GSTR 2B is a static month wise auto – drafted Input Tax Credit statement. It was recently introduced by GSTN to simplify Input Tax Credit claim for taxpayers. It is generated on 12^th of every month on the basis of the information furnished by the suppliers in their respective GSTR 1, GSTR 5 and GSTR 6.

GSTR 2B mainly consists of a summary of ITC that can be availed, ITC that has to be reversed and ITC not available.

Main Features of GSTR 2B

Some of the main features of GSTR 2B are mentioned below-

• It is a static statement that cannot be changed once it has been generated.

• It contains information on import of goods from the ICEGATE system including that from SEZ.

Importance of GSTR 2B

Main purpose of introducing GSTR 2B is to allow taxpayers to easily reconcile ITC with their own books of accounts and records. It also ensures the following-

• Reversal of ITC wherever it is required to be reversed as per law.

• Check whether ITC is not availed twice.

• Correct payment of GST on a reverse charge basis.

Comparison od GSTR 2A and GSTR 2B

The post GSTR 2B first appeared on ITC Reconciliation, GSTR 2A Reconciliation - Digitax Automation.

Fake invoice is the one which is issued without actually supplying Goods or Services. As per the SOP issues on how to tackle GST fake invoices, following are the ways in which fake invoices can be misused:

• Issue of invoice without actual supply of goods or services where payment of tax is made by way of Input Tax Credit which is not available to issuer of invoice.
• Issue of invoice by a person where the invoice is issued to one person and goods are diverted to some other person.
  Routing of invoice through a series of shell companies and transfer of input tax credit from one company to another in a circular fashion to increase the turnover.

What can be potential motives for using a fake invoice?

There can be various reasons for which an enterprise can issue a fake invoice. Some of them are mentioned below

• Evasion of GST on taxable output supplies by availing undue ITC and saving cash payment of GST by utilizing undue ITC.
  Converting excessive ITC into cash by transferring of ITC to those who can utilize it or by way of IGST refunds.
• Increasing the turnover for availing bank loans or higher Credit Limit/Overdraft from banks.
• Inflating turnover to improve valuations of stock or to bag in the government contracts.
• Booking fake purchases for showing reduced profit margins and avoiding payment of income tax by reducing net profit.
  Cash generation or diversion of company funds.
• Laundering of Money.

How can Fake Invoice Fraud impact your Business?

• Being an aid to Fake GST Invoice fraud leads to levy of penalties under the Act.
• The department can demand the unrecovered GST amount from you even if you are the victim of such fraud.
• It can hamper reputation of the business.
• Cancellation of GST Registration can also take place.

What steps should be taken to avoid pitfalls?

• Strong KYC procedures of the vendors should be in place.
• Check for the vendor’s name in the fraudster’s list issued by the government.
• Make Return reconciliation as regular practice and follow up with the vendors accordingly.
• Self-verification of the vendors on GST portal.
• Get information of about the owner of the entity.

The post HOW TO SAVE YOURSELF FROM FAKE INVOICE TRAP first appeared on ITC Reconciliation, GSTR 2A Reconciliation - Digitax Automation.

Why this is a welcome step for MSMEs?

Earlier the government has introduced rule 36(4) which says that a taxpayer can claim ITC of only those invoices which are appearing in 2A. A variation of only 10% is allowed. This rule was inoperative for the period from February 2020 to August 2020, but now it is operative.

By the introduction of this rule 36(4), the quarterly filers of GSTR-1 are facing a unique problem. Let’s understand this through an example.

The invoice appears in GSTR-2A only after counterparty files GSTR-1. The quarterly filer files GSTR-1 quarterly. The invoice of this taxpayers appears in GSTR-2A of the counterparty once every quarter. Say if the invoice date is of April 2020 and he is filing the quarterly return on 28th July 2020, his invoice will appear in the GSTR-2A of the counterparty on 28th July 2020. By then the counterparty must have already filed its monthly return GSTR-3B for June month.

This creates a situation that a person purchasing from a quarterly filer can claim ITC credit after a long period which can extend up to 4 months.

This provision alone has created a great hardship on the quarterly filers. The MSMEs who are supplying to large companies are getting continuous requests to file the GSTR-1 monthly.

But the taxpayer cannot change the option to monthly return filing in a mid of the year. This created a situation where the large companies started to avoid doing business with such taxpayers who are filing their return quarterly.

By the introduction of this new due date, quarterly filers get a marginal relief. The period of delay of a maximum of 4 months is now reduced to 3 months.

