Have you Reconciled Your Books with GST Returns? If Not, This News is For You!
Have you Reconciled Your Books with GST Returns? If Not, This News is For You! Due to short-fall in GST collection due to COVID-19 Pandemic and many other reasons, department has developed many tools to increase the collection as well as to safeguard the interest of revenue. Department has issued below circular prescribing Standard Operating Procedure (SOP) to be followed in case of suspension…
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GST reconciliation involves matching the supplier’s uploaded invoice data with that of the recipient’s purchase data. Under the GST returns, taxpayers can only claim ITC (Input Tax Credit) if the specific invoice exists in the GSTR 2A. This is the main reason why enterprises are forced into reconciliation to claim the correct ITC. An accurate reconciliation will ensure no loss in ITC on any invoices. However, there are some challenges associated with reconciling invoices.
· Downloading the GSTR 2A data State-wise and Month-wise from GSTIN portal, for FY 2018-19 & the previous year, to find the Pending/Unmatched invoices, is a tedious and a time taking process.
· Reconciliation by building the logic and macros in Excel sheet is not reliable.
· For FY 2019-20 & FY 2020-21, reconciling invoices every month while tracking the invoices from the previous months is a challenge.
· GSTR 2A Reconciliation is required for FY 2018-19 & FY 2019-20 data as a one-time activity with supplier invoice dispute resolution.
· Auto-reconciliation is required for FY 2020-21 with month-on-month reconciliation, allowing GSTR 3B return filing & ITC credit availment effortless.
· Reconciliation is required for GSTR 1 vs GSTR 3B & GSTR 3B vs GSTR 2A for FY 2018-19 & FY 2019-20. A monthly continuous recon is then required from FY 2020-21.
· Require past and real-time reports of GSTR 2A, enabling the client to analyse and take decisions on ITC, GSTR 3B, GSTR 9, GSTR 9C & other compliances.
GSTR 2B report introduced:
GSTR 2B is an ITC statement that will be automatically generated for every taxpayer based on the details furnished by his vendors in their GSTR 1, GSTR 5 (Non-resident taxable person) and GSTR 6 (Input Service Distributor). This statement will reflect the available ITC of a taxpayer against the information filed by his suppliers.
This GSTR 2B statement for the previous month will be available on the 12th day of the present month. Example: For the month of September 2020, the GSTR 2B statement will be available to the registered taxpayer on the 12th of October 2020.
enComply’s GSTR 2A Reconciliation Solution:
A Cloud based SaaS application which provides you the GSTR 2A data in real-time, month-wise/year-wise.
A single interface to monitor, report and manage the ITC, GSTR 3B & GSTR 9 with reconciliation reports of GSTR 1 vs GSTR 3B & GSTR 2A vs GSTR 3B year-wise/month-wise.
Advanced Analytics, to better understand your organization’s year on year ITC utilization & compliances.
Real-time reports of ITC available as per GSTR 2A vs ITC utilized in GSTR 3B.
Dashboards for CIO, CFO, Tax Head etc. Option to set user-based access controls.
Auto email facility to suppliers who did not file returns & have disputed invoices.
Perform reconciliations every month and check if 110% ITC is available in GSTR 3B.
Supplier-wise Monthly & Yearly Reports.
Vendor Performance Reports for credit rating.
Implementation of enComply’s GSTR 2A Reconciliation Application:
Our application downloads the vendor’s GSTR 2A using our GSP APIs.
Our application uses Pattern match, Reverse match, Supplier-wise match, PAN-wise match & Various tolerance limits and reconciles the invoices.
A summary and a detailed report of the matched, unmatched, and probable match invoices are provided.
An option for FY wise purchase register is also provided.
The final step for ITC is following up with the supplier for unmatched and unreported invoices. enComply’s Managed Services team will follow up with the suppliers and provide you with a detailed report,
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Goods and Service Tax (“GST”) is the major source of revenue for both center and state governments and any non-compliance on part of the taxpayer may result in huge losses to the government. Government keeps various checks to ensure that taxpayers are complying with the provisions and all transactions are genuinely entered such as Reconciliation ITC appearing in GSTR-2A with ITC availed in GSTR-3B, Assessment by departmental officer, Audit by specified professional etc.
Audit is defined under Section 2(13) of CGST Act as “examination of records, returns and other documents maintained or furnished by the registered person under this Act or the rules made thereunder or under any other law for the time being in force to verify the correctness of turnover declared, taxes paid, refund claimed and input tax credit availed, and to assess his compliance with the provisions of this Act or the rules made thereunder”. Therefore, audit is a verification exercise conducted by an independent professional to ensure that all provisions of GST law have been complied with.
