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The GSTR-2A form is a view-only auto-populated statement of inward supplies. It has a dynamic nature because it gets modified as the supplier uploads the invoices and so on. It is generated when the supplier has filed form GSTR-1/5, GSTR-6. The receiver can download GSTR-2A and see the details in his inward supplies.
Input Tax Credit or ITC depends on the details reported by vendors in the GSTR-1 form through invoices. The amount specified in that form is the extent to which ITC can be claimed by the taxpayer. Note that the taxpayer will get information about how much ITC can be claimed from the GSTR-2B, which is generated monthly and remains static.
The reconciliation process involves matching or checking the data that has been uploaded by your suppliers with that of your purchase data in your books. As the supplier’s uploaded information is available to you in GSTR-2A/2B, you can use that statement and then compare it with your books to check for any discrepancies. This shows you if every transaction that has taken place between the two of you has been accurately recorded or if any invoices are missing. Any data that is missing can cause future troubles and make you liable to pay penalties in the form of interest and other fees as specified by the GST authority.
On January 1, 2022, the Finance Ministry launched the 100% invoice matching criteria and made it mandatory for all businesses. Essentially, any business that wishes to claim the ITC will have to show 100% parity between their filed returns and supporting invoices. In simple words, you will only be able to claim ITC if the concerned invoice is present in GSTR-2A/GSTR2B. Here are a few reasons why GSTR-2A/2B reconciliation is important for businesses.
Loss of ITC
If the supplier has failed to upload an invoice, then it means the taxpayer cannot claim ITC because ITC will be allowed only on the reflecting on GSTR-2A/GSTR-2B statement. This will have a major impact on the working capital especially if this is done constantly by the supplier where he does not upload the invoices despite constant reminders for the same. It may not seem like a lot in the beginning but for MSMEs, this can make a huge difference because they need capital for running the business smoothly without hassles. ITC reconciliation ensures this loss of ITC does not occur and the taxpayer can claim the correct ITC on time.
Claiming excess credit/Incorrect values
The GSTR - 2A/2B reconciliation will prevent you from claiming ITC on the invoices that are reported in the GSTR-2A or GSTR-2B. For example, you may claim ITC on all the inward supplies in GSTR-3B return but, there are few that are not uploaded by the supplier. This results in an excess claim and may attract interest and penalties. There are situations where the invoices are uploaded, but the values are incorrect. Reconciling helps you identify such invoices and get those ratified with the supplier.
Notice from department
The GST authority will send notices to the taxpayer if there is a mismatch between GSTR-2A/GSTR-2B and GSTR-3B with ITC. Without GSTR - 2A reconciliation or 2B, the mismatch cannot be caught on time by the taxpayer thereby causing trouble in the future. With the help of reconciliation, the taxpayer will be claiming the correct ITC and thereby not attract such problems with the authorities. The notice asks the taxpayer about the reason behind the mismatch. If any documents are missing or the taxpayer cannot verify the same within the stipulated time, they will face penalties and may have to reverse along with interest.
Avoid duplicate or ineligible ITC
The GSTR - 2A reconciliation prevents ineligible or duplicate ITC claims. There are prescribed guidelines that need to be fulfilled to be eligible to claim ITC. Similarly, for certain notified supplies, products or services, ITC claim is blocked, meaning you cannot claim on such supplies. For example, ITC can not be claimed for those purchases used for making exempt supplies, something that is consumed for personal use etc., GSTR-2B/GSTR-2A reconciliation helps you to avoid ITC claims on ineligible supplies. It is also possible that you may claim tax credit on the same invoice multiple times, resulting in excess credit.
Identify habitual defaulter suppliers
The GSTR - 2A reconciliation will uncover the habitual defaulters who either make mistakes or fail to upload the invoices in their GSTR-1 portal. If a taxpayer finds such suppliers, it is advisable to take action depending on how many times they have made the mistakes and the gravity of those mistakes. For example, one way to tackle this issue is to look for new suppliers by the taxpayer to ensure this problem doesn’t persist in the future. Else, the taxpayer must make it clear that if they wish to do business with them, they must ensure reporting of invoices on time.
TallyPrime's seamless GSTR-2A reconciliation solution
TallyPrime's upcoming release will be enhanced with the ability to reconcile GSTR-2A in a much more seamless manner. This will make your input tax reconciliation process simple and fast.
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