But this still does not solve the problem completely. Unless the quarterly filers get to change the option of filing GSTR-1 from quarterly to monthly in the mid of the year, the problem cannot be completely solved.

The post Why due date for filing quarterly GSTR-1 is changed first appeared on ITC Reconciliation, GSTR 2A Reconciliation - Digitax Automation.

This rule is one of the most complicated rules to apply in practical circumstances. Let’s discuss what this rule is all about.

In layman’s language, rule 36(4) says that the input tax credit of regular invoices availed in a particular month cannot exceed 110% of the value of invoices matched in GSTR-2A.

Further, as per the circular, an additional condition is also specified. It says that the ITC from the suppliers who have filed their GSTR-1 within the due date will be eligible for availment in the same month. If supplier files GSTR-1 late, then that invoice will become eligible for availment only in next months.

Now, the taxpayers who want to comply with this rule has to do the following exercises every month.

1. Prepare the list of invoices on which he wants to claim ITC.
2. Match those invoices with the invoices available in GSTR-2A.
3. Bifurcate the matched invoices in 2 categories. 
   1. Matched invoices of vendors who have filed GSTR-1 within the due date.
   2. Matched invoices of vendors who have filed GSTR-1 after the due date.
4. Identify the matched invoices of past months, which are becoming eligible for availment in the current month.
5. Keep a record of invoices which are becoming eligible for availment in next months so that they do not get missed out from ITC claim.
6. Claim the ITC of invoices which are eligible for availment in the current month. A variance of 10% is allowed.

As we can see, the above steps can appear very simple to write but believe us they are really difficult to implement in practical situations. Now let’s see what are the difficulties, the taxpayers will be facing? 

1. Matching of Past Invoices: As per GST rules, the ITC of a particular invoice can be claimed up to September of the next financial year. This means that to do the matching, at the maximum the taxpayer can be required to match GSTR-2A of the last 18 months. 
2. Dynamic nature of GSTR-2A: GSTR-2A is a dynamic document. Thus for the matching process, the taxpayer is required to download the GSTR-2A for each of the past months.
3. Tracking GSTR-1 filing dates of vendors: As per the new condition, the ITC will become eligible for availment based on the GSTR-1 return filing dates of the vendors. Thus the taxpayers have to track the return filing dates of vendors.
4. Keeping a record of availment eligibility of the invoices: Due to vendor filing date condition, the taxpayers have to keep a record of availment eligibility of invoices. He needs to track when a particular invoice will be eligible for availment. 

Thus with these challenges, the taxpayer has to complete a very difficult task of complying with rule 36(4). 

We at Digitax Automation are in the process of streamlining this process. Rule 36(4) reports will be added in our system very soon. You can contact us at support@digitaxindia.com for any queries. 

The post How to comply with Rule 36(4) for claiming GST Input Tax Credit first appeared on ITC Reconciliation, GSTR 2A Reconciliation - Digitax Automation.

This is not a new thing in the tax regulatory system in India. In the time of service tax and excise duty, the Income Tax Department used to share the 26AS data with CBIC. There are so many cases of tax evasion found out by CBIC just by sharing of 26AS data.

In our previous article, we emphasized that now GSTR-2A is the new equivalent of 26AS. GSTR-2A contains such vital information about a particular business that it can be a huge data mine for the income tax authorities in finalising the assessments. 

Now the government has openly come up with an MOU with its 2 departments. This means that in future, the GSTR-2A will play a very important role in income tax assessments.

How GSTR-2A can play a game-changing role in tax assessments, let’s discuss.

1. Expense Verification: The verification of expenses claimed by an income taxpayer can be done from the GSTR-2A data. If expenses data primarily matches with the GSTR-2A, it can be reasonably assumed that the expenses are verified. If data is not matching then there is something fishy about it.
2. Unexplained Expenses: GSTR-2A can show the data of such expenses which have not been claimed by the income taxpayer. This will form a basis of enquiry as to check for the source of such expenses incurred. If the taxpayer is not able to justify the source of the expenses incurred, then it can be treated as unexplained expenses by the taxpayer.
3. Underreported income: GSTR-2A can give a good idea about the size of the business. At present, many cases are showing on the income tax compliance portal where the taxpayer is having entries in his GSTR-2A but not filing the income tax return or not disclosing adequate turnover in the income tax return. This will help in unearthing the underreported income by the income tax department.
4. Non-existing firms: In GST era, the government is facing serious challenges in the form of the dummy and non-existing firms. There are many cases where a GST registered firm is running in a person’s name without the knowledge of the said person. With data sharing between CBIC & CBDT, this will introduce an additional check for finding out the non-existing firms in GST.

