GSTN Restricts GSTR-3B Filing for Negative ITC Reclaim and RCM Balances

GSTN Advisory, Dated 29-12-2025

1. Regulatory Background

The Goods and Services Tax Network (GSTN) has issued an advisory introducing system-based validations in relation to:

• Electronic Credit Reversal, Re-claimed Statement (Reclaim Ledger), and
• Reverse Charge Mechanism (RCM) Liability/ITC Statement

These validations are aimed at improving the accuracy, consistency, and integrity of Input Tax Credit (ITC) and RCM reporting in GSTR-3B returns.

2. Objective of the System Validations

The newly introduced checks are intended to:

• Prevent excess or ineligible ITC claims
• Ensure correct utilisation and re-claim of reversed ITC
• Strengthen compliance under the Reverse Charge Mechanism
• Reduce mismatches, post-filing corrections, and enforcement actions

3. Key System Controls Introduced

3.1 Validation of Reclaimed ITC

• Taxpayers will not be allowed to file GSTR-3B if the reclaimed ITC reported in GSTR-3B exceeds the available balance in the Reclaim Ledger
• The system will automatically block return filing in such cases

3.2 Validation of RCM ITC and Liability

• Where RCM ITC is claimed in excess of the available balance, or
• Where RCM liability remains unpaid,

the system will restrict submission of GSTR-3B until the discrepancy is resolved.

4. Mandatory Pre-Filing Compliance by Taxpayers

Before filing GSTR-3B, taxpayers must ensure that:

• Any excess ITC claimed earlier is reversed or adjusted
• Any outstanding RCM liability is fully discharged
• The figures reported in GSTR-3B are fully aligned with:

1. 1. Reclaim Ledger balances
   2. RCM Liability/ITC Statements

Only after these corrections are made will the system permit submission of the return.

5. Impact on GSTR-3B Filing

• Automatic system blocking replaces post-filing scrutiny
• Errors must be corrected before return submission
• Ensures that:

1. 1. ITC claims are valid and supported by system data
   2. RCM compliance is complete and timely

6. Implications for Taxpayers

6.1 For Businesses

• Greater discipline required in:

1. 1. Tracking reversed and reclaimed ITC
   2. Monitoring RCM liabilities and credits

• Need for ledger reconciliation prior to filing

6.2 For Tax Teams and Consultants

Increased importance of:

• Pre-filing validations
• Accurate internal ITC trackers
• Alignment between books, returns, and GST portal data

7. Regulatory Intent

The advisory reflects GSTN’s move towards:

• Real-time system-driven compliance
• Prevention of incorrect ITC availment at the source
• Reduction in litigation arising from ITC mismatches
• Strengthening trust and transparency in the GST credit ecosystem

8. Key Takeaway

GSTN has introduced mandatory system validations for Reclaimed ITC and RCM ITC/Liability. Taxpayers cannot file GSTR-3B if reclaimed ITC or RCM ITC exceeds available ledger balances or if RCM liability remains unpaid. Corrections must be made before filing, ensuring only accurate and eligible ITC claims are reported.