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.

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.

Role of CFOs and Tax Heads is critical

Essentially, in this new GST regime, the role of CFO has undergone a sea-change and been imposed with significantly more responsibility of being true and correct in relation to tax reporting and compliances. As legislation imposes heavy corrective penalties in case of errors resulting in short payment of taxes or incorrect availing of ITC, the job of CFO has become more challenging.

Challenge of GST reconciliation

Ever-increasing regulatory requirements and with the vast volume of data CFO is getting it increasingly difficult, if not impossible, to manage whole work manually or with traditional spreadsheets. This reconciliation of the ITC data process requires:

• To find the mismatch in the data
• To find the missing entries in the returns filed by various
• To track the returns filed by the vendors.
• To get the timely alterations in the returns filed by the
• Manually editing or adding the data.
• To keep the records of ITC already claimed and pending

One of the recent studies has found that due to this tedious and time-consuming nature of the claim process, 40% of business houses are still grappling with GST compliance.

The only real solution here is the complete automation of the reconciliation process. This will not only eliminate all the above issues but will also enhance overall end-user experience and free up employees for more core responsibilities. With the adoption of advances technology such as direct import of data from the accounting software as well as GSTN portal and seamless integration with the returns filed by various vendors, the overall ITC matching process can shrink to a matter of 2 to 3 hours only. It will not only save the precious productive time but completely wipe off the fear of any future tax or interest liability.

To know more about GST automation solutions, you can contact at support@digitaxindia.com

The post Critical Role of CFOs and Tax Heads in claiming GST Input Tax Credit (ITC) first appeared on ITC Reconciliation, GSTR 2A Reconciliation - Digitax Automation.

The post Key Outcomes – 3rd National GST Conference first appeared on ITC Reconciliation, GSTR 2A Reconciliation - Digitax Automation.

You must be thinking, how is this even possible because the money passes through so many direct-indirect channels so its quite tedious task to do but in the advancing technological world everything is easy and can be done on a click. Just like using GRECS for ITC reconciliation to save time and money with a perk of doing it from home!

So, here we are to help you out with your doubt of how the government keeps a check on your tax credit claim. Let’s get started with the following pointers telling the exact method and process followed by the government. 

• Government is sitting on voluminous data in the GST regime.
• Earlier, the power of access to such huge data was unavailable.
• Government engages in the heavy use of Data Analytics with industry and sector benchmarking regarding ITC claim.
• Next comes the smart monitoring systems available with assessing officers configured with various kinds of analytical, graphical and ratio analysis.
• The advancing technology helps in keeping a close eye on unscrupulous refund claims.
• Availability of data trail enables the identification of circular trading transactions.
• Identification of fake entities and registrations using locational mapping techniques helps in tracking down the defaulters. 
• All India e-way bill system tracks the transportation of goods which is now linked with www.vahan.nic.in which provides transparency. Moreover, a proposed system of e-invoicing will further strengthen the control of the government.

With the increasing use of technology, there is less and less requirement of any human intervention in finding out the red flags among such big data. Hence, technology is being used in pinpointing the exact event of fraud and has increased the accuracy of anti-evasion measures undertaken by the department.

Do let us know in the comment section how do you like this piece of information. 

The post How GST department is monitoring your Tax Credit Claim? first appeared on ITC Reconciliation, GSTR 2A Reconciliation - Digitax Automation.

Nowadays, the GST portal has started showing monthly summary reports of Liability declared and credit claimed by the registered persons in a financial year. Following reports can be viewed in the GST site – 

1.   Liability statement other than export and reverse charge

2.   Liability due to reverse charge

3.   Liability due to export and SEZ supplies

4.   ITC credit claimed and due.

Out of these 4 reports, the ITC credit claimed and due report is one of the most important reports which is useful in the preparation of ITC related information in GSTR-9.

This report shows a monthly summary of ITC claimed in 3B and appearing in GSTR-2A auto-populated for that month.

Case Study

The following is a sample view of ITC credit claimed and due report of a particular case.