The above points are just a brief view of how powerful GSTR-2A can be in tax compliance. Government is now sitting on huge data where it can extract such information which an ordinary taxpayer cannot imagine.

Reconciliation of GSTR-2A is now more important than ever before as it will be treated as a “Janam Kundali” of the taxpayer by the assessing authorities.

The post GST Department to share GST data with Income Tax Department first appeared on ITC Reconciliation, GSTR 2A Reconciliation - Digitax Automation.

Many are looking at this as a welcome step towards ease of compliance in GST. No doubt that this step certainly is a welcome step for easing the compliance burden of the small taxpayers, however, there will be many cases where this can prove to be only a mirage for them.

For small taxpayers primarily making b2c sales, this will be a good step for reducing their compliance burden. Most of such taxpayers will get a major relief in compliance by filing the GSTR-3B quarterly. But they have to face the challenge of monthly tax payments also.

But for small taxpayers who are making b2b sales, then there is a problem which lies ahead.

In the same meeting, the GST council has proposed that the Input Tax Credit will be auto-populated through form GSTR-2B based on GSTR-1 filing by the counterparty. This means that, if a person is purchasing from a monthly GSTR-1 filer, the input tax credit of the purchases made shall be available to the buyer in the same month in which the purchase is made.

But, if the same buyer buys from a person who is filing GSTR-1 quarterly, he will get the input tax credit only after filing of quarterly GSTR-1 by the vendor. This means that the availment of the input tax credit from quarterly filer can extend up to as far as 4 months from the date of purchase.

This should be a major area of concern for MSMEs who are supplying to large companies having turnover above Rs. 5 crores. These large companies will now prefer to buy from the vendors who are filing GSTR-1 quarterly. Thus a small taxpayer will be under pressure from its large customers to opt for monthly filing of GSTR-1 with a constant fear of losing out of their large customer.

Though the MSMEs are currently also facing this problem since the rule 36(4) was made applicable last year. Due to COVID-19 situation, said rule was kept in abeyance till August 2020. But with this newly proposed provisions where the input tax credit is going to be auto-populated through form GSTR-2B, the challenge for MSMEs are even more.

Thus this option to file the GSTR-1 and GSTR-3B quarterly combined with new and revised input tax credit availment rules will result into a catch 22 situations for the small taxpayers who are supplying to large taxpayers in a b2b sales. They will be either forced to opt for monthly filing or lose their customer.

The post How quarterly filing of GST Returns will impact MSMEs? first appeared on ITC Reconciliation, GSTR 2A Reconciliation - Digitax Automation.

The company had 80% of its expenses as GST input expenses. Being a service company, it was quite important to vouch for all such expenses. In this period of COVID-19 where movement is quite limited, he used the GSTR-2A reconciliation as the vouching tool for completing the audit.

He got the GST Input Tax Credit register from the client and used Digitax G-RECS for reconciling the full-year data. He was able to do so within hours.

After matching the GSTR-2A data with the GST input tax register of the company, he was able to vouch for 80% of the companies expenses with reasonable certainty that such expenses are genuine and validly claimed.

He was able to find the unclaimed credit on bank charges paid by the company which was more than double the amount of audit fees charged by him. In effect for the client, the auditor has recovered twice the amount of audit costs to the company.

The focus of the auditor remained on the accounts which are not matching with GSTR-2A data and he was able to suggest many points of correction to the client which he was quite happy to implement.

From this case, it can be seen that the GSTR-2A reconciliation is a very powerful tool to finalise the audit for the professionals. As the time period for completion of the audit seems shrinking forever, with the help of a good tool, it is quite possible to complete the audit in an effective and efficient manner.

With our user-friendly GST credit reconciliation tool Digitax G-RECS, it will be quite easy for the professionals to reconcile the GST Input tax credit.

To know more about this product you can contact us over mail on support@digitaxindia.com.

The post Using GSTR-2A Reconciliation as an Audit Tool first appeared on ITC Reconciliation, GSTR 2A Reconciliation - Digitax Automation.

Recently the government has introduced 26AS in a new avatar. 26AS is now not only a tool to monitor your TDS but also an information tool for the government.

You must have experienced how Income Tax and GST (earlier Service Tax and Excise) departments are continuously pressing upon the reconciliation of 26AS with both income tax returns and service tax or excise returns.

