Matching Purchases and Input Tax Credit through GSTR 2A

Matching Purchases and Input Tax Credit through GSTR 2A

As April 3b filing is over now , Go for Matching Purchases through GSTR 2A ! GST Law has been applicable from 1st July 2017. The financial year 2017-18 has ended in the month of March. Now each and every taxpayer has to match the sales purchases in the books with the GST returns filed and they have to file the returns accordingly. From 18th May, the government has started the GSTR 2A for the view. In GSTR 2A, bill wise details of the purchases made by the taxpayers are reflecting. Every taxpayer has to match these details with books of accounts. Now many questions shall arise . Like , if the sales and purchases are matched, then only we can assume that we have done our job brilliantly. In GSTR 2A, B2B invoices, Debit notes, credit notes, purchases made from Composition dealer, credit taken through TDS and TCS, also, the amendments made in the original invoices by the supplier, etc. is reflecting. it is important to check GSTR 2A by taxpayers The government will start GSTR 2 also. In GSTR 2, we will get the ITC as per our books of accounts. If the supplier has not entered the purchases of the taxpayers, then he will be unable to get the credit of that bill. Therefore, after checking the details in GSTR 2A, match the same with Input tax credit. Ex. If from July 2017 to March 2018, A has made the purchases of Rs. 100000 from B , and also has taken the credit of Rs. 12000 in the GSTR 3B, now, A has to check it through GSTR 2A. Then he will be able to take the credit of the same. Taxpayers must do the matching of the bill wise purchases from the books of accounts with GSTR 2A. If certain entries are left due to mistake to account for in the books, then taxpayer needs to do the same. Similarly, if the taxpayer has certain bills which are not reflecting in the GSTR 2A, then the taxpayer must match those bills by communicating and reconciling the same with the supplier. There shall be an impact due to GSTR 2A There are so many issues at the time of sales and purchases, Discounts, rate differences, short or excess cash received, etc. these questions remain unsolved. Now the real era of matching mismatching concept has been started. Every taxpayer must match all the sales purchases. If the supplier has not paid GST to the government or has not filed returns properly, then only the recipient will suffer. Now the fraudulent transactions between supplier and recipient will expose in GST. It means the real task of GST has been started now. GSTR 2A is available for viewing so this is semifinals and the Finals match will start when GSTR 2 will get open for filing.

