The GST law mandates the accurate transfer of input tax credits (ITC) between states and transactional entities. To ensure the validity of ITC, all taxable goods and services purchased by a consumer and delivered by a seller undergo invoice verification. Rule 36 (4) of the CGST Act stipulates that ITC cannot exceed 110% of the achievable ITC disclosed by vendors, thus necessitating the reconciliation of vendor-declared transactions. The transactional data of the invoice submitted by the seller is provided by both GSTR 2A and GSTR2B, enabling business owners to claim input tax credits on purchases made from vendors.
Recently, the government has made significant modifications to the tax filings for business owners, and has facilitated a shift from GSTR 2A to GSTR 2B. This move offers numerous benefits for business owners, including providing a static representation of inbound supply details on Form GSTR-2B, which is now included in the GST portal. The new version of GSTR2B now shows outbound supply information reported by vendors within two Form GSTR-1s or Invoice Furnishing Facility deliverables. With the new version of GSTR2B, the process of claiming input tax credit has become more streamlined and user-friendly for businesses.
Additionally, the modified GSTR2B now allows for the reporting of missing supplies in subsequent filings, which will be reflected on Form GSTR-2A. This means that business owners no longer need to worry about missing supplies as they can be reported in subsequent filings. These modifications to GSTR 2A and GSTR2B have made the GST input reconciliation process much more efficient and straightforward for businesses.
By switching to GSTR2B, business owners can better manage their tax filings and simplify the reconciliation of input tax credits. This transition will help to minimize the errors that can occur during the filing of tax returns and ensure that businesses receive the full benefit of input tax credits. With the modifications to GSTR 2A and GSTR 2B, businesses can be confident that they are taking advantage of all available input tax credits and complying with GST regulations.
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GST (Goods and Services Tax)
GST is a single tax levied on all goods and services. The percentage of tax levied differs between different goods.
For services – 18%
For goods – anywhere between 0-28% the percentages (0,3,5,12,18,28 are the respective brackets) based on the type of goods.
The rates are decided as per the category of product or service. During registration, you have to register the product under a SIC code which then gives you the final tax percentage chargeable. Depending on the size of the catalogue, you might need to apply SIC codes, based on the category under one GST registration.
GST registration is different for each state. A permanent registration is applicable in the state where the company is registered. However, in case you want to register for another state, the same will be a temporary registration and will be valid for 1 month. An extension can be applied for twice only.
The threshold to register for GST –
For goods – 40 lakhs of annual turnover and above.
For services – 20 lakhs of annual turnover and above.
Following are the types of GST filings:
It is mandatory for companies to file this on a monthly basis unless they have less than a INR 1.5 Crore turnover, then the same can be filed quarterly. The GSTR1 filing is a detailed filing of all sales invoices and GST payable on the same during the given month/quarter. The filing includes the sales value of each transaction + the GST charged against the client’s GST number.
Due Date: 11th of the following month/quarter
It is the summary calculation of GST liability payable. Usually, it is Output Tax – Input Tax = Final liability payable to the government. This is not a detailed filing and is done on a monthly basis. The net payment of GST needs to be discharged through this form. The same can be done through a challan (a form through which the payment is made) online.
Due Date: 20th of the following month
This is the annual filing of GST. It is a summary of all the details filed during the entire financial year. The reason GST filings are annual is to ensure that in case there has been a wrong filing prior to submission and correction is required, then it can be reflected in the final filing of the same.
Due Date – 31st December of the next FY (however since it is a relatively new concept the dates currently keep shifting)
Please note: GST returns – once filed cannot be revised
So, Let’s understand how GST 2A works
The GST portal generates GSTR 2A, a dynamic purchase-related tax return, for each entity. The data is collected via GSTR 2A when a vendor files his GSTR-1. It uses the data from the vendor’s GSTR-1 to determine what products and/or services were acquired in a particular month. When filing GSTR-3B and GSTR-9 as a GST-certified buyer, you can resort to the GSTR-2A for input credit and tax details. From August 2020, taxpayers need to use GSTR-2B, which is a rigid variant of GSTR-2A, to prepare GSTR-3B.
The relevant returns of the vendors/opposite parties will be dynamically added via GSTR 2A:
|GSTR 1||Regular registered seller/vendor|
|GSTR 6||Input Service Distributor|
|GSTR 7||Person liable to deduct TDS|
|GSTR 8||e-Commerce operator|
Basic features of GSTR 2B
GSTR-2B is equivalent to GSTR-2A in that it shows valid and invalid Input Tax Credit (ITC) for every month, but it remains unchanged or unmodified for a length of time. Alternatively, anytime a GSTR-2B for a month is accessible on the GST portal, the information in it remains unchanged, even if its vendors make modifications in consecutive months.
