Invoice Matching under GST
- Invoice matching under GST requires purchase invoices to match the supplier’s sale invoices for claiming input tax credit.
- Businesses need to update their IT systems to comply with GST, which is a major change for many small and mediumsized businesses.
- The GST system requires realtime compliance and a proper IT system to support errorfree information flow between buyers and suppliers.
- Invoice matching is crucial because input tax credit is only available if the buyer's inward supplies match the supplier’s outward supplies in GST returns.
- Certain exemptions to invoice matching include taxpayers under the composition scheme, input service distributors, and nonresident taxable persons.
Under GST, every invoice about a purchase should be reconciled with the supplier’s sale invoice, which helps claim input credit tax on the GST common portal.
There were constant efforts from the Government of India to meet the July 1, 2017, deadline for implementing GST in India. For the business, this meant extensive re-organization of its IT systems. For the first time, many small and medium-sized businesses will use technological tools for bookkeeping and tax compliance. This is easily one of the most significant changes that companies will experience. It also calls for the business community’s patience and change management to ensure a smooth transition.
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The need for an IT system under the GST
The government introduced the concept of invoice matching under Goods and Services when the buyer and supplier have access to a shared information system which in turn facilitates an error-free continuous flow of information. As a result, it is critical for businesses to be highly compliant in real-time and to have a proper system in place to support it.
What is invoice matching?
Invoice matching refers to the practice of matching all taxable supplies acquired by a buyer from the seller to facilitate the accurate transfer of Input tax credit between states and all transaction parties involved.
Importance of invoice matching
Invoice matching is important because, under the Goods and Services Tax law, the input tax credit for purchasing goods or services is only available if the details of the buyer’s inward supplies filed in GSTR-2 match the details of the supplier’s outward supplies filed in GSTR-1 . This interlinking was accomplished by auto-populating data from the supplier’s GSTR-1 into the buyer’s GSTR-2 . To understand, consider the following example.
Unless and until this matching is reconciled, the buyer cannot claim the input tax credit for taxes paid on the purchase of input goods and services or both. As a result, businesses must be fully compliant with the GST regime. Compliance ratings have been devised to entice all companies to file returns on time and follow all applicable regulations.
Components to be matched
The following components should be matched:
- GSTN of the supplier
- GSTN of the recipient
- Invoice/Debit Note number
- Invoice/Debit Note date
- Taxable value
- Tax Amount
Exemptions
There are certain exemptions to the reform as well:
- Taxpayers are covered under the composition scheme.
- Input service distributors.
- Non-resident taxable persons.
