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.

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.

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.