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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.

Conditions To Claim Input Tax Credit under GST – 

• The due date of filing the GST Return for September of the next Financial year

• the date of filing the Annual Returns for that Financial year.

• Effecting exempted and taxable supplies
• Business and non-business related activities

Items on which Credit can not be availed – 

• It is made obligatory by the government for employers to provide such to the employees.
• Goods or services are taken to deliver the same category of services or as a part of composite supply. For example, Mr Abid uses the service of rent-a-cab to supply to Mr Zakir, a client, then the credit of ITC paid on purchases will be allowed.

The post ITC: Conditions To Claim Input Tax Credit under GST 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.

In the 38th meeting, the GST council suggested a few changes whose highlights are listed below in the simplified language so that it can be easily understood –

1. The deadline for the annual return in FORM GSTR-9 and reconciliation statement in FORM GSTR-9C for the Financial Year 2017-18 has been extended to 31st January 2020.
2. The deadline for filing GST returns for November 2019 has been extended to 31st December 2019 in regard with few North-Eastern States.
3. To address the grievances of general or specific nature of taxpayers there will be Grievance Redressal Committees (GRC) constituted at the Zonal/State level. The Grievance Redressal Committees (GRC) will be including both CGST and SGST officers along with representatives from various sectors such as trade and industry, GST stakeholders, GST practitioners, GSTN, etc.
4. The previous GST rates on lottery schemes that were 12% tax on state-owned and 28% tax on state-authorised are altered to 28% tax on all lotteries from 1st March 2020. The decision took place after the voting and to levy 28% tax was concluded in the matter.
5. To improve the filing of FORM GSTR-1, the Council has decided to provide relief to the taxpayers by giving a waiver of late fee for the tax periods between July 2017 and November 2019, if filed by 10th January 2020. Moreover, E-way Bill of those taxpayers who have not filed their FORM GSTR-1 for more than two consecutive tax periods shall be blocked from generation.
6. Now, the recipient whose invoices and debit notes are not reflected in the Form GSTR-2A can only avail a restricted 10% of the eligible credit available for those whose invoices or debit notes are reflected in form GSTR-2A. Earlier the credit to be availed was 20%.
7. In the case of non-filing of FORM GSTR 3B returns, a Standard Operating Procedure for the benefit of tax officers would be is released about the actions to be taken in such a situation. It will be of great help in blocking or reversal of fake Input Tax Credit availed.
8. The GST Council has also assented to various law amendments to the GST law which will be introduced in Budget 2020 – 21.

All these changes will be made effective from the date as specified and through Gazette circulars/notifications which alone shall have the force of law.

For more updates on GST related amendments and other tax-related information, stay tuned!

The post 38th GST Council Meeting Highlights first appeared on ITC Reconciliation, GSTR 2A Reconciliation - Digitax Automation.

The latest circular issued by CBIC has clarified the confusion about 20% cap on ITC claims, providing a big relief to GST taxpayers. The new rules related to availing ITC under the GST clarified that a certain category of Input Tax Credit claims such as ITC in respect of the IGST paid on imports and GST paid under the reverse charge mechanism have been opted out of the realm of the new rules introduced in October 2019.  

The clarification was made regarding the rules which were implemented by the CBIC limiting the ITC claims to 20% of the eligible amount where invoice matching has already been done. Nevertheless, the notification issued by the CBIC in the second week of October left a lot of ambiguity over the method of calculating this 20% amount, the cut-off date as well as whether it was to be calculated supplier-wise or on a consolidated basis. But now, the new circular has cleared up all the doubts related to these aspects for the benefit of GST payers. 

Let’s throw some light on the clarifications made by the CBIC. First of all, this 20% cap on the eligible Input Tax Credit will be exempted from calculating as a supplier-wise rather the GST payers will be able to avail the ITC on a consolidated basis. In order to deal with the complaints related to some businesses availing ITC using fake GST invoices, the CBEC,the nodal body responsible for the implementation of indirect taxes in the country, in October 2019 made it a compulsion to match the invoices uploaded by the suppliers in their GSTR1 forms before buyers could avail Input Tax Credit in their GSTR-3 returns. However, at the same time, the buyers were allowed to claim 20% more ITC over and above the eligible amount where the invoice matching was done but the lack of clarity of calculation method created a lot of mayhem among GST payers. 

To understand it better, let’s take an instance: If a buyer is entitled to avail input tax credit of Rs 5 lakh on purchases (inward supplies) made in a month but if his suppliers have only uploaded the correct invoices in respect of supplies of Rs 4 lakh only in the GSTR1 forms uploaded by them, then the buyer can avail ITC of Rs 4 lakh plus 20% of the eligible amount, i.e., Rs 80 thousand. Thus, the buyer could claim a total ITC of Rs 4.8 lakh in the month.

In order to check the problem of misuse of input tax credit system, the CBIC’s latest circular also clarified that the total amount of ITC, even after the addition of 20% input tax credit over and above the eligible amount where invoice matching has been done, cannot exceed the total amount of input tax credit that can be claimed.

