ITC reconciliation is a hectic task which not only requires patience but also money and proper techniques. Therefore people often depend upon expert tax professionals for the accomplishment of their reconciliation tasks. Nowadays most of the professionals ignore ITC reconciliation while filing GST returns for their clients’ reasons could be more time consumption or the client is not paying the sufficient amount to handle the task.
The write-up highlights some queries one may have related to the ITC reconciliation process.
What is ITC Reconciliation?
Reconciliation is done with the aim of covering all the details of purchases by the registered taxpayer in order to grant him the correct amount of credit. The process involves matching of details filed by the supplier in GSTR 1 with the purchase data uploaded by the registered taxpayer. Details mentioned by the supplier in form GSTR 1 shall automatically be loaded in Form GSTR 2A of the registered taxpayer.
Details uploaded by the supplier in form GSTR 1 should be accompanied by genuine invoices, debit notes, credit notes and amendments (if any) to prove the authenticity of the information provided by him.
Why ITC Reconciliation is Necessary?
One cannot afford to skip reconciliation at the time of filing the returns because:
- The client’s trust is restored which will retain him.
- The client remains immune from bothering notices by the tax department.
- No chance of losing Input Tax Credit under GST.
- Errors in business invoices or other related documents can be rectified so that the taxpayer gets just the correct amount of credit.
What are the Consequences of not Conducting the ITC Reconciliation?
The after-effects of not conducting the reconciliation are enough to lead the taxpayer in trouble. Here are some of the losses taxpayers have to deal with:
- The client might not get his ITC claim. As the government might reject his claim
- Probability of getting a notice of excess credit claimed from the IT department
- Full payment made to unscrupulous suppliers
- Loss of client’s trust on default
- Excess credit claimed may lead to extra interest costs for the client
ITC Reconciliation Process Conducted by the Taxpayer?
Reconciling the purchase data or form GSTR 2A is a requirement by the taxpayer on a monthly basis. If due to some reason monthly reconciliation is not possible then annual reconciliation is a must for the taxpayer and needs to be completed before filing GST returns for the month of September following the year during which reconciliation has to be made.
What Might be the Results of the ITC Reconciliation Form?
Reconciliation process or filing GSTR 2A for purchase may last with the following results:
Invoices Matched
This is the required result one needs for further processing the grant of ITC. Matched invoice means the data is accepted by the authorities and will be considered for approval of ITC claimed.
Invoices Mismatched
Such a result means that invoices are traced in both GSTR 2A and purchase data but there is a mismatch in the details of the invoices. The mismatch could be because of the difference in invoice value, invoice date, tax amount, invoice number, etc. In such a situation taxpayer needs to inform the supplier who in return will make changes or rectify the issue in GSTR 1. Once the changes are done the accurate details will be auto reflected in GSTR 2A of the taxpayer.
Invoice Missing in GSTR 2A
Such a message is displayed if the invoice recorded in the purchase data is missing from GSTR 2A. This may be a situation if the supplier has not yet filed his returns. Such a situation could cause inconvenience to the taxpayer.
Invoice Missing in Purchase Data
There are instances when the invoices appear in GSTR 2A of the taxpayer but are skipped in the purchase data. The reason could be that the invoice is not delivered to the recipient by the supplier or the taxpayer himself has committed the mistake in entries. The taxpayer must make a correct entry in purchase records in order to get the right ITC benefits.
Hardships Faced by Tax Professionals with ITC Reconciliation
ITC reconciliation is no doubt a very tough task to accomplish but professionals must know the fact that it is important. Indeed the tax professionals need to figure out the complexities and then find out the solutions for the same.
Read Also: GSTN Solution to ITC Mismatch Problem While Filing Form GSTR 9
Professionals rely on various software tools for their computation needs while performing a reconciliation task on behalf of the client. Some are desktop versions that will only help in identifying the matched invoices while mismatched or missing invoices will remain untraced. It depends on the type of software how explicitly one can complete the task. Experts can demand better charges if they have competent GST software which will help in seamless and detailed ITC reconciliation.
ITC Problems Faced by Tax Professionals:
- Mismatched or missing documents may call for the need to extract detailed information about the transaction. This consumes a lot of time.
- Reconciliation cannot be done without the co-operation of the clients.
- Professionals need to take regular followups from the clients in order to make correct reconciliation.
- Situations may even call for the need to go deep into the information provided by the clients to get correct details at last.
For easy and accurate compliance one must take the help of cloud software which is easily accessible anywhere and anytime and has a multi-user framework. A multi-user facility will help the professional to restrict access to his clients who can upload information only related to their ITC reconciliation.
Professionals can provide additional benefits to their clients which in turn will retain the client to their services only.
ITC Reconciliation Benefits for Taxpayers:
- Giving access to clients for viewing and managing their own ITC reconciliation
- Help the clients with finding out the faulty suppliers and take followups from them.
- Rectifying the errors in purchase records or GSTR 2A.
- Informing the supplier about errors (if any) on behalf of the client.
- Avail input tax credit on invoices that are missing in your client’s books of account.