In the financially growing world where everyone wants to earn big in a short period of time some of them manipulate their books of accounts to evade tax and adopt various kinds of malpractices such as wrong data in the books, bogus purchase or supply inward transaction without any underlying movement of goods or not filing the proper returns as per the CGST act 2017, thus in this scenario government need to take the steps to stop these activities to ensure the good practices in the tax system.
1. Who is required to get GST audit
1.1 GST Audit by Taxpayer
As per Section 35(5) of CGST Act, if aggregate turnover of a person exceeds INR 2 Crores* during a year then such person shall get his accounts audited by a Chartered Accountant or Cost Accountant.
Further, as per Section 44(2) of CGST Act, If aggregate turnover of a person exceeds INR 2 Crores * then he shall file following documents:
Copy of Audited Financial Statement
A Reconciliation statement reconciling values declared in Annual return and value appearing in Audited Books of Accounts. Reconciliation statements should be submitted in Form GSTR-9C.
* For FY 2018-19, the threshold of INR 2 Crores has been increased to INR 5 Crores.
2. Audit by Departmental Officer
2.1 General Audit under GST
Taxpayers whose turnover is within the threshold limit of INR 2 crores are waived off from being audited. However, no threshold limit is prescribed for Audit by Departmental Officer.
As per Section 65(1), commissioner or any other officer authorised by him may undertake audit of any registered person for any financial year or part of financial year or multiple parts of Financial year. Audit must be completed within a period of 3 months from date of commencement or such extended period as may be prescribed.
2.2 Special Audit under GST
During any audit, investigation or assessment, if Assistant commissioner or officer above his rank is of the opinion that value is not correctly declared by the taxable person or credit availed is not correct and then considering the interest of revenue, he may direct such registered person to get his accounts audited by Chartered Accountant or Cost Accountant nominated by the commissioner.Prior approval of commissioner is required for this purpose.
3. Objective of GST Audit
Efficiently manage the taxation- the most important objective is to manage the tax system of the country more efficiently. GST has narrowed down all the indirect taxes to one tax which made the task easy for taxpayers as well as the tax departments.
Compliance of the taxpayer – It is not possible for the department officer to scrutinise books of accounts of each and every taxpayer. Therefore, the concept of GST Audit was envisaged. GST audit main objective is to measure the compliance of the taxpayer with respect to GST Law. CGST act 2017 and rules stated in the act.
GST audit checks whether all the tax has been followed by the Taxpayer– Audit of GST not only checks the accuracy of the accounts but also the credibility of the taxpayers and his business. Audit actions discover the taxpayer’s under declare and manipulative liability also stopped them to do further.
Eliminate the manipulative trading- WIth introduction of GST, practise of issuance of fake invoices, invoice issuance without underlying supply of goods or services, has increased significantly to pass on fake ITC..Audit helps in prevention of such practises and makes the owner stop to enter into false transactions and trading
4. Due date of filing of GST Audit Report
GST Audit report is to be filed alongwith Reconciliation statement in form GSTR-9C. It should be filed by the 31 December of year following the relevant year.
However, considering the fact that GST was a newly introduced tax, therefore, due date of filing of GSTR-9C was extended till 31st January, 2020 for FY 2017-18. However, due to the covid-19 pandemic, the central board of indirect taxes and customs have postponed the reconciliation of FY 2018-19 till 31st December 2020.
5. Areas to be covered under GST Audit
Each and every transaction related to the GST has to be analysed thoroughly by the Auditor keeping in mind provisions of GST Law.
Following are the certain key areas to be analyzed by an auditor to make the audit report authentic.
5.1 Correctness of Effective GST Rates:
First and the basic point to be checked is whether the rate of GST for different products or services have been correctly plotted, i.e., GST rates are correctly allocated to goods or services in the category to which they belong (i.e. 5%, 12%, 18% and 28%).
Whether any changes in the rate during the financial year have been given effect or not?
Any exemption or abatement claimed, if any, is post satisfying all the underlying conditions given for the purpose of claiming such exemption or abatement. E.g., GST is payable on restaurant service at a reduced rate of 5% subject to the condition that no ITC is claimed related to such service.
5.2 Comparison of Data as per Books of Accounts and GST Returns
For outward supply, Auditors need to carry out the comparison between sales and output liability recorded in books of accounts and data furnished in GSTR-3B and GSTR-1. Any difference should be properly reconciled.
