Input tax credit management

Input tax credit (ITC) in xMatix is the GST you paid on purchases that you can set off against the GST you collect, and the product works it out from your posted purchase tax transactions, the GSTR-2B statement and the ITC tables that GSTR-3B Compute fills. It sits between purchasing and filing: bills and expense vouchers are posted first, GSTR-2B compares them with what your suppliers reported, and GSTR-3B turns the result into the credit you claim. The product also has an ITC Ledger entity. This page explains the working path, then what the ITC Ledger records are, why they are empty unless someone enters them, and how to use or ignore them safely.

Overview

There are two places ITC figures can appear:

• The working path — posted purchase tax transactions, the GSTR-2B statement and its reconciliation, and the 4A, 4B and 4D tables of GSTR-3B. This is what your return is built from.
• ITC Ledger records — a separate list with one row per credit event (availed, blocked, reversed or re-availed) for a GST registration and tax period, split into CGST, SGST, IGST and cess. No posting, return or scheduled job creates these rows, and no return reads them. They exist only if a user enters or imports them.

When to use it

• Use the working path for every return. Check purchase eligibility before posting, reconcile GSTR-2B, then compute GSTR-3B.
• Use ITC Ledger records only if your team wants a hand-kept register of credit events, for example to note an approved Rule 42/43 reversal next to the manual GSTR-3B row it supports. Nothing else in xMatix reacts to them.

How xMatix handles it

1. A posted purchase supplies the books evidence

Posted bills, purchase documents and expense vouchers with a tax group create input tax transaction records. These carry the GST registration, document, tax head, value and ITC eligibility. A draft or unposted bill creates no tax transaction, so it cannot appear on the books side of GSTR-2B or in the parts of GSTR-3B that read tax transactions.

Check eligibility carefully. A tax transaction marked blocked or ineligible is evidence for reversal or disclosure. It must not be treated as available credit just because a supplier reported the document.

2. GSTR-2B supplies the statement comparison

GSTR-2B processing builds the books side from your bills and purchase returns, and Pull From GSTIN brings in the portal side from GSTN through your GSP integration. The statement's Reconciliations tab then compares the two sides document by document.

On the Reconciliations tab you can record Add In Books, Ignore or Vendor Follow-up against a row. Those are your own reconciliation decisions. They do not change the IMS status that GSTN reports for a document. GSTR-3B leaves out a document with IMS status R (rejected), so make IMS accept or reject decisions on the GSTN portal and pull the statement again.

3. GSTR-3B computes the credit rows

GSTR-3B Compute uses these sources:

Rule 42/43 proportional reversal is a manual GSTR-3B row. Compute keeps rows you entered by hand and refreshes only the rows it filled itself.

4. The Rule 37 tracker

Rule 37 tracking runs as part of GSTR-3B Compute. For eligible input tax rows linked to a bill, the tracker sets a due date 180 days after the bill's document date and remembers whether a reversal or reclaim has already been made in a period.

• If the bill is still unpaid after the due date, Compute produces the temporary reversal in GSTR-3B.
• The tracker reads the payments applied to the bill (with Apply Payment) and the bill's open amount. A bill counts as paid once its open amount is no longer positive.
• After payment, a later Compute produces the reclaim.
• The stored reversed-in and reclaimed-in periods stop the same bill being reversed or reclaimed twice.

A payment posted elsewhere but not applied to the bill leaves the bill's open amount outstanding, so the tracker cannot see that it was paid.

5. What the ITC Ledger does — and does not do

• Nothing creates ITC Ledger records automatically. Posting a bill or expense voucher, processing GSTR-2B and computing GSTR-3B do not write to it. A shipped page or button cannot calculate period availment, Rule 42/43 reversal, net ITC or supplier-level reconciliation for you either.
• No return reads it. GSTR-1, GSTR-2B, GSTR-3B and the annual return ignore ITC Ledger records. Entering, changing or deleting one never changes a return.
• One dashboard reads it. The Tax & Compliance dashboard has a tile titled ITC · IGST + CGST + SGST. Despite its title, it adds up only the IGST field of ITC Ledger records. It shows zero until someone enters records, and even then it leaves out CGST, SGST and cess.
• It cannot be synced. Syncing data with an external system is refused for ITC Ledger in both directions, because xMatix treats it as derived data rather than data you author elsewhere.
• No numbering. No document numbering setting exists for ITC Ledger, so you type the reference yourself in the field labelled GL Account Name.