Similarly, in very near future Income Tax and GST departments will also ask for matching of GSTR-2A with your Income Tax Returns, your books, and GST returns.

GSTR-2A will be one of the most important weapons in the arsenal of the Income Tax and GST departments while doing the assessments of your clients.

That’s why we say that GSTR-2A = 26AS

Have you included GSTR-2A reconciliation in your GST and Income Tax return filing process for your clients?

This is very important not only in the return filing process but also in doing accounting for your clients.

Try using Digitax G-RECS ITC reconciliation system.

The post Why GSTR 2A is equal to form 26AS first appeared on ITC Reconciliation, GSTR 2A Reconciliation - Digitax Automation.

So, let’s get started and go at length with types of GST returns.

1. GSTR-1

We all know that GSTR-1  is the return which is furnished for reporting details of all outward supplies of goods and services made within a  tax period. In simple words, it reports all the details of sales transactions made during a tax period. It also includes details of debit and credit notes, invoices and revised invoices issued during the tax period. If any amendments pertaining to sales invoices are made, even in regard to previous tax periods then they should also be reported in the GSTR-1 return.

GSTR-1 is to be filed by all the registered taxpayers. It is to be filed monthly, with an exception in the case of small taxpayers with a turnover up to Rs.1.5 crores in the previous financial year, who are allowed to file it quarterly.

2. GSTR-2

As we know it, GSTR-2 is the return wherein the reporting of the inward supplies of goods and services, that is,  the purchases made during a tax period. GSTR-2 return details are auto-populated from the Form GSTR-2A. The GSTR-2 return is editable unlike GSTR-2A.

GST Tip: The filing of GSTR-2 return has been suspended ever since the inception of GST.

3. GSTR-2A

GSTR-2A return is auto-populated from the GST portal based on data filed by the suppliers in their GSTR-1. It is non-editable and a read-only return. It is the return which has the details of all inward supplies of goods and services i.e. purchases made from registered suppliers during a tax period. The data is auto-populated based on data filed by the suppliers in their GSTR-1 return.

4. GSTR-3

As we discussed in the last article, GSTR-3 is a monthly summary return providing the summarized details of all outward supplies made, inward supplies received and input tax credit claimed, in addition to the details of the tax liability and taxes paid. The return is auto-generated based on the GSTR-1 and GSTR-2 returns that have been filed.

GST Tip: The filing of the GSTR-3 has been suspended ever since the inception of GST.

5. GSTR-3B

GSTR-3B is a monthly return containing details of tax collected on outward supplies and details of tax paid on input supplies. In simple words, it is a self-declaration containing the summarized details of all outward supplies made, input tax credit claimed, tax liability  and taxes paid. GSTR-3B is to be filed by all the registered taxpayers.

GST Tip: If there is no business activity for any period under tax, in such cases NIL return is to be filed.

6. GSTR-4 / CMP-08

GSTR-4 is the return that was to be filed by the registered taxpayers who opted for the Composition Scheme. But this return has now been replaced by CMP-08 return. The Composition Scheme is the scheme which requires taxpayers with turnover up to Rs.1.5 crores to opt into and pay taxes at a fixed rate on the turnover declared.

GST Tip: The CMP-08 return is a self-assessed statement-cum-payment done on a quarterly basis by the composition dealer.

7. GSTR-5

GSTR-5 is the GST return which is to be filed by non-resident foreign taxpayers, who carry out business transactions in India and are registered under GST. The return contains all business details from all of the outward supplies made to inward supplies received to credit/debit notes to  tax liability and taxes paid.

The GSTR-5 return is to be filed on a monthly basis, for each month the taxpayer is to be registered under GST in India.

8. GSTR-6

GSTR-6 is a monthly return which is to be filed by an Input Service Distributor (ISD). It contains the details of input tax credit received and distributed by the ISD. It also contains the details of all the documents issued for distribution of input credit and the manner of distribution. The return is to be filed before the 13th of next month.

9. GSTR-7

GSTR-7 is a monthly return to be filed by persons who are required to deduct TDS (Tax deducted at source) under GST. GSTR 7 contains all the details of TDS deducted, the TDS liability payable and paid and TDS refund claimed, if any.

10. GSTR-8

GSTR-8 is a monthly return to be filed by e-commerce operators under GST who are required to collect tax at source (TCS). GSTR-8 contains all the details of supplies made through the E-commerce platform, and the amount of TCS collected on such supplies.