For inward supply, comparison should be made between the ITC Claimed in Books of Account, ITC claimed in GSTR-3B and ITC auto-populating in GSTR-2A. Any variation in the same should be properly reconciled in order to prevent the taxpayer from claiming any excess input tax credit. As per amendment in CGST Rules, No ITC is admissible for invoices not appearing in GSTR-2A. Therefore, ITC against invoices not appearing in GSTR-2A should be reversed or necessary amendments should be made by suppliers in his GSTR-1.
Auditor should check that ITC must be claimed within the due date given under Section 16 of CGST Act, i.e., due date of filing of GST return of September Month of the following year or date of filing of annual return of concerned year, whichever is earlier.
5.3 Compliance of provisions related to Job-Work
If a person is obtaining services of a job-worker then the auditor should check whether the principle has generated challan and E-way bill for movement of goods from its location to the location of the job-worker.
Whether all inputs or capital goods, sent to the job-worker, have been received back within 1 year or 3 years respectively from date of removal. In case of non-compliance, whether applicable GST has been paid on or not with applicable interest.
Whether the principal has filed ITC-04-”Details of goods/capital goods sent to the job worker and received back” within due dates.
In case of direct supply of goods from a job-workers location, whether GST has been paid on such supply or not?
5.4 Reversal of ITC in case of default in payment beyond 180 days
If the assessee has failed to make payment of consideration for inward supply alongwith applicable GST within 180 days from date of Invoice then whether ITC corresponding to such amount has been reversed or not in accordance with Section 16 of CGST Act read with Rule 137 of CGST Rules.
Further, whether ITC has been reclaimed or not once such payment is made?
Whether, E-way bill has been generated for all movement of goods of value exceeding INR 50,000 in case of inter-state supply or threshold limit applicable for intra-state movement.
Necessary reconciliation should be made between e-way bill data with the sales invoices to check if there was any bogus entry to evade the tax.
5.7 Reversal of ITC on Exempt Supply
In case of exempted supply, the auditor should make sure that Input Tax Credit related to inward supplies directly related to such exempted supply has not been taken.
In case of use of inward supply partially toward exempted supply and partially toward taxable supply then whether proportional ITC has been reversed in accordance with Section 17 of CGST Act. For example Mr. A is using rented property for his two businesses namely shirt stitching and flour trading. Supply of shirt is taxable under GST. However, supply of flour is an exempted supply. Therefore, proportionate ITC attributable toward exempted supply should be reversed.
5.8 Reversal of Ineligible ITC
Auditors should check that no ITC is available on inward supply on which ITC is restricted under Section 17(5) of CGST Act such as inward supply of motor vehicle, rent-a-cab service, Life insurance, work contract service for construction of an immovable property etc.
5.9 Tax Invoicing under GST
Whether Tax invoice or Bill of supply or any other document has been prepared in accordance with Chapter VII of CGST Act, 2017 read with Chapter VI of CGST Rules, 2017. Further, whether the invoice contains all information as mentioned in CGST Rules or not?
Whether Invoice is issued within the time limit given under CGST Rules.
Whether self invoice is raised for inward supply received from unregistered persons on which recipient is liable to pay GST under Reverse Charge Mechanism.
Whether all applicable invoices or vouchers are being prepared or not such as refund voucher, receipt voucher etc.
5.10 Export of Goods or Services
In case of export of goods, whether all the underlying conditions have been duly complied with or not?
In case of export of service, whether all underlying conditions are satisfied such as place of supply of service falls outside India, payment for such service is received in convertible foreign exchange etc.?
Whether GST has been charged on all supplies between distinct persons, i.e., stock transfers between units of the same person have different GST registrations.
Whether the place of supply is correctly determined or not?
Value of supply has been determined in accordance with Section 15 of CGST Act or not?
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Free GSTR-2B Reconciliation tool
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After the implementation of GST, one of the biggest challenges faced by both taxpayer & accountants is the complexity in tax compliance. For example, tax compliance includes GST return filing, claiming a tax refund, multiple tax returns, etc. Similarly, taxpayers have to issue GST compliant e-invoices.
E-invoices need to have components like HSN/SAC Codes, GSTIN of the supplier and the recipient, GST Rates etc. Further, they face challenges in keeping the track of all new amendments introduced by the GST Council via notifications and circulars.
Such a complex situation makes it difficult for both taxpayer & accountants to file fully compliant GST returns on time. So, to avoid delays in taxes & such issues, businesses are advised to use GST Accounting Software.
A good GST Accounting Software enables the taxpayers, accounting professionals and business owners to generate GST ready invoices effortlessly, file GST returns timely, organize GST reports and maintain all accounting data seamlessly.
One such software is Marg GST software which is affordable & provides you with the best GST Billing and Returns Filing experience. Marg GST Billing software aims at reducing your business operation cost by significantly reducing the compliance time. It fastens the entire process of return filing as you can directly push transactions into Excel, JSON or CSV format from the software on to GST Portal & file returns in a few clicks.
