All registered businesses have to file monthly, quarterly and/or annual GST Returns based on the type of business. All the GST filings happen online on the GST portal.
Under GST, a registered dealer has to primarily file GST returns that include details of:
Sales (Output GST)
Purchases (Input Tax Credit or ITC)
Understanding GSTR 2A/2B: The Supplier Compliance Report
Let's understand the filing process with the help of the following example of Super Cars Ltd:
Super Cars is supposed to upload the details of outward supplies of taxable goods and/or services for the month of April in GSTR 1 by the 11th of the next month (May). The suppliers of Super Cars are also required to file their respective GSTR 1 by 11th May.
GSTR 2A/2B is a purchase-related tax return that is automatically generated for each business by the GST portal.
When a seller files his GSTR 1, the information is captured in the purchaser's GSTR 2A/2B of the relevant month.
Super Cars should reconcile the GSTR 2A/2B along with the data of the purchases made.
The reconciliations can lead to the following:
Matched:
Invoice correctly uploaded by supplier and matches with the data in the books of the company. Hence, no further steps required.
In the given example: Bill no. 02 from Laxmi Rubber Industries.
Missing in supplier data | Invoices in accounts, with no corresponding GSTR 2A/B data
Invoice is not uploaded by the supplier.
In the given example: Bill no. 50 from Shine Aluminum. Super cars needs to follow up with the supplier to get the missing invoice uploaded in Shine's GSTR 1 at the earliest.
Missing in books | Invoices available in GSTR 2A/2B, with no corresponding accounting entry
Invoice uploaded by supplier with no corresponding purchase invoice in the books.
In the given example: Bill no. 45 from Shine Aluminum. Super cars needs to verify the same leading to 2 scenarios: Case 1: The uploaded invoice is with respect to actual purchases made by Super Cars. Make the entry in the accounting books and claim the ITC.
Case 2: The uploaded invoice is not with respect to any purchases made by Super Cars. Hence, Super cars would ignore the same and let the incorrect ITC lapse.
Mismatch in data:
There is a difference between the details as per the books and the data uploaded by the supplier.
In the given example: Bill no. 25 from Ratna Steel. Super cars needs to verify if the same and has 2 scenarios: Case 1: The supplier uploaded invoice is incorrect. Super Cars needs to ask the Ratna Steels to amend the invoice in their GSTR-1.
Case 2: The uploaded invoice is correct, while the entry made in the books had a clerical error. Make necessary corrections / modifications in your purchase register and accept the supplier invoices.
Update: CBIC removes 5% Provisional ITC, only ITC reflected in GSTR-2B can be taken from 1st Jan 2022
How will this new rule impact taxpayers?
Before this rule, all taxpayers claimed ITC on a self-declaration basis in Table 4(a) of GSTR-3B. There was no compulsion to reconcile the ITC figure with the GSTR-2A/2B until now, although it was always advised.
After the implementation of this rule, the provisional ITC amount will be restricted only to the extent of ITC value reflected in the GSTR-2B for that period.
This new rule could affect the working capital of a taxpayer, as he will be required to make GST payments in cash, despite having paid his supplier for the tax invoice raised to him and having eligible ITC in his books.
The balance ITC can be claimed in a later tax period once the supplier has uploaded the pending invoices.
This rule would increase the compliance requirement on the part of purchasers and require diligence while dealing with suppliers requiring timely follow-ups to rectify inconsistencies in invoices uploaded on the GST portal.
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