ledger acts as a permanent audit trail for reversed ITC, helping taxpayers avoid clerical errors and over-claiming.

Currently, if a taxpayer attempts to reclaim ITC beyond the available balance, the system issues a warning, but filing of GSTR-3B is still allowed. However, this leniency is about to change.

Taxpayers were also given multiple opportunities to declare opening balances for ITC reversed earlier but not reclaimed at the time this ledger was introduced.

Navigation path:

Dashboard → Services → Ledger → Electronic Credit Reversal and Re-claimed Statement

 

2. RCM Liability / ITC Statement (RCM Ledger)

To streamline reporting under the Reverse Charge Mechanism (RCM), GSTN introduced another dedicated ledger:

• Applicability
• Monthly filers: from August 2024
• Quarterly filers: from July–September 2024
• What it tracks
• RCM liability reported in Table 3.1(d) of GSTR-3B
• Corresponding ITC claimed in Table 4(A)(2) and 4(A)(3)

If ITC claimed under RCM exceeds the sum of:

• RCM liability paid in the current return, and
• Closing balance available in the RCM ledger,

the system generates a warning message.

Taxpayers were also allowed to declare and amend opening balances for past-period RCM mismatches when this statement was rolled out.

Navigation path:

Services → Ledger → RCM Liability/ITC Statement

3. Critical Change: System Blocking Excess ITC Claims

GSTN has now clarified that negative balances and excess ITC availment will soon be system-blocked in both ledgers. The following validations will become mandatory:

A. Reclaimed ITC (Table 4(D)(1))

Re-claimed ITC must be less than or equal to:

• Closing balance of the Reclaim Ledger plus
• ITC reversed in Table 4(B)(2) of the current GSTR-3B

B. RCM ITC (Table 4(A)(2) & 4(A)(3))

RCM ITC claimed must be less than or equal to:

• RCM liability paid in Table 3.1(d) of the same return plus
• Closing balance in the RCM Liability/ITC Statement

4. Impact of Negative Closing Balance

If a taxpayer already has a negative closing balance, filing of GSTR-3B will be blocked until corrective action is taken:

For Reclaim Ledger (Excess ITC Re-claimed)

• Mandatory reversal of excess ITC in Table 4(B)(2) of the current GSTR-3B
• If no ITC is available, the reversed amount will be added to output tax liability

For RCM Ledger (Excess RCM ITC)

Taxpayer must either:

• Pay additional RCM liability in Table 3.1(d), or
• Reduce ITC claimed in Table 4(A)(2) / 4(A)(3) to match the available balance

5. Key Takeaway for Taxpayers

These changes signal a shift from warning-based compliance to system-enforced discipline. Regular reconciliation of:

• ITC reversals and re-claims, and
• RCM liability versus ITC availed

is no longer optional—it is essential to ensure uninterrupted return filing.

6. Official References

• Advisory on Electronic Credit Reversal & Re-claimed Statement (17 Sept 2024)
• Advisory on RCM Liability/ITC Statement (GST Portal)
• GST Portal