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Taxpayers are preparing themselves to file their annual returns in form GSTR-9 this month. The annual return includes the data filled in by the taxpayer in all his monthly and quarterly returns. And, the taxpayer must ensure that this data matches with the annual return that is being filed by him. The data must also match with his books of accounts. If a mismatch exists, the taxpayer with turnover exceeding Rs 2 crores needs to report the same in the reconciliation statement. The taxpayer will get a demand notice from the tax department in case of any discrepancy.
One of the main reasons for receiving a notice from the tax department is the mismatch of the input tax credit, and taxpayers must ensure that there are no mismatches before they file their annual return.
There is no provision for any additional credit to be claimed in the GSTR-9 return as the March 2019 GSTR-3B return was the last return through which any credit could be claimed for FY 2017-18 that was missed out earlier. Furthermore, the credit that has already been claimed in the GSTR-3B return and the credit claimed in the auto-generated GSTR-2A return must match with the books of accounts and the annual return.
- Since the GSTR-3B is filed through the books of accounts, a check should be done to see if all ITC claimed has been recorded correctly in the books of accounts. If an entry needs to be passed or adjusted in the books, it should be done now.
- In the same way, all GST challans that have been paid during the year should also be recorded in the respective payable ledgers. In the event, there has been excess input tax credit claimed, the same can be reversed in Table-12 under Part-V of form GSTR-9. Any resulting tax liability can be paid in form DRC-03.
- On the other side, we move on to a reconciliation process between GSTR-2A and the books of accounts. Since this data is filed by the suppliers, there could be discrepancies. This step is more of a reference check to see if the ITC matches properly and if an entry needs to be passed in the books of accounts, rather than an absolute guide to matching Input Tax Credit.
- In GST 2.0, the ITC will be solely based on the data uploaded by the suppliers, unlike the current system where the Input Tax Credit is claimed on a self-declaration basis. The remedy for a credit mismatch is similar to the previous situation where any excess credit claimed over that reported in GSTR-2A should be reversed, or any tax liability arising should be paid using form DRC-03. At this point, there will be no provision to claim any missing Input Tax Credit.
- And finally, to see if the final balances tally, the electronic credit ledgers should be reconciled with the trial balances in the books of accounts. All these steps are important especially at the time of preparing the reconciliation statement in form GSTR-9C, which is mandatory to be filed by taxpayers whose annual turnover exceeds Rs 2 crore.
Taxpayers should also make sure that proper documentation has been maintained for all Input Tax Credit that has been claimed, this helps in the event any demand notice gets issued to them in future.