The details of inward supplies added, corrected or deleted by the recipient in his FORM GSTR-2 shall be made available to the supplier electronically in FORM GSTR-1A through the common portal and such supplier may either accept or reject the modifications made by the recipient and FORM GSTR-1 furnished earlier by the supplier shall stand amended to the extent of modifications accepted by him.
Demystifying the reasons for mismatch between Supplier’s GSTR – 1 and Recipients GSTR – 2
It is almost 120 days after the rollout of GST and we are yet to file the first month returns, i.e., for the month of July 2017. Is technology the main culprit for this delay? The answer is “Yes” and “No.” Yes, in case of taxpayers who have a large number of invoices and becomes really tough to match the data entered and filed by the supplier and match it with the inward supplies. This is applicable in cases where the inward supplies are more than 500+ transactions per month. The answer in case of “No” is lack of understanding of the GST Law and implementation of the same. In either case, we do not have a choice but to file a valid return.
Some of the common reasons for the data mismatch are
- Invoicing Date – the goods or services might have been billed or shipped at the fag end of the month. This could have resulted in the tax invoices not reaching the finance/accounts department.
- Goods not yet received – this also could be one the reasons, the supplier must have shipped the goods, but the same is not yet received by the recipient on account of distance, longer travel time or breakdown of the vehicle or some reasons beyond the control of both the parties.
- Wrong GSTIN – there could be cases where the supplier must have entered the GSTIN of the recipient wrongly. In such cases, the data will not be reflected in the actual recipient’s GST return. The date entry issues are caused as there might not be a proper accounting or ERP software with interfaces for the filing of returns, and manually data has to be entered. Manual data entry sometime lead to errors.
- Material received but not accounted – This is one of the most common cases, in many manufacturing organizations, there is a time lag between the receipt entry or creation and accounting in finance. Personal experience shows that it will take about 20 – 45 days minimum for the Material Receipt Note (MRN) or Goods Receipt Note (GRN) to reach finance/accounts department. If this time lag is reduced, it will definitely ease the pressure on working capital requirements of the organization. It also helps the recipient to process the payments to suppliers as most of the recipients pay from the date of accounting in the books of accounts for the purchases / inward supplies.
- Improper accounting of invoices/debit notes/credit notes – this is another major reason for the mismatch between the supplier’s and recipient’s records. Normally in our country, we account for the net amount payable to the supplier and thereby causing the mismatch. Under GST the provisions are very clear that supplier of goods or services only issues the debit note or credit note. Under GST, the recipient has to account for the full amount of the invoice issued by the supplier and then take it up for the differential amount on account of shortages/breakages / quality issues or price differential.
- GSTR – 1 of the supplier, is not submitted – it is also observed that many of the suppliers are not aware of the process of filing of the GSTR – 1 or in some cases the erstwhile tax regime returns have not be filed, as a result they were not able to carry forward the closing balances, or C forms are pending from the customers. Some of the taxpayers are not filing the same as they have to pay the differential amount for the non-receipt of C forms or other forms. This is also causing the hardships in the GST return filing process.
- GSTR – 1 of the supplier is not filed – as GST is a new system many of the vendors or suppliers in the MSME sector are not fully aware of the GST and process of filing of returns. As a result of this, it is observed that in some case, the supplier of goods or services has only submitted the return but not filed, this will lead to a mismatch between the records. In some cases, it is observed that the GSTR – 1 has been only submitted not filed.
- Accounted as imprest or in IOU – it is a normal business process to have inward supplies of goods or services through imprest basis at factories or at sites. Normally they are submitted at periodic intervals to the head office or any other office, for reimbursement. Purchases from a registered taxpayer are made in one month, and the statement is submitted in the subsequent month, this also causes the mismatch between the records.
- Software upgradation – As GST is a new tax regime and most of the accounting or ERP’s are not upgraded to carter the requirements of GST. This has also caused some issues in the initial days of data capturing and updates. In some cases, it is also observed that the upgrades have been done, but the solutions are not developed. As a result, some gaps are there.
- Knowledge of GST – As it is a new system many of the suppliers and recipients in the MSME segment are not fully aware of the GST and its implications. There is also a lack of trained manpower on GST, and some organizations have implemented on their own with understanding issues. This also has resulted in some wrong filing and mismatch of records. Frequent changes in the new law is also causing some understanding issues, to avoid this, professional should be engaged.
- Frequent Changes – as it is a new law and everyone is in the learning process and based on the feedback of the trade and industry there are some changes. The changes are in tax rates or process of GST or on reverse charge front etc.,
- Not fully operations GSTN Software – the GSTN software is not operational fully and few bugs are also observed, this is also causing some issues in the filing of the GST returns.
