Reconciliation of GST

December 2018

First Achievement of Zappy

Award It gives me immense pleasure to inform that I have been conferred as Indian Achievers’ Award for Business Excellence by Indian Achievers’ Forum at 46th National Summit on Startups and Women Entrepreneurship. This is the first achievement of Zappy at it’s young age of 3 years. This achievement being a stepping stone, we would maintain and improve our high quality service standards in timely manner.

Reconciliation of GST invoices vs GSTR-2A is a challenge to all GST practitioners. In this edition we will be discussing about the Reconciliation of GST article provided by CS Renu Wadekar, Practicing Company Secretary from Gandhinagar, Gujarat. Our usual Legal terms and News Bites related to notifications by MCA, SEBI, RBI, IT and GST.

CEO Saranya Deivasigamani,
CEO

Reconciliation of GST

Goods & Service Tax (GST) returns and process has been designed in order to harmonise the data filed by the supplier with those of the recipients by allowing the recipients to avail Input Tax Credits only when the tax is paid and returns filed by the supplier. This will infuse a pressure from the recipient to the supplier for payment of tax and returns in time so they can avail their credit in time.

To ensure that all the available input tax credit are in place, the reconciliation process will help the recipient. The reconciliation process will make sure that no sales or purchases are omitted or wrongly reported in the GST returns.

The taxpayers must reconcile their data on a regular basis with that of the vendors to claim eligible Input Tax Credit (ITC). The process of reconciliation is simple, but can be time-consuming, especially when there are more vendors and more invoices to reconciles. The taxpayers are required to continuously keep an eye on any discrepancy or mismatches that may affect the ITC claim.

In this article we will see 5 simple steps involved in Reconciliation Process.

1. First ever step in the process is to comply with the GST provisions by filing all required returns periodically. Even if the due date for a particular GST return is missed, it should be filed along with the interest or the late fees as applicable. As long as the GST returns are not filed, matching and reconciliation process will not take off. The taxpayers need to update their books of accounts and align the tax returns accordingly. Unless and until all the GST returns are filed, the taxpayers won’t be able to claim adequate ITC.

2. To Reconcile GST invoices, the taxpayers must list down all the invoices from their books of accounts probably in an excel sheet clearly mentioning: GSTIN of supplier, Name of Supplier, Date of Invoice, Invoice Number, Invoice Type, Place of Supply, Rate, Taxable Value, Invoice Value, Tax Amount (separately for CGST, SGST, IGST and Cess). Furthermore, the taxpayers shall download GSTR 2A from GST portal which will provide all the above mentioned details in excel or JSON format (which can later be converted to excel).

The taxpayers shall run a quick search among these 2 excels and identify the mismatches and correct the relevant entries in the books of accounts. They should also amend these details in the coming GST return filing period. GST laws do not allow for revision of tax returns filed in the previous periods. However, it does allow for filing of the corrected entries via an amendment return in the next periodic return. These amendment entries should be filed in GSTR 1 & GSTR 3B, accordingly.

The taxpayers should make sure that the purchase register is matched with books of accounts, GSTR 2A and GSTR 3B details. When there are any mismatch in GSTR 2A and the books of accounts of the taxpayers, they should approach the supplier and follow up with them to pay the tax and submit their returns in time. It is important to streamline the books of accounts, the GSTR-3B return, and GSTR-2A form to fully avail the ITC on the relevant purchases; otherwise, the taxpayer will lose ITC claim and will end up paying extra taxes.

3. The congruity between the books of accounts and the GST returns is crucial for claiming ITC. The taxpayer will be eligible to claim ITC of only to the extent of the GST paid and returns submitted by the vendor. Additionally, taxpayers while claiming ITC on purchases should keep a check on taxes paid under the reverse charge mechanism. However, a taxpayer can only avail credit of taxes paid under reverse charge mechanism only if the goods and/or services are used or will be used for purpose of business.

4. Communication is the key, especially amongst the vendors and customers. This coordination results in uniform reporting of the details in the GST returns. Chances of mismatches, omission or incorrect entries are reduced when the suppliers’ and the recipients’ synchronize their details and then file GST returns. It is also very important to identify the non-compliant vendors, interact with them, and resolve the queries then and there; this will help the recipients maximise ITC. There are advanced reconciliation software can help reduce this communication gap between the suppliers and the recipients. This software enables the users to send a reconciliation mismatch report to the vendors or suppliers to resolve any issue arising out of it.

5. Lastly, the taxpayers should report all the rectified sale or purchase transactions of the year, in the September returns. September return is the last chance for the taxpayers to report and correct all differences filed in tax returns of the Financial Year.

Any taxpayer who has not claimed ITC in the preceding months can avail the same in the subsequent months, but not later than the filing of annual return i.e. GSTR -9 or filing of GST returns for September month of the subsequent financial year, whichever is earlier. Any amendments or changes to the previously filed returns can be done within the same timeline.

GST reconciliation is a recurring event, it must be performed periodically to claim maximum credit and to avoid mismatches on a larger scale. The taxpayers shall communicate the queries with their recipients or vendors at the earliest and file error-free returns.

Renu Renu Wadekar,
Practicing Company Secretary

Legal Terms

Ad coelum

To the Sky.—Ad coelum doctrine relates to the common law rule that a landlord owns everything below and above the land, up to the sky and below the earth to its core.

NewsBites

MCA Updates

SEBI Updates

RBI Updates

Income Tax Updates

GST Updates

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