GSTN Advisory on how to fix GSTR 2B ITC Issue

GSTR 2B ITC Issue : GSTN Advisory on how to fix it for FY 2023-24

Recent Goods and Services Tax Network advisory and the concept explained by Rajput Jain and Associates Experts chartered Accountants in the context of GSTR-2B and ITC issues. Here are the scenarios outlined in the Goods and Services Tax Network advisory dated November 16, 2024, explaining why GSTR-2B (Input Tax Credit Statement) might not have been generated for certain taxpayers for October 2024:

Reasons GSTR-2B May Not Be Generated

• Taxpayer Registration Cancelled: If the Goods and Services Tax registration of the taxpayer was cancelled as of the first day of the following month (i.e., November 1, 2024), their GSTR-2B for October will not be generated.
• Suspension of GSTIN: When a taxpayer’s Goods and Services Tax Identification Number is suspended, GSTR-2B for the relevant period will not be generated by the system.
• Invalid GST Returns Filing: If GSTR-1 or GSTR-5 (filed by the supplier) contains errors or is not filed for October 2024, corresponding ITC will not reflect in the buyer’s GSTR-2B.
• Incorrect Invoice Data: Suppliers failing to upload accurate invoice details in GSTR-1 or IFF (Invoice Furnishing Facility) can prevent the data from populating in GSTR-2B.
• Late Filing by Supplier: If suppliers file GSTR-1/IFF after the cut-off date (typically the 11th of the following month), the invoices will not be included in GSTR-2B for that period.
• Inter-state or Cross-supply Issues: Discrepancies in reported interstate transactions or mismatches in place of supply details can cause ITC issues.

Steps to Address Issue of GSTR-2B not generated

• Verify Supplier Compliance: Ensure suppliers have filed GSTR-1 for the respective period and provided correct invoice details.
• Recheck Filing Dates: Cross-check if GSTR-1/IFF submissions were made before the cut-off date. If late, ITC for those invoices will only reflect in the next period’s GSTR-2B.
• Review Goods and Services Tax Registration Status: Confirm Taxpayer taxpayer’s goods and Services Tax Identification Number is active and valid to avoid suspension-related non-generation.
• Check Vendor Reconciliation: Compare vendor invoices with the data reflected in your GSTR-2A/2B and address mismatches directly with suppliers.
• Seek Clarifications from GST Helpdesk: Contact Goods and Services Tax Helpdesk for technical issues, providing evidence of non-generation or missing invoices.

What actions are required for taxpayers?

1. Quarterly Taxpayers Filers (QRMP Scheme):
   • Taxpayers under the Quarterly Return Monthly Payment (QRMP) scheme will not receive GSTR-2B for the first two months of a quarter.
   • For instance:
     • In the October-December 2024 quarter, GSTR-2B will only be generated for Dec 2024, not for Oct or Nov 2024.
   • Input Tax Credit (ITC) for October and November will reflect in the December 2024 GSTR-2B.
   • Be aware that GSTR-2B reflects Input Tax Credit only quarterly. Plan tax payments accordingly to avoid mismatches.
2. For Regular Filers:
   • Ensure suppliers upload invoices on time and file GSTR-1 for each month.
   • Regularly reconcile purchase invoices with GSTR-2A/GSTR-2B.
3. Non-filing of GSTR-3B:
   • Taxpayers who fail to file their previous period GSTR-3B will not have their GSTR-2B generated.
   • Action Required: File the pending GSTR-3B to enable the generation of GSTR-2B.
4. Rectify Pending Compliance:
   • File previous GSTR-3B promptly to enable the generation of current GSTR-2B.
   • Coordinate with suppliers to resolve discrepancies.

Impact of Non-generation of GSTR-2B:

Buyers cannot claim Input Tax Credit for Financial Year 2023-24 if the supplier fails to upload invoices by November 30, 2024. Businesses may need to pay GST in cash due to denied Input Tax Credit, impacting liquidity.