- Wrong data entry – as the return filing process is at the transactional level, there are understanding issues, and data is being entered wrongly in the returns, this has also resulted in a mismatch of the records. Like invoice amount being entered in the taxable amount columns or tax amounts entered wrongly at the time of filing of returns.
The above are some of the major reasons for the mismatch between the supplier’s returns and recipient’s returns. In view of the above challenges, the government is also responding and extending the due dates of filing of returns from time to time. One thing we all should keep in mind is that the for matching of the returns there is a window period of two months and not required to be matched in the same month/period of return filing. As it is a new system, it takes time to stabilize and also for the taxpayers to understand the same. No new system is stable, and change is also difficult to adopt either for the taxpayers or for the consumers or for the tax officials. The recent experience in Malaysia where GST was rolled out on 1st April 2015, took one year for the same to stabilize and for us, only four months have passed after the rollout. One good thing in our country is all the stakeholders are responding positively to the changes and striving for the successful implementation.
Any views or opinions represented above are personal and belong solely to the author and do not represent those of people, institutions or organizations that the owner may or may not be associated with in professional or personal capacity, unless explicitly stated. Any views or opinions are not intended to malign any religion, ethnic group, club, organization, company, or individual.
GST Tip – 378
The last date for filing of Returns for the month of July 2017 has been extended wide Notification No. 54 /2017 – Central Tax. In case of GSTR – 2 the last date is 30th Nov 2017 and in case of GSTR – 3 it is 11th Dec 2017.
Gist of GST Notifications & Orders issued on 28th Oct 2017
Series of notifications have been issued by the Department on GST and here is the gist of the same
Late fee for delayed filing of GSTR – 3B has been waived off for the months of August and September 2017 wide Notification No. 50/2017 – Central Tax
Last Date for Cancellation of Registration for Migrated Tax Payers has been extended from 31st Oct 2017 to 31st Dec 2017. For Cancellation of Registration, FORM GST REG-29 has to be filed. This is notified wide Notification No. 51/2017 – Central Tax
For submission of FORM GST ITC-04, issued for tracking the materials sent on Job work has to be filed by on or before the twenty-fifth day of the month succeeding the said quarter as per Sub-Rule 3 of Rule 45, now the words “within such further period as may be extended by the Commissioner by a notification in this behalf” have been added after the words “before the twenty-fifth day of the month succeeding”. This is notified wide Notification No. 51/2017 – Central Tax
The information entered by the taxpayer in Table 6A for exports in monthly outward supplies return FORM GSTR-1 will be transmitted electronically by the common portal to the system designated by the Customs. This is notified wide Notification No. 51/2017 – Central Tax
The last date for declaration of FORMGST ITC – 01 has been extended to 31st Oct 2017 wide Notification No. 52/2017 – Central Tax This has replaced the Notification No. 44/2017 – Central Tax.
Interstate Supply of Services to Nepal and Bhutan against payment in INR will be exempted from IGST, This is Notified wide Notification No. 42/2017-Integrated Tax (Rate).
A clarification has been issued on Unstitched Salwar Suits as cut pieces and it will attract GST @ 5% without ITC wide Circular No.13/13/2017-GST .
The last date for filing of FORM GST CMP-03 is extended till 30th November 2017 wide Order No. 05/2017-GST
GST Tip – 377
As per Notification No. 51/2017 – Central Tax , Last Date for Cancellation of Registration for Migrated Tax Payers has been extended from 31st Oct 2017 to 31st Dec 2017. For Cancellation of Registration, FORM GST REG-29 has to be filed.
GST Tip – 376
The last date for filing of the GST TRAN – 1 has been extended to 30th Nov 2017 based on the Order-08/2017-GST
GST Tip – 375
As per Notification No. 39/2017-Central Tax (Rate), items falling under Chapter No 19 to 21 can be supplied at a concessional rate 2.5% for food preparations put up in unit containers and intended for free distribution to economically weaker sections of the society under a programme duly approved by the Central Government or any State Government.
GST Tip – 374
Any invoice or debit note issued in pursuance of any tax payable in accordance with the provisions of section 74 or section 129 or section 130 shall prominently contain the words “INPUT TAX CREDIT NOT ADMISSIBLE”
GST Tip – 373
In case of movement of goods on sale or approval basis, the supply is known only at the time of acceptance by the customer, after customers acceptance only tax invoice can be issued. Until such point of time, the goods are to be removed or moved only on delivery challan and e-waybill if applicable.
GST Tip – 372
As per Notification No. 50/2017 – Central Tax dated 24th Oct 2017, the late for the month of August and September has been waived off for all the taxpayers who have not filed GSTR – 3B by the due date.
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