No Immediate ITC Reversal for Non-filing of GSTR-3B by Suppliers

In a recent update, the government has clarified that there will be no immediate Input Tax Credit (ITC) reversal for non-filing of GSTR-3B by suppliers. This clarification has brought relief to many businesses that were worried about the impact on their cash flows.

What is GSTR-3B?

GSTR-3B is a monthly return that is to be filed by registered businesses to report their summary of sales and purchases. It is a summary return and not a detailed one like GSTR-1, GSTR-2, and GSTR-3. The due date for filing GSTR-3B is the 20th of the subsequent month.

What is Input Tax Credit (ITC)?

Input Tax Credit (ITC) is the credit that a registered business can claim for the taxes paid on their purchases. This credit can be used to offset the output tax liability of the business. For example, if a business purchases goods worth Rs. 1,00,000 and pays a GST of Rs. 18,000, they can claim an ITC of Rs. 18,000. This ITC can be used to offset the output tax liability of the business, i.e., the GST that the business collects on its sales.

Why was there confusion about ITC reversal for non-filing of GSTR-3B?

Earlier, there was confusion about whether the government will reverse the ITC claimed by businesses if their suppliers do not file GSTR-3B. This confusion arose because of a provision in the GST law that said that if the suppliers do not file their returns, the recipients will not be able to claim the ITC.

What is the clarification?

The government has clarified that there will be no immediate ITC reversal for non-filing of GSTR-3B by suppliers. This means that businesses will not lose their ITC immediately if their suppliers do not file GSTR-3B. However, businesses will have to keep a track of their suppliers' compliance and ensure that they file their returns on time. If the suppliers do not file their returns for a continuous period of six months, the government may consider reversal of ITC.

Impact on businesses

The clarification by the government has brought relief to many businesses that were worried about the impact on their cash flows. Businesses can now claim the ITC even if their suppliers do not file GSTR-3B immediately. However, businesses will have to be vigilant and ensure that their suppliers file their returns on time to avoid any potential ITC reversal in the future.

Conclusion

The government's clarification on the ITC reversal for non-filing of GSTR-3B by suppliers has brought relief to businesses. The immediate impact is that businesses can claim the ITC even if their suppliers do not file GSTR-3B. However, businesses will have to be vigilant and ensure that their suppliers file their returns on time to avoid any potential ITC reversal in the future.