For instance, if a buyer is entitled to ITC of Rs 8 lakh on inward supplies and invoice matching is done in case of Rs 7 lakh then as per the 20% cap rule, he is also entitled to avail 20% over and above the eligible amount of Rs 7 lakh, which is 1.4 lakh in this case. However, this can take the total amount of ITC to be availed by him in the month to Rs 8.4 lakh, Rs 40,000 more than the total ITC amount that can be claimed. The new circular has intended to clarify this only, that in any case ITC claims will be restricted to the total amount due.

This was one of the aspects of the new circular, to know more about where the new GST Input Tax Credit rule will not be applicable and to know more new amends every day, stay tuned!

The post Clarifying Input Tax Credit Claims under New GST Rules 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.

The post Method of Utilization of Input Tax Credit (ITC) in GST first appeared on ITC Reconciliation, GSTR 2A Reconciliation - Digitax Automation.

Following conditions should be satisfied to avail input tax credit under GST

1. Goods or services received must be for furtherance of business
2. Tax Invoice, Debit Note, Bill of Entry should be available
3. Goods or services must be received
4. Tax charged on the invoice should be paid by vendor
5. Vendor must have filed its returns

Compliance of conditions number 1 to 3 is under the control of the person claiming the ITC but conditions number 4 and 5 are dependent on external factors where the taxpayer needs to track the compliance status of his vendors for finalisation of his own claim of ITC.

WHAT HAPPENS WHEN ABOVE CONDITIONS ARE NOT SATISFIED?

Now the burning question is what will happen when the taxpayer fails to satisfy any of the above conditions?

1. Your claim of ITC becomes incorrect and invalid.
2. Reversal of wrongly claimed ITC and levy of interest @ 24%
3. Demand of Tax and interest by government on reversal.
4. Levy of penalty equal to amount of ITC wrongly claimed.
5. Prosecution and imprisonment.

WHY THIS RECONCILIATION IS IMPORTANT?

The ITC reconciliation is an important activity to do due to following reasons.

• Ensuring correct claim of ITC by the company
• Avoiding risk of reversal of ITC, levy of interest and penalty by government.
• Protecting the bottom line of the company.
• Identifying the misuse of GSTIN of the company.

WHY ITC RECONCILIATION IS A TIMELY EXERCISE TO DO?

ITC reconciliation is a timely exercise due to following reasons.

1. Matching of ITC is mandatory condition under GST.
2. Government can scrutinize the GST returns upto 6 years.
3. If reconciliation not done, company is carrying major risk for 6 years.
4. With interest @24% the ivnterest cost may be high than basic tax.
5. In case of delay, recovery from defaulting vendor is difficult.
6. Detection of misuse of your GSTIN is possible by regular reconciliation.

HOW ENTRIES IN GSTR-2A CAN BE A REASON FOR TAX DEMANDS?

GSTR-2A is not only the tax credit report but also a tax demand report.

1. RCM invoices of GST registered vendors show up in GSTR-2A.
2. If RCM invoices not reconciled with own books, government can raise demand of tax under RCM.
3. Company will not be able to claim ITC of demand deposited under audit.
4. Purchase invoices can also show up in GSTR-2A which may not have been entered in the books. This can also result in demand of tax.

8 STEP PROCESS OF RECONCILIATION AND TRACKING VENDOR COMPLIANCE

Process for reconciling own ITC with GSTR-2A.

1. Monthly matching exercise with 2A & ITC Register.
2. Track invoice status showing as “Submitted” or “Not Submitted”.
3. Track the status of filing of GSTR-3B by vendor.
4. Find out any entries in ITC register unmatched with 2A and reasons thereof.
5. Rectify the mismatching entries in ITC register with 2A due to own error.
6. Identify and follow up the mismatching and unmatching entries in 2A due to vendor error.
7. Find out and avail unclaimed ITC appearing in 2A.
8. Taking steps like issue of debit notes or withholding of payment of vendors till resolution of ITC issuevs.

TOP REASONS OF MISMATCHED, UNMATCHED AND UNCLAIMED ITC IN 2A

• Wrong data input by own team
• Wrong data input by vendor team
• Debit notes and credit note issues
• Tax invoice issued but GST returns not filed by vendor
• Invoice issued in a month but ITC claimed in another month.
• Amendment of tax invoice by vendor
• Issue of  debit notes or credit notes by vendors.
• Place of supply mismatches

CHALLENGES IN RECONCILIATION PROCESS

• System to track ITC and 2A data simultaneously is not available
• Time consuming process
• Lack of collaboration between team members
• Usage of complex excel formulas and maintaining multiple excel files across the organization.
• Frequent changes in accounting and finance team.
• Handling of updates and amendments in 2A.
• Identification and resolution with defaulting vendors.

The post GST Input Tax Credit (ITC) Reconciliation first appeared on ITC Reconciliation, GSTR 2A Reconciliation - Digitax Automation.