        ITC Credit Claimed and Due Report

However, when we see the auto-populated figure in point no. 8 of GSTR-9 of the same GSTIN, that figures are slightly different from the above report. The following is what appears on the screen. 

                Auto populated figures in point no. 8 of GSTR-9

As you can see that the auto-populated figures of 2A as showing in point number 8 of GSTR-9 and figures as showing in the ITC Credit claimed and due report, there is a difference in IGST figure. Total of IGST in ITC claimed and due report is 63,43,276.76 whereas in point no. 8 of GSTR-9 it is shown as 61,91,525.11. There is a difference of Rs. 1,51,751.65 in these 2 figures.

One may think, how this can be possible, where one report on the GST site shows one figure and the same GST site is showing another figure in another report.

How Digitax helps in finding this difference?

In Digitax G-Recs ITC reconciliation software you can see the consolidated 2A report for the whole financial year in various formats.

1.   Invoice Wise 2A report classified into Regular Invoices, Amended Invoices, Credit Note Debit Notes and Reverse Charge Invoices

2.   GSTIN Wise 2A report

3.   GSTIN wise 2A summary

4.   Month wise 2A Summary

Now, let’s see in the above case, how the difference can be easily seen.

When we see the invoice wise 2A report for the financial year in Digitax, the software classifies the Regular Invoices, Credit Notes, Debit Notes, Amended Invoices and Reverse Charge Invoices appearing in 2A for the whole financial year.

In the above case, when we see the 2A report for the FY 2017-18, the following classification comes.

From above it becomes clear that in the point no. 8 of GSTR-9, the auto-populated figures of ITC does not include Reverse Charge Invoices on which tax is liable to be paid on reverse charge basis. However, the credit claimed and due report, the credit of reverse charge invoices is included.

Sorting out the above difference without the help of any tool is quite challenging, whereas, with the right tool, you can save your valuable time and energy while preparing for GSTR-9.

For more information on Digitax G-Recs ITC reconciliation software, you can write to support@digitaxindia.com.

Stay tuned for more such information about GST and G-RECS.

The post Difference between auto-populated data of GSTR-2A shown in GST Login: A Case Study first appeared on ITC Reconciliation, GSTR 2A Reconciliation - Digitax Automation.

What is Input Tax Credit (ITC)?

Input Tax Credit basically refers to the reduction of the taxes paid on inputs from taxes to be paid on output. When the supply of goods and services is supplied to a taxable person, the GST charged is known as Input Tax. The concept of ITC is not entirely new as it already existed under the pre-GST indirect taxes regime (service tax, VAT and excise duty). Now just the scope of it has been widened under GST. Earlier, it was not allowed to claim ITC for Central Sales Tax, Entry Tax, Luxury Tax and other taxes. In addition to all these, the manufacturers and service providers were barred from claiming the Central Excise duty. Though, it should be noted that Input Tax Credit can not be applied to all types of inputs. Each and every state or country can have a different set of rules and regulations to be followed. Input Tax Credit can also be applicable to a dealer who has purchased goods to resale. These rules are quite stringent and particular in their approach. Let’s take an instance, where a manufacturer needs to figure out his final taxes after claiming the ITC. Let’s say, the tax to be paid on the final product is Rs. 500 and the purchase tax paid is Rs. 350. The Input credit he claimed is Rs. 350, then the final taxes he will pay is Rs.150. Under GST, It is a very critical activity to claim for ITC for every business to settle the tax liability. So, let’s learn how to claim ITC.

How to claim Input Tax Credit (ITC)?

If you want to claim and be entitled to your Input Credit Tax then the following must be followed as per the GST laws –

1. One should be a registered taxable person.

2. One can claim Input Tax Credit only, in the case, where the goods or services received is used for business purposes.

3. Input Tax Credit is taxable and can be claimed on exports or zero-rated supplies.

4. If you are a registered taxable person, and the constitution changes due to merger, sale or transfer of business, then the unused Input Tax Credit shall be transferred to the merged, sold or transferred business.

5. One can credit the Input Tax Credit in his/her Electronic Credit Ledger in a provisional manner on the common portal as per the model GST law.

