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GSTR 2A reconciliation is a crucial process that helps different types of businesses to match the invoices and identify if there is any discrepancy. The process of GST reconciliation primarily includes matching the data that the suppliers upload with the purchase date of the recipient. Therefore, businesses must undertake the process of GST reconciliation. This article will explain the importance, process, and challenges associated with GSTR 2A reconciliation.
Form GSTR 2A refers to the system-generated dynamic tax return related to the purchase. It is a read-only document that lists the invoices from various vendors during a month. This document informs a business about the invoice details of its sellers.
Generally, reconciliation refers to the comparison between the data entries sets, which helps identify the differences or variances. It allows you to rectify unintentional errors. Under taxation, reconciliation is significant as it can give rise to a situation where you pay the excess or less tax.
It is a process of matching invoices found in the GSTR 2A with those mentioned by a business in its books. This process allows businesses to compare the invoices and find out the discrepancy between the invoices. The process involves comparing the data uploaded by the suppliers with the recipient’s data.
It includes matching the GSTR-2A auto-populated from the data of the suppliers and the data recorded by the one who obtains the supplies. This helps ensure that the transactions that occur in a specific period are documented safely.
There are several reasons why the reconciliation process is crucial. It allows a person to ensure that no input tax credit is lost on the invoices where the vendor has specified their GST liability but the buyer has not claimed the credit in their returns.
The GSTR 2A Reconciliation process also permits you to identify the missing invoices in GSTR 2A. You can then take the steps required to upload the missing invoices from the supplier. Further, in the case where invoices have been uploaded, but the values are not accurate, then in such cases reconciling allows you to take immediate steps to rectify the error. It also helps one avoid the claim of ITC on similar invoices multiple times.
The different types of mismatches that can be found during the reconciliation process include the following-
If these differences are found, it can lead to the issuance of notice to the taxpayers. It may even lead to the suspension of GST registration.
There may be multiple reasons behind such mismatches. We have discussed some popular ones below-
The process of GST reconciliation sometimes becomes challenging. It becomes an arduous task and consumes a lot of time. Some of the challenges faced by people while going the complete exercise have been discussed below-
Till 2019, many business owners did not consider this process necessary. This was because the entries made in the GSTR 2A didn’t affect the tax liability or the taxpayers’ assets. Therefore, the taxpayers could afford to ignore the same. However, there has been a definite shift in people’s perspectives. With Rule 36 amendments, GSTR 2A reconciliation has become relevant. Now it has become crucial for businesses to go through the reconciliation process.
Another reason why it has become crucial is that the GST department has sent notices to various taxpayers. The department made recurring queries about the reconciliation of GSTR 2A. The department claimed that certain businesses had received undisclosed goods or services from different vendors. Many didn’t know they were required to file multiple returns, which caused many to file returns incorrectly. This affected GSTR 2A. Thus, when taxpayers started getting notices from the department, people also started handing over a proper GSTR 2A reconciliation.
There is one more reason that raises the significance of this process. The refund claimants also consider the reconciliation process as, under the GST legislation, those businesses engaged in the export business and other supplies are eligible to claim tax refunds. In certain scenarios, taxpayers are required to show the concerned department that they have made tax payments on the inward supplies. This can be done through the respective entries made in GSTR 2A.
Hence, export businesses ensure that the purchases are reflected on the GSTR 2A without missing out on them. The reconciliation process allows the business to follow up with the suppliers and ensure that the GSTR 2A is updated.
Considering the above scenarios, the reconciliation process has gained immense significance. In case of any query, taking a GST professional’s assistance can prove valuable. It is advisable that timely reconciliation should be carried out and stay compliant with the requirements. The businesses have stood ahead by following and undertaking the compliance requirements under the GST law.
The following process should be followed to ensure that the reconciliation is done properly-
GSTR 2A reconciliation may seem a straightforward process with automation assistance, but it is time-consuming. The taxpayers must constantly connect with the vendors to make changes in the returns filed. It can become challenging for businesses dealing with thousands of invoices in a month. Hence, businesses are advised to reconcile the returns data regularly under the GST.
Read Our Article: GST Registration Requirements (Goods and Services)