GST ITC Reconciliation: Common Errors & How to Avoid Them

GST ITC Reconciliation helps in the process of reconciliation of purchases by businesses with their ITC appearing in GSTR 2B. Conducting this procedure on a regular basis will help detect any issues such as missing invoices and duplicate credits, among others.

What is GST ITC Reconciliation?

GST ITC reconciliation is basically the comparison of purchase invoices and input tax credits eligible to claim against the information available in GSTR 2B. This helps in identifying the GST ITC mismatch and in determining if the input tax credit claimed is on the basis of proper invoices and documentation. It is generally done prior to claiming input tax credit in GSTR 3B by comparing the supplier invoices reported with the purchase register of the business. Proper reconciliation also helps identify ineligible credit, errors in invoice details and credit that may require ITC reversal.

How to Reconcile GSTR 2B With Books?

GSTR 2B reconciliation with books needs to be done on a regular basis to align the information regarding the input tax credit with the information about purchases to ensure that all credits have been recorded properly. It enables the business organization to find out the issues and resolve them before submitting the GST return. Steps in the basic reconciliation process are:

• Download GSTR 2B
• Compare invoices with purchase register/books
• Check GSTIN, invoice number, date and tax amount
• Identify missing, duplicate or ineligible ITC
• Make necessary corrections/reversals before filing

Common GST ITC Reconciliation Errors

There may be several GST ITC reconciliation errors caused by erroneous invoice information or discrepancies arising out of time differences or accounting errors. These discrepancies can be found earlier to avoid wrong ITC claims and GST compliance issues in the future.

Invoice Missing From GSTR 2B

The Invoice Missing From GSTR 2B might occur due to the wrong reporting of the invoice by the supplier in GSTR 2B or at a different time. The buyer must verify the invoice and contact the supplier rather than claiming the credit.

Duplicate ITC Claim

A duplicate ITC claim can occur when the invoice is registered twice in the accounting book or in the reconciliation process. It is recommended that the company should compare the invoice against the GSTIN number and the amount of tax paid.

Wrong GSTIN or Invoice Details

A wrong GSTIN in GSTR 2B may lead to inconsistency between the supplier’s invoice and buyer’s record. Inconsistency can arise due to incorrect numbers of invoices, their dates, and taxes paid by the supplier. The discrepancies should be reconciled with the supplier when necessary.

Supplier Not Filing GSTR 1

If a supplier who does not file the GSTR 1 form submits the invoice late or does not submit it at all, the information associated with that invoice will not be included in the GSTR 2B. Such billing should be monitored periodically by businesses, and contact should be made with suppliers to solve any reporting problems.

ITC Appearing in GSTR 2B but Not Eligible

The appearance of the ITC in the GSTR 2B does not automatically imply its eligibility for claim by the businesses. It is important for the businesses to see whether the transaction satisfies the eligibility requirements of ITC. ITC that appears in GSTR 2B without being eligible cannot simply be claimed.

Excess ITC Claimed or ITC Not Reversed

Excess ITC claimed may occur because of duplicate entries or due to errors in calculation or ineligible credit. In case there is ineligibility in credit, the ITC reversal or adjustment will have to be done the right way.

ITC Mismatch Between GSTR 2B and GSTR 3B 

An ITC mismatch between GSTR 2B and GSTR 3B forms arises when there is a case of no congruence between the ITC claimed in the form and the one recorded in the GSTR 2B form. The causes of such mismatches include time delays, non-existence of invoices, duplicate claims for ITC and wrong taxation.

GSTR 2B vs Purchase Register Reconciliation

GSTR 2B vs purchase register reconciliation ensures that there is verification to prove whether the invoices recorded in accounting books have been recorded in the GST ledger as well. Comparison of invoice number, GSTIN of the supplier, date, taxable value, and tax should be done by the business. Issues found in the comparison process should be categorized into four categories:

• Missing invoices
• Data errors
• Duplicate entries
• Eligibility issues

How to Avoid GST ITC Reconciliation Errors?

Companies can avoid making GSTR 2B reconciliation errors by having a common way of checking throughout the year. These include:

• GSTR-2 B must be reconciled with purchase ledgers periodically.
• Both GSTIN and invoices need to be verified before taking any credit.
• Missing or incorrect invoices need to be identified
• Duplicate invoices need to be checked before submitting the GST returns
• ITC eligibility, restricted and blocked credit needs to be checked
• The necessary adjustments have to be made
• Reconciliation report and invoices need to be preserved for records.
• Contact suppliers when any difference is reported.

An efficient reconciliation process will help in resolving differences prior to GST return filing and minimizing the possibility of incorrect ITC reporting.

GST ITC Reconciliation in Excel or Tally Prime

GST ITC Reconciliation in Excel may be done by businesses for small volumes of information or accounting software can be used for large volumes of information. GSTR 2B Reconciliation with Tally Prime may also prove useful in comparing the accounting information and the difference therein. The method should provide clear records of matched, missing, duplicate and ineligible invoices.

Conclusion

GST ITC Reconciliation is a critical component of proper GST Compliance. Matching of GSTR-2 B, purchases, and returns on a regular basis will help in detecting mistakes early on. You can take help from My Startup Solution, a Chartered Accountant firm, for assistance in GST Reconciliation and other GST compliance issues. For professional assistance, contact +91-7081220800.