The claim of input tax credit shall be considered as matched where the amount of input tax credit claimed in GSTR – 2 of the recipient is equal to or less than the output tax on such tax invoice or debit note in the GSTR -1 of the Supplier.
In GSTR – 3 if there is a difference between the tax amounts filed in GSTR – 3B and with GSTR – 1 and GSTR – 2, the same can be adjusted in Part – B of GSTR – 3. If the tax liability is more, then the same has to be paid/discharged in case of excess credit, the same will be updated in the electronic credit ledger.
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.
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.
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.
No extension of last date for filing GSTR-1 for July, 2017 No extension of last date for filing GSTR-1 for July, 2017 The last date for filing GSTR-1 for the month of July, 2017 is 10th October, 2017. http://india-gst.in/no-extension-of-last-date-for-filing-gstr-1-for-july-2017/
Data in GSTR – 2A will remain available for a tax period till the supplier files or submits his GSTR – 2 for the tax period.
GSTR – 2A is an auto-populated draft inward supplies return based on the supplier of goods or services filed through GSTR – 1 (outward supplies), GSTR – 5 ( filed by non-resident taxable person), GSTR – 6 (filed by input service distributor), GSTR – 6 (filed by Tax deductor at source) & GSTR – 7 (filed by a person collecting tax at source).
In GSTR – 3B, the tax implications on the credit notes, debit notes & purchases from unregistered dealers which are falling under RCM have to be reported and paid, in case of f the taxpayer has missed all these documents, they can upload the same in GSTR – 1 and GSTR – 2 and this will automatically get updated in the GSTR – 3 and the tax liability can be settled and be GST compliant.
If a taxpayer has missed any outward supplies or inward supplies invoices amounts while filing GSTR – 3B, those invoices can be included in the GSTR – 1 and GSTR – 2 and the output liability and input tax credit will be considered in the GSTR – 3 and if any amount is payable the same can be paid. As there is no edit option available for GSTR – 3B, this approach can be taken and be tax compliant.