Why is GSTR-2A reconciliation so important for businesses?

 

What is GSTR-2A?

The GSTR-2A form is an auto-populated statement of inward supplies which is available only in view-only mode, so it cannot be edited. It is filled completely dynamically and is updated whenever a supplier quotes your GST Registration Number in their invoices and uploads the to the GST Portal. It is generated only when the supplier has filed forms GSTR-1/5, and GSTR-6. The receiver can then download GSTR-2A and see the details in his inward supplies.

Input Tax Credit or ITC depends on the details reported by vendors in the GSTR-1 form through invoices. The amount specified in that form is the extent to which ITC can be claimed by the taxpayer. Note that the taxpayer will get information about how much ITC can be claimed from the GSTR-2B, which is generated monthly and remains static.

What is GSTR-2A/2B reconciliation?

The Gst Reconciliation Software process involves matching or checking the data that has been uploaded by your suppliers with that of your purchase data in your books. As the supplier’s uploaded information is available to you in GSTR-2A/2B, you can use that statement and then compare it with your books to check for any discrepancies. This shows you if every transaction that has taken place between the two of you has been accurately recorded or if any invoices are missing. Any data that is missing can cause future troubles and make you liable to pay penalties in the form of interest and other fees as specified by the GST authority.

Importance of GSTR-2A/2B for businesses

On January 1, 2022, the Finance Ministry launched the 100% invoice matching criteria and made it mandatory for all businesses. Essentially, any business that wishes to claim the ITC will have to show 100% parity between their filed returns and supporting invoices software. In simple words, you will only be able to claim ITC if the concerned invoice is present in GSTR-2A/GSTR2B. Here are a few reasons why GSTR-2A/2B reconciliation is important for businesses.

Loss of ITC for the Taxpayer

If one of your suppliers fails to upload an invoice, it affects you because, even though you paid the necessary tax to the supplier, you cannot claim the ITC rightfully due to you. This is because the tax you paid will not be reflected in the GSTR-2A/GSTR-2B statement, which is a prerequisite to claiming ITC. This problem can negatively impact your working capital, especially if your supplier is a habitual defaulter. It may seem trivial at first, but it can make a huge difference because many MSMEs need capital for running their business operations smoothly. ITC reconciliation is the only way to ensure this loss of ITC does not occur and the taxpayer can claim the correct ITC in a timely manner.

Avoid duplicate or ineligible ITC

The GSTR — 2A reconciliation prevents ineligible or duplicate ITC claims. There are prescribed guidelines that need to be fulfilled to be eligible to claim ITC. Similarly, for certain notified supplies, products or services, ITC claim is blocked, meaning you cannot claim on such supplies. For example, ITC can not be claimed for those purchases used for making exempt supplies, something that is consumed for personal use etc., GSTR-2B/GSTR-2A reconciliation helps you to avoid ITC claims on ineligible supplies. It is also possible that you may claim tax credit on the same invoice multiple times, resulting in excess credit.

Original Source: Why is GSTR-2A reconciliation so important for businesses?


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