Guide for BASIC GST ENTRIES:

Basic GST Journal Entries – Quick Reference

Purchases & Sales

GSTPurchase (Local Purchase with CGST & SGST)

(Being goods purchased locally with CGST & SGST)

GSTSales (Local Sale with CGST & SGST)

(Being goods sold locally with GST collected)

IGSTPurchase (Inter-State Purchase with IGST)

(Being goods purchased from another state with IGST)

IGSTSales (Inter-State Sale with IGST)

(Being goods sold outside the state with IGST collected)

Tax Adjustments & ITC

ITC Claim (Adjusting ITC against Output Tax)

(Being ITC adjusted against output GST liability)

ITC Adjusted (Payable Adjustment)

(Being net payable adjusted with input credit)

CGSTSGST (Final Settlement of Tax Payable)

(Being GST liability transferred to payable accounts)

Reverse Charge Mechanism (RCM)

ReverseCharge (Expense under RCM)

(Being expense booked under reverse charge)

RCM GST (Recording GST liability under RCM)

(Being GST liability paid under RCM, eligible for ITC)

 This way, the Input Accounts (ITC) and Output Accounts (Tax collected) get properly adjusted, and the final payable is settled with the GST Department.

Final Deadline Reminder claim Input Tax credit

• Suppliers must upload all invoices for FY 2023-24 by November 30, 2024, to ensure buyers can claim Input Tax credit. Missing this deadline results in permanent denial of Input Tax Credit for affected invoices.
• Taxpayers and suppliers are advised to coordinate immediately to ensure all invoices are uploaded and filed by the November 30, 2024 deadline to prevent loss of Input Tax Credit for FY 2023-24

Purpose & Scope of Rule 86A – Blocking of ITC under GST

Purpose of Rule 86A : Rule 86A of the CGST Rules empowers the Commissioner or authorised officer (not below the rank of Assistant Commissioner) to block Input Tax Credit (ITC) in the Electronic Credit Ledger if there exists a reasonable belief that the credit has been fraudulently availed or is ineligible.  The intent is to prevent misuse of ITC while ensuring genuine taxpayers are protected through procedural safeguards.

Authority & Monetary Limits

ITC Amount Involved	Competent Authority
Up to INR 1 crore	Assistant/Deputy Commissioner
INR 1 crore – INR 5 crore	Joint/Additional Commissioner
Above INR 5 crore	Commissioner/Principal Commissioner

Blocking must be authorised only by the proper officer, based on the prescribed monetary thresholds.

Grounds for Blocking ITC :

Credit may be restricted when The supplier is non-existent or fictitious. Goods/services not received as per the invoice. Tax not paid to the Government. Invoice issued without valid documentation. & ITC is claimed on ineligible supplies (e.g., exempt, non-business, or blocked under Section 17(5)).

Requirement of “Reason to Believe”

Officers must record specific, document-based reasons not assumptions or third-party reports. Mere suspicion or borrowed satisfaction from another officer’s opinion is invalid. And Absence of clear reasoning renders the blocking order ultra vires and liable to be quashed.

Procedural Safeguards & Principles of Natural Justice

• Blocking ITC often leads to severe financial hardship; therefore A pre-decisional hearing and written justification are essential. Courts have held that orders passed without prior notice or reasoning violate natural justice. & Such orders are routinely set aside by High Courts.

Extent & Scope of Blocking

• Blocking must be proportionate to the alleged fraudulent amount. Creation of negative ITC balances or blocking unrelated credits exceeds jurisdiction. & Courts have repeatedly held that officers cannot freeze the entire ledger arbitrarily.

Jurisdictional & Procedural Errors :

Orders are void ab initio if Issued by an unauthorised officer, The officer fails to independently apply his mind. And Monetary limits or procedural conditions are not followed.

Judicial Trends (2024–2025)

• Supreme Court (2025): Affirmed that ITC cannot be blocked beyond the available balance in the ledger.
• Telangana HC (2024): Struck down blocking done without notice or opportunity to be heard.
• Bombay & Delhi HCs (2024–25): Held that the one-year limit in Rule 86A(3) is mandatory; restrictions lapse automatically after expiry.

Courts consistently uphold a strict interpretation of Rule 86A, emphasizing Taxpayer protection, Proportionality, and Accountability of the authorities. Rule 86A is a preventive tool, not a punitive weapon   it must be exercised with evidence, restraint, and fairness.