Prerequisites

• To open ITC Ledger records you need a security profile with access to the entity. The shipped profiles that have it are listed under Permissions.
• The GST Registration lookup offers the GST registrations already set up for your companies (see GST registrations).

Procedure

Step 1 — Open the ITC Ledger list

ITC Ledger is not on any shipped app menu. Open the App Launcher and, under All Entities, select ITC Ledger. You can type ITC Ledger in the launcher's search box to find it. The list shows Name, Entry Type, Category, CGST, SGST, IGST and Created. On a new tenant the list is empty. That is expected: see What the ITC Ledger does.

Step 2 — Record a credit event by hand

1. Click New.
2. Enter a unique reference in GL Account Name, for example ITC-REV-2026-09. It is required. Give each record its own reference.
3. Choose the GST Registration the credit belongs to, and enter Tax Period Month (1–12) and Tax Period Year (the calendar year, such as 2026).
4. Type the Entry Type and Category using the words in the Fields table. They are plain text boxes, so type them consistently.
5. Enter the CGST, SGST, IGST and Cess amounts. Enter a reversal as negative amounts.
6. Add Narration, and Reversal Rule for a reversal.
7. Save. The record appears in the list. Nothing else changes: no return, journal or bill is touched.

Step 3 — Change or delete a record

Open the record from the list, change the fields and save, or delete it. Because no return reads ITC Ledger records, an edit or delete affects only the list and the Tax & Compliance dashboard tile.

Step 4 — Work the credit through the return

Do the real ITC work on the working path:

1. Post purchase documents only after checking GSTIN, document date, tax heads and eligibility.
2. Process GSTR-2B and pull the portal statement.
3. Investigate reconciliation differences document by document, and record your decision on each row.
4. Check that payments are applied to bills before you compute GSTR-3B, so the Rule 37 tracker sees them.
5. Compute GSTR-3B, then tie 4A, 4B and 4D back to the GSTR-2B and tax transaction sources above.
6. Work out Rule 42/43 outside xMatix, enter the approved manual GSTR-3B row and keep the workpaper.
7. Apply the statutory time limits for claiming credit as a manual review. No save or return action checks them.

Fields

The ITC Ledger form shows these fields, in this order. Partner Account (the company) is not on the form.

Business rules

• Required. Only GL Account Name is required. Every other field can be left blank.
• No picklists. Entry Type, Category, Reconciliation Status and Reversal Rule are plain text. xMatix does not check what you type.
• No calculations. Saving does not total the tax heads, check them against tax transactions, or derive the period from Entry Date.
• No links back. Saving, editing or deleting a record does not touch a bill, journal, tax transaction, GSTR-2B statement or GSTR-3B return.
• GSTR-3B keeps your manual rows. A Rule 42/43 reversal you enter as a manual GSTR-3B row survives a recompute. Only rows Compute filled itself are refreshed.
• Rule 37 needs applied payments. The tracker reads payments applied to the bill. Payment that is not applied to the bill does not count.

Example

A trading company with one GST registration in Maharashtra makes taxable and exempt supplies. For September 2026, its accountant works out outside xMatix that 12% of its common input credit must be reversed under Rule 42: CGST 3,600, SGST 3,600 and no IGST.

1. They compute the September 2026 GSTR-3B and enter the Rule 42 reversal as a manual 4B row, CGST 3,600 and SGST 3,600.
2. To keep a register next to the return, they open ITC Ledger from the App Launcher, click New, and enter GL Account Name ITC-R42-2026-09, the Maharashtra GST Registration, Tax Period Month 9, Tax Period Year 2026, Entry Type Reversed, Category Input, Reversal Rule Rule42, CGST -3600, SGST -3600, Entry Date 30/09/2026 and the narration Rule 42 — exempt ratio 12.00%.
3. They save. The record appears in the list. The GSTR-3B 4B row is unchanged, because it came from the manual entry in step 1, not from the ledger record.
4. The Tax & Compliance dashboard tile still shows zero, because the record's IGST is zero.

Training

Practice exercise

In a sandbox, compute a GSTR-3B for one month. Then create an ITC Ledger record for the same registration and month with IGST 1,000. Recompute the GSTR-3B.

