Credit Mismatch – What is it and how to deal with it?

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As per the provisions of Central Goods and Service Tax Act, every registered person under GST is required to file the annual return GSTR-9 irrespective of his business turnover. GSTR-9 contains all the details about inward or outward supplies of an entity, taxes paid, refund claimed and ITC availed by the taxpayer.

Deadline for filing GSTR-9 is already nearby and the Government has clearly stated that the date will not be extended anymore. Thus, to avoid any interest and penalties or any demand notice by the tax department, taxpayers should file the annual return before the due date i.e. 30th June 2019.

The primary reason for receiving a notice from the Tax Department is a mismatch of the input tax credit in returns GSTR-3B and GSTR-2A. Hence, before filing GSTR-9, taxpayers must ensure that there are no discrepancies in the data submitted in returns GSTR-3B, GSTR-2A and GSTR-9.

Possible reasons for mismatches:-

The most common reasons for the Credit mismatch of Input Tax Credit claimed are:

  • Difference in the values entered in the books of accounts and supplier’s invoice.
  • Omission in recording any Purchase or Debit notes.
  • The invoices for which ITC is claimed are yet to be uploaded by the supplier.

To reduce the complications being faced by taxpayers, the GSTN team has given clarification over various issues faced by the taxpayers while filing GSTR-9:

  • For taxpayers whose turnover exceeds Rs. 2 crores, data filled in GSTR-9 must tally with the books of accounts and mismatch, if any, should be disclosed in the reconciliation statement.
  • Details of any additional outward supply that was not disclosed in monthly and quarterly filed returns shall be declared in FORM GSTR-9 and any additional tax liability shall be paid through FORM DRC-03 along with interest amount.
  • All the details filled in Form GSTR-2A till May 1st 2019, need to be auto-populated in Table 8A of FORM GSTR-9.
  • ITC on inward supplies shall be disclosed in Table 8C of FORM GSTR-9.
  • Details of transactions carried on in the financial year 2018-19 must be declared in Pt. V of FORM GSTR-9.
  • Reconciliation of outward turnover reported in GST returns should be done with annual turnover reported in the income tax return, and if any difference occurs, the same shall be reported in GSTR 9. 
  • There may be chances of mismatch of turnover due to deemed supply i.e. branch transfer which is required to be reported separately in GSTR 9. 
  • GSTR-3B and GSTR-1 shall be reconciled for outward liability and any difference must be reported and treated accordingly in GSTR 9.
  • ITC claimed in GSTR 3B and GSTR 2A shall be reconciled properly.
  • If ITC claimed in GSTR 2A is more than ITC claimed in GSTR 3B, then the difference of ITC must be adjusted in GSTR 9.
  •  If ITC claimed in GSTR 3B is more than ITC in GSTR 2A, then such ITC must be claimed as per section 16(2) as there may be high chances to face scrutiny in such cases.
  • To ensure accuracy of final balances, the electronic credit ledgers and trial balances in the books of accounts should be reconciled.
  • To avoid unnecessary obstacles, the taxpayer should ensure that there is substantial documentary proof of all data that is reported in the return.
  • If GSTR-9 is filed after the due date, a penalty of Rs. 200 per day will be levied on the taxpayer.
  • GSTR-9 must be filed with due care as there is no provision in the act to revise the return.

About Author

An MBA in finance, I like to cover the wide range of topics related to Taxation, SEBI, Finance and anything that is Public Helpful. The motive is always to make it simpler for the taxpayers understand the system better and take informed decisions.

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