All regular, SEZ and transient taxpayers can use GSTR-2B. It can be generated by any consumer using the GSTR-1, GSTR-5, and GSTR-6 forms provided by their vendors.
The statement will illustrate document-by-document eligibility for the ITC. ITC data will be handled from the date of filing of the previous month’s GSTR-1 (M-1) to the date of filing of the present month’s GSTR-1 (M).
How can GSTR 2B benefit your businesses?
The information in GSTR2B is presented in such a way that taxpayers can easily reconcile ITC according to their own accounting records. It will make documentation authentication simpler for them, allowing them to assure the following:
- The input tax cannot be used repeatedly on the same document.
- Where necessary, the tax credit is inverted in accordance with GST regulation in their GSTR-3B.
- For the relevant papers, such as the import of products, GST is duly paid on a reverse charge system.
- The declaration specifies the GSTR-3B tables or rows where an invoice/debit file’s input tax credit shall be claimed.
The shift from GST 2A to GST 2B
Form GSTR-2B is currently approved by the Government Of India to monitor the credit line submitted by the supplier and match it to the credit ultimately received by the receiver on his Form GSTR-3B.
a. Taxpayers who have been using Form GSTR-2A to obtain credit
These taxpayers haven’t been using credit in the abundance of that shown on Form GSTR-2A, i.e., they have used credit if the supplier has revealed the invoice in Form GSTR-1, and they can now use credit based on the records in Form GSTR-2B each month.
b. Taxpayers who’ve already taken advantage of credit under GSTR-2A + permitted percent, i.e. 20%, 10%, or 5%
All those are taxpayers who’ve already obtained credit if only their vendor has reported the invoice in Form GSTR-1, but they’ve also taken advantage of the authorised percent under rule 36. (4)
c. Taxpayers who’ve already taken credit on the records without reading GSTR2A
It is recommended that such taxpayers reconcile GSTR2A and GSTR3B if they want to take credit. They can begin reconciliation of their accounting books credit with GSTR-2B in the upcoming records, precisely as it appears on Form GSTR2A with no markup of 20%, 10%, or 5%.
Taxpayers will need to develop a culture of requesting that vendors begin revealing invoices on Form GSTR-1, and the government will reap huge dual benefits by urging the recipient to do so in instances in which it is feasible.
Opportunities of the switch from GST 2A to GST 2B
There are numerous benefits for businesses to make a switch from GST 2A to GST 2B:
- It comprises data from the ICEGATE network on items imported, as well as inbound supply of commodities obtained from Special Economic Zones Units/Developers.
- An overview statement that lists all of the ITCs that are accessible and those that are not underneath each area. The advice supplied next to each part describes the action that taxpayers must take in that section of GSTR-3B.
- All invoices, credits and debit documents, and other records are also available for viewing and downloading at the document level.
Pitfalls of the switch from GST 2A to GST 2B
Despite the advantages, there are a few drawbacks for businesses to make a switch from GST 2A to GST 2B:
- On the 14th of the next month, GSTN will make 2B accessible. The 2B reconciling with the accounting records would be completed in a short amount of time.
- Numerous sheets in 2B excel, such as B2B, B2BA, DNs, CNs, Imports, and payable accounts, will be combined with typical B2B inbound, causing issues.
- The existence of ITC on 2A/2B is only used for reconciliation purposes, not to determine eligibility for input tax.
The way forward
Overall, the GSTR 2B and GSTR 2A are essential tools for reconciling taxes and claiming the maximum Input Tax Credit (ITC). However, it’s crucial to understand that whether you are using GSTR 2A or GSTR 2B, the reconciliation process remains the same. You must manually match the details on both forms, as instructed in the GSTR-2B notification, to ensure accurate tax filing.
One of the key differences between GSTR 2A and GSTR 2B is that the ITC information is better organized in the latter. GSTR-2B separates ITC information into a more user-friendly report, making it easier to track and claim tax credits accurately.
To reconcile with both GSTR 2A and GSTR 2B effectively, businesses need advanced and high-tech assistance to simplify the reconciliation process and claim the most ITC. The recent transition to GSTR-2B has revolutionized the tax filing process for businesses in India. However, the added complexity of reconciling monthly returns with GSTR-2B returns from suppliers has made it challenging for businesses to stay compliant.
At Savage and Palmer Accounting services, we understand the importance of staying up-to-date with tax regulations, which is why our team of experts is well-equipped to help you navigate the new GSTR-2B system. We will work with you to reconcile your GSTR-2A and GSTR-2B returns, ensuring that your business remains compliant with the new regulations.
As a full-service accounting firm, Savage & Palmer can assist you in meeting all your tax requirements, including GSTR 2A and GSTR 2B. We are dedicated to helping our clients achieve financial success and peace of mind. Contact us today to learn more about how we can help your business succeed.