11. GSTR-9

GSTR-9 is the annual return to be filed once in a year by the taxpayers registered under GST. It contains the details of all outward supplies made, inward supplies received during the year under different tax heads i.e. CGST, SGST & IGST and HSN codes. It also consists of all the details of taxes payable and paid. It is a consolidation of all the monthly or quarterly returns, i.e., GSTR-1, GSTR-2A, GSTR-3B filed during the year.

Exceptions to GSTR-9 are the taxpayers under the Composition Scheme, Casual Taxable Persons, Non-resident Taxable Persons, Input Service Distributors and the persons paying TDS under section 51 of the CGST Act.

GST Tip: The 37th GST Council meeting has decided GSTR-9 filing to be optional for the businesses with turnover up to Rs.2 crore in FY 17-18 and FY 18-19.

12. GSTR-9A

GSTR-9A is an annual return to be filed by the taxpayers who have opted for the Composition Scheme in a financial year. It consolidates the information of all the quarterly returns filed during the financial year.

GST Tip: The 37th GST Council meeting took the decision to waive off filing of GSTR-9A for Composition taxpayers for FY 2017-18 and FY 2018-19.

13. GSTR-9C

GSTR-9C is a reconciliation statement to be filed by all the registered taxpayers under GST whose annual turnover exceeds Rs.2 crores. The statement of reconciliation is between the figures as per audited financial statements of the taxpayer and the annual return GSTR-9 that has already been filed. It is certified by  a Chartered/Cost Accountant and is similar to that of a tax credit report provided under the Income-tax act.

GST Tip: GSTR-9C is to be filed for every GSTIN, thus, one PAN can have multiple GSTR-9C returns being filed.

14. GSTR-10

GSTR-10 is to be filed by a taxable person whose registration has been cancelled or surrendered under the GST. The return is also known as  final return and is required to be filed within 3 months from the date of cancellation or cancellation order, whichever is earlier.

15. GSTR-11

GSTR-11 is a return to be filed by persons who have been issued a Unique Identity Number(UIN) in order to get a refund under GST for the goods and services purchased by them in India. GSTR-11 contains the details of inward supplies received and refund claimed.

GST Tip: UIN is a classification especially made for the foreign diplomatic missions and embassies not liable to tax in India with the purpose of getting a refund of taxes.

So here are the types of GST returns and every extra information about them. Stay tuned for more such GST enhanced blogs.

The post All About Types of GST Returns first appeared on ITC Reconciliation, GSTR 2A Reconciliation - Digitax Automation.

The name of the fund i.e. PM cares stands for “Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund’. The fund is being set up to fight the crisis that has occurred as a result of the current pandemic – COVID19. The prime minister will be the chairman of this trust that aims to utilise the donations in various other disastrous situations in future.

Why we recommend donating in PM CARES Fund:

There can be many reasons to donate in this fund but the most important ones are here.

• The fund has sole is envisaged especially to carry out COVID-19 relief practices.
• You will have this chance of availing 100% Tax benefit u/s 80G without 10% restriction. So when you will be donating a respective amount in the fund that amount will get reduced from your taxable income when the tax will be calculated thereafter.
• You can make donations till 30-06-2020 and can claim benefits under section 80G for the financial year 2019-2020.
• Companies that are willing to donate now in this fund can get extra benefits also. As the donations will also be applicable for CSR purposes under the Companies Act.
• This will help the government in providing the best services to all the doctors who are facing the threat from very close enough.
• The minimum donation in the fund is Rs. 10. This minimum limit gives an opportunity to every citizen irrespective of their economic status to donate towards a good cause.

How to donate in PM CARES Fund:

1. Donate through cheque or demand draft by in the nearest branch of your bank.
2. Donate through debit cards, net banking and UPI by following the link provided on PM India portal (Govt of India portal).
3. You can also donate through applications like PAYTM, BHIM etc.
4. For making offline payments you can contact the nearest branch of your bank.

To know more about this fund you can check out the following websites also.

About PM Cares Fund – https://www.pmindia.gov.in/en/about-pm-cares-fund/

Press release on PIB website: https://pib.gov.in/PressReleseDetail.aspx?PRID=1609734

Let’s come forward to strengthen our nation in these difficult times because together we will win this fight with COVID19. Moreover, take care of yourself and your loved ones at home.

The post PM Cares Fund to fight COVID-19 Crisis – All you need to know first appeared on ITC Reconciliation, GSTR 2A Reconciliation - Digitax Automation.