What is ECRS?
Electronic Credit Reversal and Re-claimed Statement (ECRS) aims to provide a comprehensive view of ITC reversals, their reclaims, and the balance on a particular date.
The ECRS is intended to keep track of the amounts that are temporarily reversed under 4B (2) for subsequent re-claim on compliance with the conditions under Section 16 and the CGST Rules. The opening balance of the statement shall be based on the declaration furnished by the taxpayer and the amounts disclosed under 4(B) (2) of the subsequent periods will be added whereas reclaims under 4D (1) will be deduced on a rolling period basis to arrive at the maximum eligible amount of reclaims as on date. The balance needs to be reported by November 30 and can be amended up to 3 times till December 31.
ECRS provides an effective monitoring mechanism to validate purported ITC reclaims and flags in case of claims beyond the balance available as per GSTR-2B and previous reversals.
How to calculate ECRS opening balances?
Opening balance of ECRS for ITC claim shall be:
| Particulars | Amount |
| Add: Amount of eligible ITC available in GSTR-2B but not availed in 4A (5) and not temporarily reversed in 4B (2) | **** |
| Add: Amount of eligible ITC availed and temporarily reversed in 4B (2) | **** |
| Add: Amount of eligible ITC availed and temporarily reversed earlier but not in 4B (2) and now available for reclaim (if not reclaimed at the time of reporting of opening balance) | **** |
| Less: Amount reported in 4(D)(1) i.e., ITC reclaimed | (***) |
| Less: ITC already reclaimed but not reported in 4D (1) | (***) |
| Opening balance of ECRS | **** |
For Instance;
| Sr No. | Particulars | Amount |
| 1 | ITC reversed under 4B (2) due to non-payment to the supplier | 100,000 |
| 2 | ITC reflected in GSTR-2B but not availed due to non-receipt of goods | 50000 |
| 3 | ITC reversed and already claimed back on receipt of invoices. (reported in 4D (1)) | 30000 |
| 4 | ITC previously reclaimed on payment of tax without reporting in 4D (1) | 20000 |
| 5 | ITC to be reclaimed on payment of tax after 180 days | 15000 |
| 6 | Ineligible ITC u/s 17(5) | 5000 |
| 7 | ITC reversed under rule- 42 | 7000 |
| 8 | ITC is available for reclaim on payment to suppliers which was earlier reversed without reporting in 4B (2) | 80000 |
The total opening balance of the ECRS ledger will be (1 + 2 – 3 + 5 + 8) = 2,15,000. The amounts at #6 and #7 are permanent reversals and will not be included in the opening balance. There will be no impact for ITC that has already been reclaimed (#4).
In brief, the opening balance shall have all eligible ITC pending for availment or which is availed but temporarily reversed whether it is reversed through Table 4B (2) of GSTR-3B or not and the amount shall be reduced by the ITC already reclaimed whether reported in 4D (1) or not.
ITC that can be temporarily reversed and reclaimed under the ECRS ledger:
The government has introduced ECRS to keep track of the ITC availment by businesses. ITC can be availed to the extent the amount is available in the ECRS ledger, any ITC availed in excess of the amount available in the ECRS ledger will invite notice from the government. Therefore, it is inevitable to report the eligible ITC in the opening balance of the ECRS ledger:
Here is the indicative list of ITCs that are eligible and ineligible for reclaim.:
Eligible for availment, temporary reversal, and reclaim:
- ITC is available in GSTR-2B but cannot be availed due to:
- Non-receipt of goods or services or both
- Non-receipt of invoices, debit notes, or any other relevant document
- Non-filing of return
- When goods are received in lots or installments and if all installments or lots are not yet received.
- ITC availed but required to be reversed temporarily due to non-payment to suppliers within 180 days from the date of invoice.
Ineligible for availment and cannot be part of the ECRS ledger:
- Blocked ITC u/s 17(5) of CGST Act, 2017
- ITC reversed under rules 42 and 43 of CGST Rules, 2017.
- ITC on the tax component of capital goods purchased on which depreciation is charged.
- ITC which is time-bared for availment.
Note: The list is not exhaustive and there can be other ITCs based on circumstances that can be eligible or ineligible for availment.
Essential Steps to follow for Precise ECRS Opening Balance Calculation
Steps to follow for accurate calculation of the opening balance:
- A detailed reconciliation should be performed starting from April 2022.
- Prepare a reconciliation of inward supply Vs GSTR-3B Vs GSTR-2B.
- Identify the ineligible ITC which cannot be availed or has to be permanently reversed.
- Identify the eligible ITC that is not availed yet or availed but temporarily reversed and the ITC that was temporarily reversed but reclaimed.
- Maintain a separate ledger in the books of accounts for all temporary ITC reversals and reclaims.
- Ensure that no ineligible ITC is availed.
- Perform audit trail to ensure that no ITC is availed twice, or no ITC has been missed for availment.
- Proper documentation should be maintained for the ITC claimed, ITC temporarily reversed, or ITC reclaimed.
- Report proper ITC reversed and reclaimed in ECRS ledger on time.
- Ensure that GSTR-3B aligns with the ECRS ledger.
- Establish a tech-driven solution or system to reduce manual intervention for all the above activities to save cost and time for the business and comply with accurate reporting requirements.
Author
Krunal Shah
Senior Tax Expert
Krunal is a member of the Institute of Chartered Accounts of India, a Certified Management Accountant, and a management graduate. With a background in finance & taxation and years of experience advising clients on intricate tax matters in India and the Middle East, he brings a wealth of financial acumen and regulatory insight to the world of taxation. At Cygnet.one , he heads the managed services, ensuring timely tax compliance for some of India’s finest corporates. Through his published works, he simplifies complex tax concepts, making them accessible to a broad audience and empowering readers to navigate the intricacies of taxation with confidence.