6. Supporting documents such as a debit note, tax invoice, supplementary invoice, all are needed to claim the Input Tax Credit.

7. Input Tax Credit can be claimed if there is an actual receipt of goods and services.

8. The Input Tax needs to be paid through Electronic Credit/Cash ledger.

9. All GST returns like GST-1, 2,3, 6, and 7 needs to be filed.

So, this was all about Input Tax Credit, stay tuned for more!

The post What is Input Tax Credit (ITC) and how to claim it? first appeared on ITC Reconciliation, GSTR 2A Reconciliation - Digitax Automation.

Here are the 5 changes under the GST to be applied for New Year 2020-

1. Restriction on the Claiming of ITC- With the effect to the decision taken in the 38th GST Council Meeting, Central Board of Indirect Taxes & Customs has reduced the percentage of eligible ITC available for Availment, the details of which are not been shown by the supplier in GSTR-1. Earlier, the CGST rules stated that only 20% of the eligible credit can be claimed as ITC in respect of invoices or debit notes, the details of which have not been uploaded by the suppliers in GSTR-01, by a registered person. But now, the only total of 10% of such credit can be availed.

2. Commissioner has the power to block ITC under new Rule 86A- The new Rule 86A grants the power to a Commissioner to decide or vary the conditions for use of ITC available in the electronic credit register. As per the amendment, a Commissioner might not allow the debiting of the amount in the electronic credit register for the discharge of tax liabilities or claim of a refund of any unutilized amounts in the tax register if he/she has reasons to believe, that such tax credit is:

(i) Availed fraudulently based on invoices from a non-existing person or non-registered person.

(ii)Availed without the receipt of goods or services.

(iii)Availed on the strength of tax invoices which has not been paid to the government.

3. If GSTR-1 not filed, blocking the generation of E-way Bill- From January 11, 2020 non-filing of GSTR-1 for two consecutive months or quarters can lead to blocking of the generation of E-way Bill. Hence, in the year 2020, make sure that the regular filing of GSTR-1 and GSTR-3B go hand in hand.

4. E-Invoicing under GST Mandatory- From April 01, 2020, it is mandated for every registered person whose aggregate turnover (including exempt supplies) on PAN India basis exceeds Rs. 100 crores in a financial year to generate e-invoices in the case of B2B supplies and report the same to the notified common portals of GST, mentioned below:

(i) www.einvoice1.gst.gov.in;

(ii) www.einvoice2.gst.gov.in;

(iii)www.einvoice3.gst.gov.in;

(iv) www.einvoice4.gst.gov.in;

(v) www.einvoice5.gst.gov.in;

(vi) www.einvoice6.gst.gov.in;

(vii) www.einvoice7.gst.gov.in;

(viii) www.einvoice8.gst.gov.in;

(ix) www.einvoice9.gst.gov.in;

(x) www.einvoice10.gst.gov.in.

The portals will be in effect from January 01, 2020, for the smooth and better accommodation and transition of the taxpayers.

5. QR codes creation for B2C supplies – With effect from April 01, 2020, Quick Response Code (QR Code) will become mandatory in the cases where an invoice is issued by a registered person, exceeding rs. 500 crore in aggregate turnover in a financial year, to an unregistered person, i.e., B2C invoice.

For the cases, where a registered person makes a Dynamic QR Code available to the receiver through a digital display, such B2C invoice issued by the registered person containing cross-reference of the payment using a Dynamic QR Code, will be deemed as QR Code.

There are more such changes, to know about them stay tuned!

The post New Changes in New Year Under GST first appeared on ITC Reconciliation, GSTR 2A Reconciliation - Digitax Automation.

GSTR-2A is a purchase-related tax return that is automatically generated for each business by the GSTN portal. It is based on the details of GSTR 1, details operator from GSTR 5 (supplied by non-resident taxable person), GSTR 6 (ISD), GSTR 7 (TDS Deduction) and GSTR 8 (collected by TCS e-commerce) of your suppliers. You can verify and amend this return before you file it in the GSTN portal as your GSTR-2.

