GST ITC Reconciliation FY 2024-25 | March 2025 Compliance Guide

As we approach the end of Financial Year 2024-25, March 2025 marks the critical last month for GST Input Tax Credit (ITC) reconciliation. This comprehensive guide will help businesses ensure accurate ITC claims and compliance with GST regulations before year-end closing.

Why March 2025 ITC Reconciliation is Critical ?
March is the final month of FY 2024-25, making it crucial for:
• Year-end compliance - Ensuring all eligible ITC is claimed before the financial year closes
• Annual return preparation - Getting ready for GSTR-9 and GSTR-9C filing
• Audit readiness - Maintaining clean books for statutory audits

GSTR 3B – TABLE 4 (INPUT TAX CREDIT)

• Background of the recent changes in GSTR-3B

• Contents of Table 4 of GSTR-3B and Applicability
Table 4 of the GSTR-3B return provides a complete breakdown of ITC-related information for a return period, including ITC on imports of goods and services, capital goods, inward supplies under reverse charge, ITC distributed by Input Service Distributors (ISDs), ineligible ITC, ITC reversals under CGST Act and Rules, unavailable ITC, and reclaimed ITC. Accurate reporting is critical as it determines the net tax liability and total GST due to the government; inaccurate values can result in notices and penalties. The new Table 4 format applies from the August 2022 return period onwards.

• New format of Table 4 of GSTR-3B
Effective the August 2022 return period, the government revamped Table 4, making ITC reporting in GSTR-3B a bit more challenging. The new Table 4 has four sections 4(A), 4(B), 4(C), and 4(D).

Every tax period, the total ITC figure gets auto-populated in Table 4(A) from the GSTR-2B statement (except for unavailable ITC due to the period of limitation or place of supply rules).

Taxpayers will need to bifurcate their ITC into eligible and ineligible ITC accurately for GSTR-3B reporting. It allows the ineligible ITC to be deducted from the auto-populated total ITC figure.

• What is the procedure to be followed by taxpayers while filing their GSTR-3B?
1. The total ITC (both eligible and ineligible) is auto-populated from the GSTR-2B in Table 4(A), except for unavailable ITC limited by Section 16(4) or POS rules.
2. The taxpayer reports the non-reclaimable (permanent) reversals of ITC in Table 4(B)(1).
3. The taxpayer reports reclaimable (temporary) reversals of ITC in Table 4(B)(2). If such ITC is reclaimed in future, the same is to be done in Table 4(A)(5) on fulfilling the relevant conditions. In this part, taxpayers may also reverse ITC claimed in a previous tax period due to an inadvertent error.
4. Any reclaimed ITC should also be reported in Table 4(D)(1).
5. The net ITC available will be displayed in Table 4(C) and credited to the Electronic Credit Ledger of the taxpayer.
6. ITC not available on account of the limitation of the time period as per Section 16(4) or POS rules should be reported in Table 4(D)(2).

• Why is ineligible ITC under section 17(5) now reported in Table 4(B) and not Table 4(D)?
After the update of the Table 4 format, Table 4(A) now gets auto-populated with the total figure from the GSTR2B, including ineligible ITC. If the ineligible ITC is not properly bifurcated and reversed in Table 4(B), the same will accumulate in the net ITC balance of the taxpayer. This is incorrect and unlawful. Hence, ineligible ITC should be accurately reversed and deducted, and reclaims corrected reported, in order to arrive at the exact net ITC figure.
The aim of the government is to ensure that taxpayers report accurate values of ineligible ITC and claim only the eligible amounts. It helps the government in correlating the data reported in GSTR-3B with GSTR-2B and GSTR9 with GSTR-3B.

• How does this change impact taxpayers?
Taxpayers now need to maintain a separate ledger in their books of accounts for the accounting of ineligible ITC. The new changes warrant invoice-wise tracking to bifurcate ITC into eligible, ineligible, unavailable, permanently reversible, and temporarily reversible categories, respectively. All reclaimable ITC must be carefully tracked so that it can be accurately claimed in the relevant tax period. This applies to credit notes as well.
urther, these changes heighten the need for frequent reconciliations of all transactions of the GSTR-2B with the Purchase Register (PR), preferably automated and in real-time. Last but not least, taxpayers need to keep a trail of all ITC-related information (at a section and document level) for any future audits or notices.

1. Log in to the GST Portal
2. Navigate to Services > Returns > GSTR-2B
3. Select March 2025 (03/2025) and Financial Year 2024-25
4. Download the statement in Excel/JSON format.
What is GSTR-2B? It's an auto-generated, static statement showing ITC available to you based on supplier filings. Unlike GSTR-2A (dynamic), GSTR-2B is final and cannot change after generation.

