Saturday, October 10, 2020

GST ITC Reconciliation with GSTR-2A

Necessity of GSTR-2A Reco from Feb to Aug 2020

Rule 36(4) of the CGST Rules allows for ITC to be availed up to maximum of 110% of amount appearing in GSTR-2A at the time of filing of GSTR-3B.

Among the pandemic linked compliance relief measures announced by the government, one under GST laws was announced vide notification No. 30/2020-CT dated 03-Apr-2020, by which the rule of 110% of ITC appearing in GSTR-2A was to be looked at cumulatively for the tax periods from Feb 2020 to Aug 2020, finally adjusted in the GSTR-3B for September, 2020.

Accordingly, all tax payers are advised to ascertain the details of invoices uploaded by their suppliers under Section 37(1) of the CGST Act for the periods from Feb to Aug till the due date of filing Form GSTR-1 for September 2020 as reflected in GSTR-2A.

General Issues w.r.t. Reconciliations

While Rule 36(4) of the CGST Rules allows for ITC to be availed up to maximum of 110% of amount appearing in GSTR-2A at the time of filing of GSTR-3B, this does not mean that a taxpayer shall avail ITC more than the 100% amount eligible for any financial year. 

For the eligibility of ITC, having the tax invoice for the inward supply or inputs is not enough. The same amount shall also be reflecting in the GSTR-2A.

Please reconcile your ITC appearing in GSTR-2A with ITC claimed as per books and in the GSTR-3B. You may have to take the following actions on account of the differences.

1. Excess ITC appearing in GSTR-2A: After removing the ineligible ITC, compare values of eligible ITC in 2A with those claimed in your GSTR-3B as per books of accounts. You may have incorrectly recorded eligible ITC as an expense in your books, which may be corrected in case your financial statements for FY 2019-20 have not been closed yet. Such ITC can be claimed up to the due date of filing of GSTR-3B for September 2020 only and not after.

2. Lower ITC appearing in GSTR-2A: In case you have availed ITC in your books of accounts and in GSTR-3B, however the same is not appearing in GSTR-2A, you may have either taken the ITC incorrectly against a B2C invoice or against a supply which may not be under a tax invoice. It is also possible that your vendor may not have recorded the invoice correctly in GSTR-2A. As the last opportunity for any such corrections is up to the due date of filing of GST Returns for September, 2020, you must immediately bring this to the notice of the vendor so that he can modify his return and make the necessary correction. Such ITC amount not appearing in GSTR-2A will otherwise require reversal and also attract interest liability computed @ 24% p.a.

Such excess ITC availed arising out of reconciliation during this period, if any, shall be required to be reversed in Table 4(B)(2) of Form GSTR-3B, for the month of September, 2020.

Please carry out such reconciliation for entire FY 2019-20 as well as the same will be used for ITC reversals either during GST Audit in GSTR-9C or by the GST Department.