BUSY is a simple, yet powerful GST / VAT compliant Business Accounting Software that has everything you need to grow your business.
The Indian Taxation system has witnessed transformation after the introduction of the Goods and Services Tax (GST). The idea behind implementing GST was to streamline the tax structure, but it created a new set of challenges for businesses when claiming input tax credits (ITC). To streamline this process, the Indian government introduced GSTR-2B, which plays a vital role in ITC reconciliation.
In this blog, we will discuss why GSTR- 2B is important and how it helps businesses optimise their ITC claims.
GSTR-2B is an Input Tax Credit statement auto-generated by the GST portal for all taxpayers countrywide. The form’s details are based on the information shared by the suppliers in GSTR-1/IFF, GSTR-5, and GSTR-6.
The GSTR-2B form is generated monthly, allowing you to claim ITC easily. GSTR-2B is a static version of GSTR-2A because its details can’t be changed and are generated regularly.
GSTR- 2B is important in determining missing invoices when the suppliers file their application documents in the GST portal. You can check for missing invoices when the GSTR- 2B reconciliation occurs. For instance, the supplier may not register the data for some of the invoices and may fail to upload them to the GST portal. This indicates that even if you have the records of the lost invoices in your books, they can go missing from the GST portal when the GST- 2B is generated.
When you generate GSTR 2B, you can review all the invoice details furnished by the suppliers. You can review if all the invoices have been accurately uploaded or not. Locating invoices with errors enables you to discover the defaulter suppliers who may not be taking the time to correctly upload invoices.
If they continue to do so, you may consider your contract with such suppliers because inaccurate invoices will lead to problems when it comes to GST. Remember, it is not possible for the invoices to be uploaded by the supplier as GSTR-2B is a static document, unlike GSTR-2A, which continuously changes. GSTR-2A reflects the modifications as and when they arise, which means if the supplier uploads an invoice, it will be displayed in that document.
In GSTR-2B, the changes are not reflected until the next month, so businesses must check invoices for potential errors. Constantly incorrect invoices can lead to interest and penalties.
While filing the GSTR- 2B, pay the GST correctly, as paying extra or less can create problems. However, reconciling GSTR- 2B ensures you make accurate GST payments on the portal at the right time. This will save you from fines and time, making your overall GST filing process effortless.
Another advantage of GSTR 2B is that it will help you avoid claiming ITC twice, which can happen if you don’t reconcile. This was a problem when the provision was rolled out earlier (before the GSTR-2B). With GSTR-2B reconciliation, you can track exactly which invoices have been used to claim ITC.
Thus, you can track those claimed invoices and also the remaining invoices for which ITC has not been claimed yet, making the process simpler and faster.
Invoices may go missing in the books even if they are available in the GSTR- 2B form. For instance, when suppliers upload the invoices, you cannot find them in your purchase register. This may occur if the period of reporting invoices is typically not the same for your supplier or you.
This can lead to a big difference in the accounting period when invoices are uploaded and your purchases are registered. Moreover, you may not have accounted for debit or credit notes by the supplier, which leads to a mismatch at the time of reconciliation.
GSTR-2B has become crucial for businesses in ITC reconciliation. With GSTR 2B, businesses can improve compliance, reduce errors in ITC claims, and make their tax processes seamless.
BUSY is a simple, yet powerful GST / VAT compliant Business Accounting Software that has everything you need to grow your business.