Compile the following from your accounting system:
• All purchase invoices for March 2025
• Debit notes received
• Import bills of entry
• ISD (Input Service Distributor) credits
• RCM (Reverse Charge Mechanism) transactions

Create a reconciliation sheet with these columns:
• Supplier GSTIN
• Invoice Number
• Invoice Date
• Invoice Value
• Taxable Value
• CGST Amount
• SGST/UTGST Amount
• IGST Amount
• Total Tax Amount
• Status (Matched/Unmatched/Missing)

Common Scenarios:
A. Perfect Match
• Invoice appears in both books and GSTR-2B
• All values match
• Action: Claim ITC in GSTR-3B
B. Invoice in Books but Not in GSTR-2B
• Supplier hasn't filed GSTR-1
• Supplier filed after cut-off
• Wrong GSTIN mentioned
• Action: Follow up with supplier, consider reversing ITC temporarily
C. Invoice in GSTR-2B but Not in Books
• Invoice received but not recorded
• Duplicate entry by supplier
• Wrong recipient GSTIN
• Action: Verify with supplier, update books if genuine
D. Value Mismatch
• Different amounts in books vs GSTR-2B
• Action: Cross-verify original invoice, contact supplier for correction

Step 4: Verify GSTR-3B vs GSTR-2B

Compare the ITC claimed in your GSTR-3B returns (April 2024 to March 2025) with cumulative GSTR-2B:
Formula:
ITC Claimed in GSTR-3B = ITC Available in GSTR-2B + Adjustments
Key Tables in GSTR-3B to Reconcile:
• Table 4A(5) - ITC from suppliers (B2B)
• Table 4A(3) - ITC on imports
• Table 4A(4) - ITC from ISD
• Table 4B - ITC reversed

Review and exclude ITC on:
• Personal expenses
• Motor vehicles (unless specified exceptions)
• Food and beverages
• Goods/services for exempt supplies
• Membership of clubs, health, and fitness centers
• GST paid under composition scheme
• Blocked credits under Section 17(5)

Step 6: Handle Mismatches
For Invoices Not Reported by Suppliers:

Option 1: Wait and Claim Later
• Supplier may file in subsequent months
• You can claim ITC until September 2025 for FY 2024-25
Option 2: Reverse ITC Provisionally
• Reverse in Table 4B of GSTR-3B for March
• Re-claim when supplier files (within time limit)
Option 3: Contact Supplier
• Request immediate GSTR-1 filing
• Verify invoice details are correct
• Ensure your GSTIN is correctly mentioned
For Rate/Value Mismatches:
1. Contact supplier immediately
2. Request amendment in GSTR-1
3. Update your books if error is on your side
4. File GSTR-3B with correct values

Step 7: RCM Reconciliation

For Reverse Charge Mechanism transactions:
• Verify RCM liability is paid (Table 3.1(d) of GSTR-3B)
• Ensure corresponding ITC is claimed (Table 4A(3))
• Common RCM scenarios:
o Purchases from unregistered dealers
o Specified services (legal, GTA, etc.)
o Imports of services

Maintain records of:
• Reconciliation statements with formulas
• Correspondence with suppliers
• Reasons for ITC reversal
• Screenshots of GSTR-2B
• Working notes for adjustments

Issue 1: Bulk Mismatches
Solution: Use GST reconciliation software or Excel macros for automated matching

Issue 2: Supplier Not Filing Returns
Solution:
• Maintain documentary evidence (tax invoice, payment proof, goods receipt)
• Reverse ITC provisionally
• Legal recourse: Include clause in purchase agreements

Issue 3: Amendment by Suppliers
Solution:
• Monitor GSTR-2B of subsequent months
• Adjust ITC when amendments reflect
• Maintain amendment register

Issue 4: ISD Credit Not Reflecting
Solution:
• Verify ISD has filed GSTR-6
• Check if your GSTIN is correctly listed
• Coordinate with head office/ISD entity

Checklist for March 2025 Reconciliation
• Downloaded GSTR-2B for March 2025
• Extracted purchase data from books
• Matched invoices line by line
• Identified and categorized mismatches
• Contacted suppliers for missing invoices
• Reversed ineligible/unmatched ITC
• Reconciled RCM transactions
• Updated reconciliation register
• Documented all adjustments
• Filed GSTR-3B with accurate ITC
• Archived reconciliation workings
• Prepared summary for annual return

Penalties for Incorrect ITC Claims
Overclaimed ITC:
• Interest @ 18% per annum
• Penalty equal to tax amount or ₹10,000 (whichever is higher)
Wrongful ITC:
• Interest @ 24% per annum for fraudulent claims
• Penalty up to 100% of tax amount
Late Reversal:
• Interest from due date till reversal date

KEY TAKEAWAYS
March 2025 ITC reconciliation is not just a compliance requirement but a financial discipline that can save substantial tax liability. By following this systematic approach, businesses can:
• Claim maximum eligible ITC
• Avoid penalties and interest
• Maintain clean audit trails
Prepare seamlessly for annual returns

At Tax-O-Smart, Remember, GST reconciliation is an ongoing process. While March is critical for year-end, establishing monthly reconciliation practices will make your compliance journey smoother throughout FY 2025-26.

DISCLAIMER
The information contained in this document is prepared by R.J. Soni & Associates and TaxOSmart LLP (hereinafter referred to as RJSA) for information purpose only. It does not constitute any legal advice or tax advice. In no way, this document should be treated as a marketing material or efforts to solicit a client. While we have made every attempt to ensure that the information contained in this document is true, RJSA, its partners and/or any of its employees make no claims / guarantee about its accuracy, completeness, or up-to-date character, or warranty, express or implied, including the warranty of opinions expressed for a particular purpose, or assume any liability or responsibility for the accuracy, completeness, or usefulness of any information available from this document.