The deadline for availing Input Tax Credit (ITC) or reversing it for a previous financial year is governed by the Section 16(4) CGST Act. According to this provision, a taxable person is not entitled to take ITC in respect of any invoice or debit note for goods or services after the 30th of November following the end of the financial year to which such invoice or debit note pertains, or the filing of the relevant annual return, whichever is earlier.
Effective from 1st January 2022 a registered person can avail ITC only for those invoices or debit notes furnished by the supplier in their GSTR-1/IFF and appearing in GSTR-2B.
As the 30th of November 2023 deadline approaches for the financial year 2022-23, tax payers must take necessary steps to ensure compliance with GST regulations concerning Input Tax Credit (ITC). Here is the breakdown of the action items and reconciliations that need to be addressed:
Action Items:
1. Review Purchase Register: Taxpayers should diligently review their purchase register to classify eligible and ineligible ITC. Identifying eligible ITC is essential to maximize tax benefits, while recognizing ineligible ITC is crucial to prevent unnecessary claims.
2. Reconcile Books and GST Returns: The reconciliation process involves matching the ITC claimed in the GSTR 3B return with the ITC recorded in the company’s accounting books. This step ensures that the ITC claims are accurate and compliant with GST regulations.
3. Claim Eligible ITC and Reverse Ineligible ITC: It is vital to claim all eligible ITC and reverse any ineligible ITC. This action is integral to ensuring compliance and avoiding complications in the future.
4. Follow up with Suppliers: In cases where suppliers have not reported invoices or debit notes pertaining to the financial year 2022-2023 in GSTR-1, taxpayers should actively follow up and request them to report these documents. Failure to do so can result in the permanent disallowance of ITC claims.
5. Review GSTR-2B Data: Taxpayers should thoroughly review the GSTR-2B data to ensure that it aligns with their purchase register. Discrepancies between GSTR-2B and the purchase register should be addressed promptly to avoid potential issues with ITC claims.
Significance of Reconciliation between books and GSTR 2B :
Reconciling books and GSTR 2B is a crucial step in ensuring accurate GST compliance. It involves matching the GST input tax credit (ITC) claimed in the GSTR 3B return with the ITC recorded in the company’s accounting books. The significance of this process includes:
- Accuracy of ITC Claims: Reconciliation ensures that ITC claims are precise and adhere to GST regulations, minimizing the risk of discrepancies.
- Identification of Errors: Errors in ITC claims can be identified and rectified, preventing potential legal and financial issues.
1. Scenario 1: Books > GSTR 2B
If the ITC in the books is more than the ITC reflecting in GSTR 3B, it may suggests that eligible ITC may have been missed. Check for any unclaimed eligible ITC and include it in the GSTR 3B return. Also, verify if any invoices are missing from GSTR 2B. If so, follow up with the supplier to report the invoices in their GSTR-1.
2. Scenario 2: Books < GSTR 2B
If the ITC in the books is less than the ITC claimed in GSTR 2B, it indicates that ineligible ITC may have been claimed. Identify and reverse the ineligible ITC in the GSTR 3B return.
GST registered dealers must adhere to the deadline of 30th November of the following financial year for claiming ITC for the previous financial year. Regular reconciliations help ensure the accuracy and validity of ITC claims. Timely and accurate ITC claims contribute to efficient financial records management and compliance with GST regulations.
Conclusion:
GST-registered dealers must adhere to the 30th November deadline for claiming ITC for the previous financial year. Regular reconciliations play a pivotal role in ensuring the accuracy and validity of ITC claims. Timely and accurate ITC claims not only contribute to efficient financial records management but also ensure compliance with GST regulations, ultimately safeguarding businesses from legal and financial consequences. It is imperative for taxpayers to take proactive measures to meet this deadline and avoid unnecessary complications.
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What will happen if someone has not claimed and reversed ITC of FY 2022-23 till 30.11.2023.