Let us discuss few important unique features of Marg GST Billing software:
GST Invoices & Billing
With Marg GST invoice software you can generate GST compliant invoices in a few seconds and can also track invoice. It improves the billing speed by 40% with multiple advanced shortcuts & search options like Barcode etc.
GST Reports & Return Filing
One of the biggest advantages of Marg GST filing software is that it can create GST Invoices & push transactions directly into the GSTN portal in Excel, JSON or CSV Format & File GSTR 1, GSTR 2, GSTR 3B, GSTR 4, GSTR 9 directly from the software. This saves a lot of time & efforts that go wasted in filing return manually. Moreover, you are not dependent on any accountant for maintaining your books.
GSTR 2A Reconciliation
GSTR 2A reconciliation in Marg e-invoice software is very easy. Simply reconcile GSTR 2A of the entire year without even logging in to the GST portal frequently. Download GSTR-2A auto-populated purchase bills in order to match them in Marg GST software
Automatically club together both input & output tax of a particular month and further pass a general entry at the end of the month required for GST Payable
No manual data entry required with Marg GST software. Easily import and export all data with just a click. Check Account Balance, Account History, Invoices, Quotations, Payments and Alerts everything that smooths your business accounting till maintaining the Balance Sheet. Marg GST software helps you at every step by digitizing & automating all your accounting.
Another challenge that is faced by the maximum of the small & medium-sized businesses. Marg e-invoice software is ready with e-invoicing. Marg GST software is equipped with all necessary e-invoice format & requirement notified by the government. You can gen Upload your B2B transaction invoices authenticated by Invoice Registration Portal (IRP) of Registered Party’s Credit & Debit Note on the GSTN portal electronically & reconcile directly
Internal audit is an important process of accounting. Running an internal audit is a crucial part that you need to master to avoid any mistakes & errors. Well, Marg GST software automatically validates the data for any errors and gives you alerts during the internal audit. It is that simple with Marg ERP software. You don’t have to worry about anything. It also validates the GSTIN of the suppliers to file 100% error-free returns
GST RCM Statement & Eway bill
Marg software lets you generate GST RCM statement when GST is to be paid and deposited against the Goods/ Services. You can also generate Single, Multiple & Bulk e-way bill to directly upload on the portal. An E-way bill is the most important document that is required for the movement of goods. Manually creating e-way bills is very time consuming, therefore it is beneficial to generate e-way bill via software which will be then automatically shared with the buyer as well.
Marg GST software provides the most simple & user-friendly interface for filing the 100% error-free TDS/ TCS returns online as per the norms of TRACES and CPC, India
Experience uninterrupted online banking inside Marg ERP integrated with ICICI Bank. Manage all type of bank transactions i.e. NEFT, RTGS etc. including Auto-Bank Reconciliation with 140+ Banks
To simplify the payment & collection problems Marg ERP has launched India’s first B2B payment collection platform- MargPay. MargPay provides secure Payment Modes, Bill-by-bill Reconciliation, Same-day Settlement, Business Loans etc. to small & medium businesses for better financial growth.
Marg GST Software for Billing & Accounting can be customized as per the business you are doing without any hassle. Marg GST Software provides you with the option to send the bills through email automatically which saves time. With Marg GST Software, you can also switch over anywhere from bill to bill which saves a lot of time.
Marg GST Software enables you to easily reconcile GSTR 2, GSTR 2A without logging in to GST portal frequently and download the purchase bills in order to match them in the software. We always keep you up-to-date on all the critical numbers & taxes with 1000+ MIS reports that can be customized according to your company requirement. Marg GST billing software is the best way to file your taxes along with managing your business, as you get complete business solutions in one place. Stay GST Compliant with Marg ERP & leave your tax filing burden to us!
The technology trends that are equipped in Marg GST invoice software are constructive to streamline your business processes. You don't have to spend hours checking tax returns. You can easily sync your account books with GST returns using Marg GST software. All in all, GST solutions can make things more comfortable in your organization and give you the best returns on investment
list of Year Ending Tasks for FY 2020-21
Refund for FY 2018-19 GST on advanced payments Letter Of Undertaking Reco of GSTR 2A with the purchase invoices Reconciliation of ITC ledgers Reconciliation of Gstr 1/3B Sales with balance sheet sales Reconciliation of Gstr 3B with the ITC on purchases Reconciliation of E Way Bills with Gstr 1 and further with Gstr 3B Job work Blocked Credit Restricted ITC as per 36(4) Payment of Supplier within…
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