There are two ways by which a registered taxable person can view the data generated by GSTR 2A return. The details can directly be viewed on the GST portal by login and accessing the return filing segment which stacks in other returns of the taxable person or can download GSTR 2A file and view it in the offline utility tool.  

Difference between GSTR 2 and GSTR 2A

GSTR-2 and GSTR-2A are two different yet related GST returns. GSTR-2A Form makes it easier for users to file GSTR-2 by providing most details in a ready-to-fill format. GSTR-2A fetches the details of the outward supplies as mentioned by your supplier in their returns, which you can use to file your own GSTR-2. Basically, GSTR-2 will be a replica of the GSTR-2A, but it will be editable so you can check the details and edit the same or change them, in addition to the invoices related to those supplies. The user, therefore, need not upload all the inward supplies details manually. The GSTR-2A Form will also include all the inward supplies invoices uploaded by your supplier, which you can check, modify or delete, to be further added to your GSTR-2 Form. Be sure to include only the correct information in your returns, as your input tax credit eligibility will be determined based on the information provided by you in your GSTR-2 Form.

Importance of GST Reconciliation on a regular basis. 

ITC Reconciliation is a must-do exercise for every business to increase their profitability. Under new GST returns, the taxpayers will only be able to claim ITC if the particular invoice is present in the GSTR-2A or supplier’s data. 

This requirement forces the businesses to reconcile and claim ITC correctly. In case the vendor has declared his GST liability and credit has not been availed by the purchaser in his GST returns. So, to not to lose the claim of ITC, the data should be reconciled on a regular basis. This reconciliation process will ensure no ITC loss on any invoices and helps in avoiding any duplication.

It is mandatory to file a GST Return for each and every entity registered under the GST Act. Even in case where there are no inward supplies during the tax period, NIL return for that period is required to be filed. In case of failure to file the return within due period, the taxpayer is penalized with the late fees of INR 100 per day up to a maximum limit of INR 5,000.

The post What is GSTR- 2A reconciliation & why it is important for your business  first appeared on ITC Reconciliation, GSTR 2A Reconciliation - Digitax Automation.

Goods and Services Tax (GST) is considered the biggest financial reforms in India. Input Tax Credit in brief, ITC under GST is a credit which is available to supplier to set off the tax he has paid on purchase of goods from output tax on sale of such goods. Hence, the tax will levy on the value added which results in avoiding double taxation. In simple words, Input Credit means at the time of paying tax on sales, you can reduce the tax you have already paid on purchases.

MANNER OF UTILIZING INPUT TAX CREDIT

Most importantly, the manner of utilization of ITC for payment of Output Tax Liability in GST has been a subject matter of change since last few months. The following is the brief summary of legal provisions relating to manner of utilization of ITC.

The mechanism of utilization of GST ITC  From 01-07-2017 to 31-01-2019 (Section 49A of CGST Act) was as follows-

NEW RULES FOR UTILIZATION OF ITC IN GST

From 01-02-2019 to 31-03-2019 (Amended Section 49A of CGST Act)   From 01-02-2019 the new rules for utilization of ITC are as follows.

*The IGST input needs to be exhausted first in order of IGST Output, CGST Output and SGST output.   From 01-04-2019 Onwards (Rule 88A of CGST Rules)   Now w.e.f. 01-04-2019, again some changes are done in the rules relating to utilization of ITC which are as below.

*The IGST input needs to be exhausted first for IGST Output then in any order for CGST Output and SGST output.   The above rules can be understood with following example. We are summarizing the effect of changes in rules in all the 3 cases above.

EFFECT OF CHANGES IN RULES

From 01-07-2017 to 31-01-2019 (Section 49A of CGST Act)

From 01-02-2019 to 31-03-2019 (Amended Section 49A of CGST Act)

From 01-04-2019 Onwards (Rule 88A of CGST Rules)

Thus, rule 88A now relieves the taxpayers from the hardships of new ITC utilization mechanism effective from 01-02-2019.

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