Claiming ITC Is Easy | Follow complete Checklist to Avail 100% ITC

Claiming ITC Is Easy | Follow complete Checklist to Avail 100% ITC

Reetu | May 5, 2022 |

Claiming ITC Is Easy | Follow complete Checklist to Avail 100% ITC

Claiming ITC Is Easy | Follow complete Checklist to Avail 100% ITC

GST Input Tax Credit can be availed without blocking your credit if you follow the right way.

Flawless reconciliations, manual error minimisation and timely follow-ups with your suppliers can allow you to claim maximum eligible ITC for the month, and your working capital will not be blocked.

We have also discussed the importance of Form GSTR 2B and its reconciliation against various data to claim maximum eligible ITC.

In this short article, we present a Golden checklist that every taxpayer should follow to identify & claim 100% of their eligible Input Tax Credit under GST.

Essentials to claim ITC

Following are the three important documents that are essential for identifying and claiming eligible Input Tax Credit.

a. GSTR-2A

b. GSTR-2B (This Form is of paramount importance to identify your eligible ITC)

c. Purchase Register or Books of Accounts

We will see the significance of every entity, one by one.

Form GSTR 2A

  • Form GSTR-2A is automatically generated on a monthly basis.
  • Form GSTR-2A captures purchase-related data & is generated by the GST portal for every GST registered business.
  • Form GSTR-2A of the Recipient is generated based on the other GST returns like GSTR-1, GSTR-5, GSTR-6, GSTR-7 & GSTR-8 of the Vendor/Supplier.
  • Form GSTR 2A is dynamic & gets updated every month.

To claim ITC through an easy process, Form GSTR-2B was introduced under the GST structure.

Form GSTR 2B

  • The Recipient’s GSTR2B gets auto-generated on the GST portal when his suppliers file timely & accurate GSTR-1 returns.
  • CBIC has ended the debate of GSTR-2A or GSTR-2B to identify the ITC by stating that Form GSTR-2B will be the definitive and authoritative source to determine the eligible ITC for the month.
  • Hence, before claiming your eligible ITC for the month, taxpayers are advised to check their GSTR-2B and use a GSTR 2B reconciliation Tool to identify the eligible ITC available for the month.
  • GSTR-2B is auto-generated on the 12th day of every month.
  • GSTR-2B remains static such that it does NOT change as GSTR-2A did.

Purchase Register or Books of Accounts

  • Purchase register captures every single detail maintained by the Recipient in his ERP software or any other Billing system.
  • This purchase data captured in the Purchase Register helps the business match all the purchase-related details in the GSTR-2B generated on the 12th of every month.
  • GSTR-2B vs Purchase data reconciliation becomes crucial to cross-check whether all your suppliers have filed their GSTR-1 corresponding to the transactions done with you.
  • Hence, the Purchase register becomes the third most essential requirement in the GST Input Tax Credit claim process.

In the later part of the article, we have provided a very simple checklist that will help you claim maximum eligible ITC and no credit is blocked due to the GST non-compliance of your vendor.

Checklist to claim eligible ITC

The points discussed in this section are straightforward but are often ignored. Hence, it takes a toll on the working capital of the business.

Hence, businesses must take this Checklist as an internal SOP that will help you stay compliant with the GST laws & your business remains protected against all the GST litigations.

1. The validity of the invoice should be checked

  • Validity of the invoice simple means the authenticity of the invoice you receive from your vendor. If you get a fake invoice and claim ITC based on this fake invoice, you are landing your business into trouble.
  • This is essential caution that every taxpayer should take when he receives invoices or receipts from the vendor/supplier.
  • The responsibility to scrutinise every detail printed on the invoice lies with the taxpayer receiving it.
  • Taxpayers must also ensure that their Supplier is eligible for e-Invoicing under GST or not.

2. Checking printed QR Code

  • QR code on an e-Invoice captures all the essential details about the e-Invoice. Hence, the receiving party must ensure that the QR code is clearly printed and NOT smudged anywhere.
  • QR code is the guarantee of the authenticity of the e-Invoice.
  • Make sure you obtain your purchase invoices with a valid QR code embedded in them. (From all the businesses who fulfil e Invoicing applicability ).

3. Scrutinise GSTR-2A for the invoice details

  • GSTR-2A holds all your purchase-related entries for the preceding month. Hence businesses must cross-check the invoices received from the Suppliers against the Form GSTR-2A.
  • If any supplier cancels the invoice, GSTR 2A shall NOT reflect this invoice data.

GSTR 2A and GSTR 2B reconciliation also become necessary if the businesses want to identify the ITC accumulated from the previous months.

4. Scrutinise GSTR-2B for the invoice details

  • As mentioned in the earlier section, Form GSTR 2B is of paramount importance to claim eligible Input Tax Credit under GST.
  • GSTR-2B is considered the final and standard document to claim your eligible GST ITC
  • Businesses should check their GSTR-2B before making any claim for the ITC.
  • All the details of your purchase invoice will appear in this statement, and this will also indicate whether our Supplier has filed his GSTR-1 on time or not.

Hence, GSTR 2B reconciliation tool is significant because businesses with multiple vendors cannot do this manually.

Businesses need automated reconciliation software that will do the process in a few minutes.

5. Regular follow-ups with GST defaulting vendors

  • Claiming of eligible ITC is an activity that requires coordination between the Recipient and the Supplier. And this coordination is possible when there is frequent communication between these two parties.
  • Failure of your Supplier to file his GSTR-1 on time can block your ITC for that month.
  • Hence, during your routine GSTR 2B reconciliation, if you find any such invoice details that are not reflected in the GSTR-2B, it simply means that your Supplier with whom this transaction was done has NOT filed his GSTR-1 on time or filed it after the due date.
  • Businesses must frequently follow up with such GST defaulting suppliers to utilise the blocked credit at least in the next month.

6. Timely payments to your suppliers

  • When businesses want to claim 100% eligible ITC, the payments to the suppliers must be cleared.
  • Make sure that all the payments to your suppliers are cleared within SIX months from the date of transactions.
  • Failure to do so results in ITC reversal of the credit claimed by you on such transactions.
  • GST portal has enabled a provision to notify the Recipient about the pending payment. This tells us that the GST portal has information about delayed payments, which can cause a problem in the future.

Word of caution for the businesses

Reconciliation is a routine activity during the GST return filing. It has become necessary to comply with the GST laws and make minimum errors.

Businesses with multiple branches and suppliers must have a robust and automated reconciliation solution like GST Hero.

Taxpayers are advised to use the GSTR 2B Reconciliation tool to identify the eligible Input Tax Credit.

Reconciliation of your purchase records against GSTR-2A and GSTR-2B will help you claim 100% eligible Input Tax Credit.

It is always better to have our infrastructure in place and keep the business’s working capital safe. However, ITC is the right of every taxpayer & hence, utmost care must be taken to claim the eligible ITC properly.

Stay updated; stay ahead!

Until the next time….

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