Correct ITC Balance to Show in Balance Sheet

Correct ITC Balance to Show in Balance Sheet

Hello. I have a GST registered business. I made some purchases in the last financial year, due to which I accumulated an Input Tax Credit (ITC) balance over time. Some of these purchases were services that I purchased towards the end of the financial year (in Q4 of FY2024-25). Although the supply of services was completed by the end of the FY (by end of March 2025), the invoice was naturally shared with me after 31st March. Subsequently, the payment was made by me to the supplier, and then the details of those purchases were added by the supplier on the GST portal (around early to mid of April 2025). For this reason, the ITC corresponding to them does not show up in my Electronic Credit Ledger running total as of 31st-March-2025, but it does show up in the running total report as on a later date (say, 22-April-2025).

My main question is: In the year-end balance sheet of my business (that is, as of 31st-March-2025), is it correct to mention, on the assets side, the ITC that was actually showing up in my ITC ledger on the GST portal on 31st-March on the portal? Or is it instead ok (and correct) to mention the ITC balance as on 22-April, given that the service provision was completed before 31st March, even though I did not actually have the credit available to me for use on 31st March?

My understanding is that in my 31st March balance sheet, I can only show the ITC balance that was actually available to me for use as on 31st-March as per the GST portal reports. ITC that was updated after 31st March should not be counted. This seems to be the correct action as per my interpretation of relevant statutes and guidelines such as Section 16 (2)(c) and Section 16 (2)(aa) of CGST Act. However, I would like your expert advice and confirmation please.

Supplementary question: When my supplier sent me the invoice (in early April 2025) for the services provided in Q4 or FY2024-25, the invoice carried a date of 6-March-2025. Thus, the invoice was found to be "back-dated" when I received it. Is it OK on his part to do that?

Asked 4 days ago in GST

1. ITC Balance in Balance Sheet as of 31st March 2025

In the balance sheet, you must show only ITC that is actually available in your Electronic Credit Ledger (ECL) as of 31-March-2025.

Reasoning:

Section 16(2)(c) of the CGST Act requires that tax must have been actually paid to the Government by the supplier. Until the supplier uploads the invoice in their GSTR-1 and it reflects in your GSTR-2B, your entitlement is not finalized.

Section 16(2)(aa) (inserted in 2021) ties ITC availment to reflection in GSTR-2B. If it is not in 2B as on March, you cannot take credit as on that date.

Hence, the balance sheet should reflect the ITC balance that is actually usable as on 31-March, not “deemed available” later.

Therefore, your understanding is correct:

Show in assets: ITC as per GST portal balance as on 31-March-2025.

Do not include: ITC which became available only after April (even if invoice/service was of March).

---

2. How to Present “Missed” ITC in Accounts

Even though you cannot show it as ITC in your balance sheet on 31-March:

You may treat that portion as “GST Receivable” under Current Assets” until the invoice is reflected and ITC is taken in April 2025.

This way, your books correctly capture the fact that tax has been paid and credit is expected, but you don’t overstate the “ITC Ledger balance” as on March.

This is a common accounting treatment in practice.

---

3. Supplementary Question – Back-dated Invoice

Your supplier issuing an invoice dated 6-March-2025 but sending it to you in April raises an important point:

Under Section 31 of CGST Act:

For services, the supplier must issue a tax invoice within 30 days from the date of supply (for normal taxpayers).

If service was provided in March, an invoice dated 6-March is valid if actually issued on that date.

If the supplier only prepared it later in April but back-dated it, that is technically non-compliance / irregular practice.

From your side, you can still avail ITC as long as the invoice eventually appears in your GSTR-2B.

But strictly, suppliers should not “create invoices later and backdate.” They should issue on or before the prescribed time limit.

So while it doesn’t usually create a problem for you as recipient (since the credit is allowed when it reflects in 2B), the supplier may face procedural issues if authorities scrutinize the timing.

Thanks

CA Damini Agarwal

www.thewitcorp.com

Damini Agarwal

CA, Bangalore, Bengaluru

539 Answers

31 Consultations

Talk to Damini Agarwal

Thanks for your reply. I understand that the amount should not be shown as Input Tax Credit in the Balance Sheet. In the further interest of conservative financial reporting, is it Ok to not include it even in the "GST receivable(s)" line/header as a current asset? I would prefer to do that and to show it as an asset (under any header or description) only when the process is complete and the invoice shows up in my GSTR-2B.

Asked 4 days ago

1. Accounting Principle Involved

Accrual basis: Normally, once you have received a supply and are eligible to claim ITC (subject to section 16 of CGST Act), you could record it as a receivable.

Conservatism principle: If there is uncertainty in realization or eligibility, it is better to postpone recognition until certainty exists.

---

2. Your Scenario

Supply was received before 31st March (FY24-25).

Invoice was issued only after 31st March and uploaded later, hence not reflected in your GSTR-2B of March.

Technically, ITC becomes claimable only once all conditions under section 16 are satisfied — including possession of invoice and supplier filing in GSTR-1 (so it reflects in your GSTR-2B).

Thus, as of 31-March-2025, you did not yet have documentary evidence in GSTR-2B to establish your claim.

---

3. Balance Sheet Treatment Options

Option A (Aggressive/Accrual approach)

Show under “GST Receivables” / ITC receivable (Current Assets) based on the fact that supply was received and payment made, even if invoice appeared later.

Pros: Matches accrual principle.

Cons: May be questioned if GST department disallows due to timing mismatch.

Option B (Conservative approach – your preference)

Do not show under “GST Receivable” as on 31-March-2025.

Instead, record the ITC only in the year/period when it actually reflects in GSTR-2B (say April 2025).

Until then, you can simply treat the payment as part of expense (higher P&L charge for FY24-25), and reverse/adjust when ITC credit gets booked in FY25-26.

This avoids overstating assets or creating a receivable which is not yet substantiated

---

4. Professional Guidance

Most CAs would say:

Legally, you could recognise ITC as receivable once supply is received and invoice issued.

Prudently, since it wasn’t in 2B by March-end, waiting until it appears in GSTR-2B is perfectly fine — in fact, more defensible in case of scrutiny.

Auditors also usually prefer the conservative treatment, because it avoids a scenario where assets are shown but not yet backed by system-validated credit.

---

Conclusion

Yes — it is absolutely fine (and conservative) to not show it under “GST Receivable” as of 31-March-2025. You can recognise it only in the next FY, once it appears in GSTR-2B. This approach:

avoids overstatement of current assets, aligns with conservatism, and keeps your Balance Sheet cleaner in case of review.

Damini Agarwal

CA, Bangalore, Bengaluru

539 Answers

31 Consultations