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Advisory & FAQs on Electronic Credit Reversal and Re-claimed Statement and RCM Liability/ITC Statement

(GSTN Advisory dated 29 December 2025)

1. Introduction – Why this Advisory is Important:

The GST law allows taxpayers to avail Input Tax Credit (ITC) subject to conditions and also requires reversal of ITC in specific situations such as non-payment to vendors, ineligible credits, or provisional reversals. Similarly, under the Reverse Charge Mechanism (RCM), tax must first be paid and only then ITC can be claimed.

Over the years, GST authorities noticed frequent clerical errors, excess reclaim of ITC, premature RCM ITC claims, and mismatch between liability paid and ITC availed. To address these issues and to bring system-based discipline, GSTN introduced two important system-generated statements (popularly called ledgers):

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

2.    RCM Liability/ITC Statement (RCM Ledger)

The advisory dated 29 December 2025 makes it clear that very soon the GST portal will strictly block excess ITC availment, and taxpayers will not be allowed to file GSTR-3B if these ledgers show negative balances or mismatches.

This article explains both statements, upcoming validations, and practical steps taxpayers must take to remain compliant.

2. Electronic Credit Reversal and Re-claimed Statement – Concept and Purpose:

The Electronic Credit Reversal and Re-claimed Statement was introduced to ensure accurate tracking of ITC that is temporarily reversed and later reclaimed.

This statement is applicable:

• From August 2023 onwards for monthly filers, and
• From July–September 2023 quarter onwards for quarterly filers.

What does this statement capture?

This statement tracks:

• ITC reversed temporarily in Table 4(B)(2) of GSTR-3B, and
• ITC reclaimed later in:
• Table 4(A)(5), and
• Table 4(D)(1) of GSTR-3B.

In simple terms, it acts as a memory ledger of how much ITC you reversed earlier and how much of that reversal you have already reclaimed.

3. Filing Experience So Far – Warning Without Restriction:

At present, if a taxpayer tries to reclaim more ITC in Table 4(D)(1) than what is available in the Reclaim Ledger, the system:

• Shows a warning message, but
• Still allows filing of GSTR-3B.

Because of this flexibility, many taxpayers ended up with negative closing balances, indicating excess reclaim of ITC.

4. Opening Balance Facility – Multiple Chances Given:

GSTN has been fairly liberal and provided multiple opportunities to taxpayers to:

• Declare opening balance of ITC which was reversed earlier but not reclaimed, and
• Correct historical mismatches that existed prior to introduction of this statement.

This opening balance facility was meant to ensure that legacy reversals were properly reflected and future compliance remained clean.

5. How to View the Electronic Credit Reversal and Re-claimed Statement:

Taxpayers can view this statement by following the below navigation on the GST portal:

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

Regular review of this ledger is now critical, as it will directly impact the ability to file returns.

6. Introduction of RCM Liability/ITC Statement – A Second Control Ledger:

To further strengthen compliance under Reverse Charge Mechanism, GSTN introduced another statement called the RCM Liability/ITC Statement.

This statement is applicable:

• From August 2024 onwards for monthly filers, and
• From July–September 2024 quarter for quarterly filers.

What does the RCM Ledger track?

The RCM Ledger captures:

• RCM liability reported in Table 3.1(d) of GSTR-3B, and
• RCM ITC claimed in:
• Table 4(A)(2) (RCM – services), and
• Table 4(A)(3) (RCM – inward supplies from ISD, etc.).

This ensures that RCM ITC is claimed only after tax is paid.

7. Warning Mechanism in RCM Ledger:

Currently, if a taxpayer claims RCM ITC exceeding:

• Closing balance of the RCM Ledger plus
• RCM liability reported in Table 3.1(d) of the same return,

The system generates a warning, but still allows return filing.

However, this is about to change.

8. Opening Balance and Amendment Facility in RCM Ledger:

Just like the ITC Reclaim Ledger, taxpayers were given multiple chances to:

• Declare opening balance of excess RCM liability or ITC, and
• Correct past errors that occurred before implementation of this statement.

This facility was a one-time compliance correction window and should be utilised carefully.

9. Accessing the RCM Liability/ITC Statement:

The RCM Ledger can be accessed as follows:

Services → Ledger → RCM Liability/ITC Statement

Taxpayers dealing frequently with RCM transactions should monitor this statement every return period.

10. Major Change Ahead – Hard System Validations:

GSTN has now clearly informed taxpayers that shortly, the portal will not allow:

• Negative balances in either ledger, or
• Excess ITC availment beyond available balance.

New Validations to be Enforced

(a) For ITC Reclaim Ledger

The ITC reclaimed in Table 4(D)(1) shall be less than or equal to:

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

(b) For RCM Ledger

RCM ITC claimed in Table 4(A)(2) & 4(A)(3) shall be less than or equal to:

Closing balance of RCM Liability/ITC Statement
plus
RCM liability paid in Table 3.1(d) of the same GSTR-3B.

11. Consequences of Negative Closing Balance – Filing Will Be Blocked:

If a taxpayer already has a negative closing balance in either ledger, the system will not allow filing of GSTR-3B until corrective action is taken.

(a) Negative Balance in ITC Reclaim Ledger

This means excess ITC was reclaimed earlier.

To file GSTR-3B, the taxpayer must:

• Reverse the excess ITC in Table 4(B)(2) of the current return.

If no ITC is available in the current period:

• The reversed amount will be added to output tax liability and must be paid in cash.

Example:
If the ledger shows –₹10,000, the taxpayer must reverse ₹10,000 in Table 4(B)(2) to proceed with filing.

(b) Negative Balance in RCM Liability/ITC Statement

This indicates excess RCM ITC claimed earlier.

To correct this, the taxpayer has two options:

1.    Pay additional RCM liability in Table 3.1(d) equivalent to the negative balance, OR

2.    Reduce RCM ITC claim in Table 4(A)(2) or 4(A)(3) in the current return.

Example:
If the RCM Ledger shows –₹5,000, the taxpayer must either:

• Pay ₹5,000 as RCM liability, or
• Reduce RCM ITC claim by ₹5,000.

Only after this correction will return filing be allowed.

12. FAQs – Key Clarifications

The FAQs issued by GSTN largely reiterate the above principles and clearly indicate that system-based compliance is now mandatory, not optional.

The emphasis is on:

• Correct reporting,
• No excess reclaim or premature ITC, and
• Matching of liability paid and ITC availed.

13. Conclusion

The GST portal is steadily moving towards a fully system-controlled compliance regime, where manual flexibility will no longer be available. The introduction and strict enforcement of the Electronic Credit Reversal and Re-claimed Statement and the RCM Liability/ITC Statement marks a decisive step in that direction.

Taxpayers who proactively review and correct their ledgers will face smooth return filing, while those ignoring these statements may soon find themselves blocked at the filing stage with forced reversals or cash payments.

Early action, proper reconciliation, and disciplined reporting are the only way forward under GST

 Disclaimer: All the Information is based on the notification, circular advisory and order issued by the Govt. authority and judgement delivered by the court or the authority information is strictly for educational purposes and on the basis of our best understanding of laws & not binding on anyone.

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