1. Reconciliation of ITC credit ledgers & GST liability ledgers Logically speaking, ITC closing balance as on 31st March 2018 should match with ITC balance reflected on GST portal under input tax credit ledger and cash ledger (like PLA balance).
2. Classification of goods / services and respective rate Verification is advisable mainly in case of composite supply. In such a case, company is required to classify such supply and GST rate pertaining to principal supply of goods or service.
3. Matching of ITC on imported goods with ICEGATE Government system has started matching of IGST value of a particular month reported in GSTR3B (under IGST credit on imported goods) with IGST value reflected on ICEGATE This value may not match due to certain reasons, mainly in case of month end import consignments. In such a case, reconciliation with IGST value as reflected on ICEGATE portal is going to play a vital role.
4. Admissibility of input tax credit (ITC) While finalizing ITC, it is advisable to go through the negative list given u/s 17(5) of CGST Act, 2017. In other words, ITC is available on all such goods / services which are used in the course of business except list of goods / services given u/s 17(5) of the CGST Act, 2017.
5. Verification of place of supply to check whether correct GST is charged Verification is advisable mainly in cases where Bill To person is different than Ship To person. In such a case, place of supply is location of the Bill To person rather than location of the Ship To person.
6. Reverse charge liability in case of goods / services It is advisable to reconcile value reported in GSTR-3B with respective expense ledger. For example, transport expenses for GTA, legal expenses / professional fee for Legal service etc.
7. Verification of Other Income ledger It is advisable to go through every transaction reflected in Other Income ledger to confirm as to whether GST is applicable on any of such transaction for which tax invoice is not prepared. For example, penalty / damages recovered etc.
8. Supply of services free of cost to branches located to other States As per Section 25 of the CGST Act, 2017 read with clause 2 of Schedule I to the CGST Act, 2017, any support given by head office to its branches / factory is to be treated as outward supply and accordingly, IGST will be In such a case, companies are definitely not preparing any commercial invoice however, as per above legal provisions, tax invoice is required to be prepared and IGST liability needs to be paid.
9. Non-availment of ITC in case of FOC receipts As per Section 7 of the CGST Act, 2017, GST is not required to be charged in case of supply of free samples or However, it is seen that many companies are charging GST on free sample or FOC supply for easy compliance of Rule 42 of CGST Rules, 2017 (i.e. non-requirement of reversal of ITC on free sample or FOC supply). If any company has received any goods as free sample or under warranty or FOC along with tax invoice of the supplier, then in that case, it would be advisable not to claim input tax credit since there is no question of making payment to the vendor, which is one of the pre-condition of availment of credit.
10. Creditors more than 6 months (180 days) As per the proviso to Section 16(2) of the CGST Act, 2017, company is required to make payment of basic value plus GST to the respective supplier within a period of 180 days from the date of tax invoice. It may be noted that if such payment is not made within 180 days from the date of tax invoice, then in that case, input tax credit availed against such tax invoice is required to be reversed (by adding output tax liability) along with interest.
11. Adjustment of advance in earlier month Upto 14th November 2017, GST was payable even on receipt of advance against goods. In such a case, GST liability was required to be reduced at the time of raising tax invoice in the subsequent month(s). It is seen that in few cases, companies have inadvertently not reduced GST liability and paid full GST amount as mentioned in tax invoice which has resulted in excess payment of GST. Such excess payment can to be adjusted in financial year 2018-19 at the time of filing GSTR-3B of any month.
12. Any foreign payment made (apart for import of goods) for which CA Certificate is obtained all foreign payments excluding payments against import of goods may attract IGST towards import of service under reverse charge.
13. Any recovery from employees Recovery of any amount towards transport charges, mobile expenses, notice pay, canteen expenses etc. would attract GST. Such recovery is to be treated as outward supply and GST is applicable at the appropriate However, since employer-employee are related parties, valuation will play a vital role.
14. Any value of goods written off in the books as per Section 17(5)(h) of the CGST Act, 2017, if any company writes off any value of goods (whether raw material or WIP or finished goods), in such a case, respective ITC needs to be reversed.
15. Sale of used cars In case of sale of used cars, Compensation Cess was required to be paid apart from GST. Such Compensation Cess was payable upto 24th December 2017. I have observed that many companies have paid GST at appropriate rate at the time of sale of company owned cars however, Compensation Cess has remain unpaid.
16. Reversal of ITC in case of exempted / non-GST supply As per Section 17(1) and 17(2) of CGST Act, 2017 read with Rule 42 of CGST Rules, 2017, companies are required to reverse input tax credit of common goods / services used for providing taxable as well as exempted supply. Such reversal is required to be made as per the formula given under Rule 42 of CGST Rules, 2017 on proportionate basis.
17. ITC on pre-paid expenses It is seen that many companies have paid certain amount in the financial year 2017-18 which is pertaining to services to be received during the financial year 2018-19. Such expenses are treated as pre-paid expenses . For example, lease line expenses, rent, insurance etc. It is seen that companies have claimed ITC on such services since tax invoices are booked and payment is made. However, one of the pre-condition of availment of taking credit is that such service is received. In case of pre- paid expenses, service is not actually received and therefore, this would amount to excess availment of credit.

The above list is certainly not the exhaustive list. It is just an attempt to cover as many as GST related points to be considered while finalizing Balance Sheet and for GST audit preparation. This Article has been written by CA Kedia Pinki FCA, LLB, DISA. The Author can be reached at [email protected] Please mention your queries in the comment section given below.

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Tags : GSTR-2A, input tax credit, rule 42 of cgst rules, Matching Purchases and Input Tax Credit through GSTR 2A, Matching Input in GST, reasons for difference between GSTR 3B & 2A, Importance of matching input