GST

Invoice Matching Under GST

Continuing the reforms agenda, now the government has come up with the concept of invoice matching under GST. In this article we will have a look at it.

Significance of technology in tax administration

As per the GST Act, Input tax credits on the purchase of goods or services can be only claimed, if a supplier has verified the purchase made by the purchaser.

The Indian taxation system is moving towards the maximum use of technology in tax administration to minimize the tax collection cost and therefore the government has been aggressively focusing on digital tax department, it can be only achieved by the optimum of use of technology. It will further, help governments to minimize the tax evasion.

Modi government has been working hard to provide ease of doing business in India. The entire software system of GST portal shall be regularly monitored and verified so that rollout date of GST from 1^st July 2017 can be achieved. The current tax administration system is inadequate to resolve complex tax issues. Every business has to change/ upgrade it’s IT / ERP so that they can comply with GST laws from rollout date 1^st July 2017. The SME in India is going to adopt technology in their business and profession.

Why do we need Software under GST?

The government has been determined for business reforms in India and to ensure ease of doing and managing a business in India. Demonetization of old currency being one of the big business reforms in India. With the continuous business reforms in India, businesses have been promoting the use of technology.

Further on the way of business reforms, GST rollout date has been finalized for 1st July 2017, Now Government comes up with concept of matching the invoice under goods and service tax act 2016. Invoice matching is only possible if both buyer and supplier are connected with one common portal of GST.  Every sales invoice has to be uploaded on the GST website and invoice wise details has to fill after sales. The highest level of automation has been made to match the invoice. For every business, it important to use software which is directly connected with the GST portal.

What is Invoice Matching Process?

Invoice matching is a legal requirement under GST, under invoice matching all taxable supply of goods has to be matched with a buyer. Whenever a taxable person supplies goods or services, has to raise an invoice and while filing GST returns, have to mention the invoice number along with the GSTIN of the buyer.

This system will ensure a hassle free process of an input tax credit. GST portal has been establishing a high level of algorithm and IT infrastructure for effective implementation of GST in India.  For example, if you have raised one invoice RST0001 for R.s. 1 lac and taxes 18%, Rs. 18000. The buyer can only claim an input tax credit under GST law if invoice no. is matching with returns filled by the supplier. Indirectly few components of GST was implemented by DVAT^[1] for 2 years and invoicing matching for input tax credit claims has been started and registration under DVAT can be generated very similarly to current GST. Under GST government has introduced a more efficient process of matching the invoice for both supplier and purchaser.

How will Invoice Matching be implemented under GST?

The supplier of goods or services will file GSTR-1 by 10^th of the following month with detail of invoices raised during previous month and Purchaser will file GSTR-2 by the 13^th of the following month. In GST-2 input tax credit will be automatically populated. If any difference in the invoice can be rectified by issuing a debit note credit note. The Purchaser will be entitled to input tax credit only after of matching to tax as per the supplier GST-1. GST Compliance rating mechanism has been introduced to ensure that supplier and purchaser can rate each other for better compliance of GST law.

Conclusion

I am sure after reading the article on invoice matching principal under GST; you must be thinking what’s next? As a next step, every business has to be GST Compliant and needs to examine the ERP system of your company. Non-compliant with its principal may cause loss of input tax credit on the purchase.

Read our article: CBDT Clarifies Issues Related to Challenges Regarding Implementation of Provisions of GST Laws Faced by Registered Persons