Role Of GSTR-2B In Claiming Maximum GST Input Tax Credit
GST Input Tax Credit is the ‘Elephant in the Room’ when it comes to the GST in India. The GST structure is erected on this feature which is also considered one of the most just and lucrative feature of the system.
GST is called the progressive tax, and ITC is one of its many features that make the tax structure beneficial & easy for the taxpayers.
Books of accounts, GSTR-2A & GSTR-2B, are essential sources that help the taxpayers to identify the eligible ITC.
In this article, we will be discussing one such form called GSTR-2B. GSTR-2B is the main source for a recipient to find his eligible ITC for that particular month.
What is GSTR-2B?
- GSTR-2B is an auto-generated statement generated every month.
- Recipient’s GSTR-2B is generated based on the details furnished by the suppliers in their GSTR-1, GSTR-5 or GSTR-6.
- GSTR-2B is a read-only statement and cannot be edited by the taxpayers.
- GSTR-2B is available only after the 12th of every month.
‘Tell me, and I’ll forget; show me, and I may remember; involve me, and I’ll understand.‘
Staying true to the above maxim let me explain to you the importance of GSTR-2B with a simple day-to-day example.
Consider a Supplier ‘Nandini Traders’:
A recipient ‘ Bhola retails’ has purchased some goods worth Rs. 2,00,000 from his Supplier ‘Nandini Traders’.
Following are the transaction details:
Worth of goods= Rs. 2,00,000
GST collected = 12% = Rs. 24,000
Total amount collected from the recipient = Rs. 2,24,000
Supplier files his GSTR-1 on time and with the correct details for this transaction.
On the Recipient’s side, ‘Bhola Retails’:
As his Supplier has accurately filed his GSTR-1 returns for this month, the GSTR-2A & GSTR-2B of the recipient will get auto-populated with this information and based on his GSTR-2A or GSTR-2B; the recipient can claim his Input Tax Credit of Rs. 24,000 for the current month.
If the Supplier fails to file his GSTR-1 for that month, the recipient will NOT be able to avail the Input Tax Credit in that month, and he will only be able to avail the ITC in the next month provided that his Supplier files the GSTR-1 after the due date.
Part 2 of the example:
Consider that the recipient has one more Supplier named ‘Jethabhai Traders’.
Following are the details of the transactions between Jethabhai & the recipient:
Goods purchased in the month of June for = 1,00,000
GST paid = 18% = 18,000
Total transaction = 1,00,000 + 18,000 = Rs. 1,18,000
Now, in this case Jethabhai the Supplier delays the filling his GSTR-1.
He files his GSTR-1 but files it after 11th July (month succeeding to the transaction month).
Following are the consequences of this delayed filing on the recipient:
- The Supplier has delayed filing his GSTR-1; hence, the transaction details will NOT get auto-populated in the Recipient’s GSTR-2B for the month of July-2021. But, these details will be reflected in the upcoming month’s GSTR-2B statement, i.e. August-2021.
- The Supplier has filed his GSTR-1 though late. So the transaction details from his GSTR-1 will get auto-populated in the GSTR-2A of the recipient for the month of July-2021.
So according to the following are his ITC details for July-2021:
- ITC as per Books of accounts = ITC on other transactions +18,000
- ITC as per GSTR-2A = ITC on other transactions +18,000
- ITC as per GSTR-2B = ITC on other transactions + 00
This example helps us understand that in case of delayed filing of the GSTR-1 by the Supplier, it directly impacts the GSTR-2B of the recipient.
Hence, it would be best if you carried out a thorough GSTR-2B reconciliation and GSTR 2A Reconciliation against your books of accounts.
If you find a Supplier is delaying his GSTR-1 filling, you can immediately follow up with the defaulting Supplier and ask him to timely file his GSTR-1 returns so that your ITC won’t get blocked for that transaction.
Common Confusion – 2B or not 2B?
When we look at the above example, we can see that the taxpayers have two choices:
- Avail ITC as per his GSTR-2A
- Avail ITC as per his GSTR-2B
Taxpayers were in a dilemma about which statement should they consider claiming the final Input Tax Credit for the current month.
The CBIC is a tweetdated 15th March 2021has clarified that The CBIC has clarified that the Input Tax Credit MUST BE AVAILED as per the invoice details available in GSTR-2B.
GSTR-2A details shall NOT be used to claim the Input Tax Credit.
To check your current eligible Input Tax Credit status, the authoritative source will be GSTR-2B only!
Reconciliation for ITC is now important!
Claiming only the eligible Input Tax Credit is important for every taxpayer. There has to be GSTR 2B reconciliation tool with every business to match and check all their purchase records with the GSTR-2B generated for the month.
When the taxpayers try to perform this reconciliation manually, there is a good chance that there will be some clerical errors introduced in the reconciliation report, and you may end up claiming ineligible ITC.
Hence, businesses should be well equipped with a GST Input Tax Creditautomated solution that helps businesses generate a flawless reconciliation report, identify the defaulting suppliers, and notify them automatically of the concerned error from their side.
Is there any software for a perfect reconciliation?
GST Hero’s ITC reconciliation tool helps you claim maximum Input Tax Credit in a completely automated setup and within few clicks.
Following are some of the salient features of the GSTHero’s ITC reconciliation tool:
- Minimum human intervention to eliminate errors
- Automatically notify your defaulting suppliers
- Detailed reconciliation reports
- Fully compliant with the GST laws as GSTHero is a government-appointed GST Suvidha Provider (GSP)
Advice to the taxpayers
The taxpayers must refrain from claiming the ineligible ITC as this may lead to some severe consequences and even go upto suspension of your GST registration. Hence it is advised that the taxpayers take due care to identify only the eligible Input Tax Credit from their GSTR-2B.
If a taxpayer has erroneously claimed ineligible ITC, it should be reversed while filing GSTR-3B returns.
An automated solution for reconciliation will help the taxpayers quickly generate a reconciliation report and identify any mismatches between your books of accounts and the auto-generated GSTR-2B.
Stay Updated; stay ahead!
Until the next time…..