KNOW ALL ABOUT INPUT CREDIT RECONCILIATION(ITC)
What is ITC Reconciliation?
Reconciliation is done with the aim of covering all the details of purchases by the registered taxpayer in order to grant him the correct amount of credit. The process involves matching of details filed by the supplier in GSTR 1 with the purchase data uploaded by the registered taxpayer. Details mentioned by the supplier in form GSTR 1 shall automatically be loaded in Form GSTR 2A of the registered taxpayer.
Details uploaded by the supplier in form GSTR 1 should be accompanied by genuine invoices, debit notes, credit notes and amendments (if any) to prove the authenticity of the information provided by him.
Why ITC Reconciliation is Necessary?
Consequences faced by the taxpayers for not conducting ITC Reconciliation:
ITC Reconciliation Process Conducted by the Taxpayer?
Reconciling the purchase data or form GSTR 2A is a requirement by the taxpayer on a monthly basis. If due to some reason monthly reconciliation is not possible then annual reconciliation is a must for the taxpayer and needs to be completed before filing GST returns for the month of September following the year during which reconciliation has to be made.
What Might be the Results of the ITC Reconciliation Form?
Reconciliation process or filing GSTR 2A for purchase may last with the following results:
This is the required result one needs for further processing the grant of ITC. Matched invoice means the data is accepted by the authorities and will be considered for approval of ITC claimed.
Such a result means that invoices are traced in both GSTR 2A and purchase data but there is a mismatch in the details of the invoices. The mismatch could be because of the difference in invoice value, invoice date, tax amount, invoice number, etc. In such a situation taxpayer needs to inform the supplier who in return will make changes or rectify the issue in GSTR 1. Once the changes are done the accurate details will be auto reflected in GSTR 2A of the taxpayer.
Invoice Missing in GSTR 2A
Such a message is displayed if the invoice recorded in the purchase data is missing from GSTR 2A. This may be a situation if the supplier has not yet filed his returns. Such a situation could cause inconvenience to the taxpayer.
Invoice Missing in Purchase Data
There are instances when the invoices appear in GSTR 2A of the taxpayer but are skipped in the purchase data. The reason could be that the invoice is not delivered to the recipient by the supplier or the taxpayer himself has committed the mistake in entries. The taxpayer must make a correct entry in purchase records in order to get the right ITC benefits.
How to do GST Reconciliation?
To start with, reconciliation must be done for every GSTIN and then must be considered at a PAN level. Reconciliation must be done across months for the entire FY. Not just that, but the amendments made to GST returns of the previous FY in the current FY must also be considered.
ITC is the most important component of your GST returns as it holds greater relevance when compared to any other component of the GST returns. The stage at which the sanctity of claims were checked in the previous tax regime is no longer the same as the current GST regime. The genuineness can be confirmed by a taxpayer now at a stage of filing GST returns(vis-a-vis with GSTR-2B or GSTR-2A and taking action). Earlier, tax authorities usually carry out this check while processing the returns.
Hence, the vendor-wise reconciliation must be done on a regular basis. If not done, taxpayers must consider doing it before filing GST returns of September of FY following the relevant FY. This will help identify and declare any unclaimed ITC within the deadline.
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