Expected result: the GSTR-3B 4A, 4B and 4D figures are the same before and after, and the Tax & Compliance dashboard tile rises by 1,000. Delete the record and the tile goes back down.

Quick reference

• Your ITC comes from posted tax transactions, GSTR-2B and GSTR-3B Compute — not from the ITC Ledger.
• Nothing creates ITC Ledger records automatically; an empty list is normal.
• No return reads ITC Ledger records.
• Open it from the App Launcher → All Entities → ITC Ledger.
• GL Account Name is the record's own required reference, not a GL account.
• Entry Type, Category and Reversal Rule are plain text — type them consistently.
• Enter reversals as negative amounts.
• Tax Period Year is the calendar year.
• Rule 42/43 is a manual GSTR-3B row; Rule 37 is computed from bills and applied payments.

Permissions

ITC Ledger access is set per security profile, under the entity's permissions. In the shipped profiles, System Admin, Standard User, Sales Executive and Sales Manager have full access: they can see, create, edit and delete ITC Ledger records. A user whose profile has no access to ITC Ledger cannot open the list and does not see records. Access to GSTR-2B and GSTR-3B is set separately on those entities.

Configuration

• Menu placement. ITC Ledger is on no shipped app menu. An administrator can add it to an app if a team keeps a register (see Create an entity, step 7).
• Form and list. The shipped form and the All ITCLedger list view can be changed in the layout designer and the view settings like any other entity. You can, for example, add Partner Account to the form.
• Dashboard tile. To show the full credit in the Tax & Compliance dashboard tile, or to remove the tile, edit the dashboard (see Dashboards).
• Rule 37. The tracker needs no setting. Its input is the payments applied to bills.
• GSTR-2B and GSTR-3B. Their settings are on their own pages: GSTR-2B and GSTR-3B.

Common problems

The ITC Ledger list is empty

This is expected. No posting, return or job creates ITC Ledger records. Your credit is in the GSTR-2B statement and the GSTR-3B 4A, 4B and 4D tables.

The "ITC · IGST + CGST + SGST" tile shows zero, or less than my credit

The tile adds up only the IGST field of ITC Ledger records. It does not read tax transactions or returns. Use GSTR-3B table 4A for your available credit, or change the tile (see Configuration).

I changed an ITC Ledger record and GSTR-3B did not change

No return reads ITC Ledger records. To change a credit figure, correct the source bill or GSTR-2B data and compute again, or enter a manual GSTR-3B row.

A Rule 37 reversal appeared

Open the bill concerned. Its due date has passed and xMatix still sees an open amount, or no payment applied to it. Apply the payment to the bill; do not delete the return row to hide the problem.

A paid bill was not reclaimed

Check that the payment is applied to that bill and that its open amount is no longer positive. Then compute an open GSTR-3B period again.

Common questions

Where do I run ITC availment or Rule 42?

There is no screen or button that runs period availment or Rule 42 in xMatix. Available credit comes into GSTR-3B 4A from GSTR-2B when you compute the return. For Rule 42/43, work out the reversal outside xMatix, have it approved, and enter it as a manual GSTR-3B row. Compute keeps that row when you recompute. If you want a register of these reversals inside xMatix, you can record them as ITC Ledger records, but that is for reference only: the return does not read them.

Should I delete ITC Ledger records someone entered?

You can. Deleting an ITC Ledger record changes no return, journal or bill. The only effect is on the ITC Ledger list and the Tax & Compliance dashboard tile, which adds up their IGST. Before deleting, check whether the person who entered them uses them as a register or workpaper, because the records are not rebuilt.

Does an expense voucher add to my ITC?

A posted expense voucher with a tax group records its input tax as tax transactions, in the same way as a bill. It does not create ITC Ledger records. Whether that tax is claimed in GSTR-3B depends on GSTR-2B: table 4A is filled from what suppliers reported to GSTN.

Why is the reference field called GL Account Name?

That is the label the shipped ITC Ledger form gives its required reference field. It is not linked to a GL account or the chart of accounts. Treat it as the record's name and give each record its own value, such as the period and the kind of entry. Nothing in xMatix reads it apart from the list, where it appears in the Name column.

Related topics

• GSTR-2B — inward supplies and ITC
• GSTR-3B — the summary return
• GST registrations
• Expense vouchers
• Recording and applying payments
• ITC Ledger — entity reference