How to cushion the COVID 19 impact with 100% GST Reconciliation and maximizing ITC claim

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Taxation and Financial Management
Change during the Pandemic?"
How to
Respond, Recover and Thrive
in the face of
IRISGST in Association with CII

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How to cushion the
COVID-19 impact with
100% GST Reconciliation
and maximizing ITC claim

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From Lockdown to Standing Up Again
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50
100
150
200
250
300
350
400
Growth Curve
Lockdown
• Economy came to a standstill
• Growth curves suddenly turned flat
• Sales Impacted
• Operating Expenses – As-is/increase
• Receivables Impacted
0
50
100
150
200
250
300
350
400
Growth Curve
Unlock
• Sales started picking up
• Receivables will still be staggered
• Expenses steady
• Liquidity Crisis
• Govt delayed compliance burden
One area to
help manage
crisis is ITC
utilisation
Maximum utilisation for
minimum outflow of cash

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January February March April
The
not-to-be
ignored
ITC
support
• Sales picked up, liability payment due
• Govt relaxed rules, but not done away
https:irisgst.com
May June

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Quick Recap of ITC
SUPPLIER
MAKE/USE
CONSUMER
Supplier Pays
Tax to the
Government
Pay Tax to the
Supplier
You deposit tax
with the
Government
You Collect Tax
from the
Consumer
SELLBUY
Life is Good..
But is it as
easy as it
seems?
Supplier pays tax
Supplier reports
Data is Perfect
You do Accounting
You Take ITC
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Rules to ITC
- Internal
Taxpayer should be in possession of the tax invoice or
debit note or relevant tax paying documents.
INVOICE
He should have received the goods and services.
PAYMENT
Payment of invoice to the supplier should be done
within 180 days from the date of issue of invoice
GSTR 3B
Claim in within time limit specified
Should not fall under the list of Blocked Credit.
BLOCKED CREDIT
Proper Apportionment of credit – Personal vs Business
Purpose & Exempt vs Taxable supply
Taxpayer has furnished return under section 39 i.e.
GSTR 3B
No ITC if depreciation claimed
RECEIPT
DEPRECIATION
TIME PERIOD
APPORTIONMENT
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Rules to ITC
- External
Invoices booked by you need to present in Govt
system (GSTR 2A)
Vendor should have put proper details in
2A and charged proper tax.
Vendor should have filed his GSTR1 and
GSTR3B on time
Amendments if any should also be done within
the time limit specified
Payment of such tax is made to the government by the
vendor through his GSTR3B
Your Purchase Data and GSTR 2A data
has to Match
VENDOR
GSTR 3B
GSTR 2A
ON-TIME FILING
PAYMENT
AMENDMENTS
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Key Aspects of ITC
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Lorem Ipsum is simply
dummy text of the
printing and typesetting
industry.
ELIGIBLE ITC
INELIGIBLE ITC
Lorem Ipsum is simply
dummy text of the
printing and typesetting
industry.
NEGATIVE LIST
Lorem Ipsum is simply
dummy text of the
printing and typesetting
industry.
PROVISIONAL ITC
Lorem Ipsum is simply
dummy text of the
printing and typesetting
industry.
ITC ON AMENDED
INVOICES
Lorem Ipsum is simply
dummy text of the
printing and typesetting
industry.
Lorem Ipsum is simply
dummy text of the
printing and typesetting
industry.
REPORTING
OF ITC
Lorem Ipsum is simply
dummy text of the
printing and typesetting
industry.
ITC ON REVERSE
CHARGE
Lorem Ipsum is simply
dummy text of the
printing and typesetting
industry.
REVERSAL OF
ITC

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Available ITC to be Claimed
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INVOICES IN 2A AS WELL AS IN
PURCHASE REGISTER
INVOICES IN 2A BUT NOT IN PURCHASE
REGISTER – DEFERRED CLAIM
INVOICES IN PURCHASE REGISTERS
NOT IN 2A – PROVISIONAL CLAIM

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Provisional ITC
0403 Extra 10% claimed, needs to monitored
for ensuring no double claim in
subsequent period and if warrants ITC
reversal
Required 10% to apply cumulatively for Feb 2020 to Aug 2020
and any adjustment to be done in Sept 2020 return.
Example : From Feb to Aug Total ITC as per 2A
amount to Rs.600000 then the total provisional ITC
taken from Feb to Aug 2020 cannot be more than Rs.
60000.
Relaxation
01 Up to 10% can be claimed provisionally
Current Rule
02 Over 10% of what comes in GSTR 2A
Interprested as
April 2020 May 2020
Eligible ITC as per books
Eligible ITC as per 2A
Provisional ITC (10%)
Total Claim in April 2020
Carry forward ITC (as per 2P)1100
9900
900
9000
11000
Eligible ITC as per books
Eligible ITC as per 2A
Provisional ITC (10%)
Total Claim in April 2020
Carry forward ITC (as per 2P) 0
6100
700
7000
5000+1100
b/f 1100

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Practical Challenges
• Not only you but also vendor
Entire supply chain has to
be GST compliant
• What if supplier is quarterly filer, not yet uploaded
• What if supplier has filed but your invoice not included
• What if supplier has filed nil
• What if…..
Invoices booked by you
need to present in Govt
system (GSTR 2A)
• Are the tax amounts ok?
• Is the correct tax rate applied
Your data has to be in
sync with your supplier’s
data
Am I tracking ITC reversal
ITC
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How to Streamline ITC Processes
01
02
04
03
ITC Process
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Internal Processes and Control
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Robust Reconcilaition
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Comprehensive Reports
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Vendor Compliance

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Reconciliation – the soul of ITC
Your invoice and GSTR 2A
invoices are same
Match
01
Some mismatch between your
internal data and invoices in
GSTR 2A
Mismatch
02
Invoices available in GSTR 2A,
but not yet booked by you
Not Booked
03
Invoices not in GSTR 2A but
booked by you
Not Uploaded
04
Process of comparing
data
To know what is ok, clear further
processing – release payments,
taking ITC
To know what is not ok, for
corrective actions –
communication with vendor for
noncompliance or missing
invoices or mismatches

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Automated &
Advanced
Reconciliation
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3
5
2
4
Compare invoices in 2A
and purchase register with
same supplier invoice no.s
across months within
financial year.
Automated Annual
Recon
Timing difference
between reporting of
invoices.
Reconcile across
financial years as
well
Eg 2A has A001/19-20 and 2P as A001,
then also these invoices are
comparable and should be compared
Compare invoices even if
invoice numbers are not
completely matching
exact values or user
defined tolerances also
can be used
Ignore invoice no.s and
compare based on amounts
and document month
If after all automated steps also still invoices
remain in Not Booked or Not Uploaded
category
Allowing user to define
which invoices are
comparable
6 Deemed Match
Mismatch invoices with amount
differences within a user specified
tolerance

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Levels of
Reconciliation
For all vendors, net of
credit and debit notes
Aggregate for months are
compared
For the year as a whole
• Totals at vendor level
compared
• Net of debit and credit
notes
Vendor Level
• Comparing invoice level
totals
• Variations in tax rate, tax
amount at item level not
considered
Invoice Level
• Comparing every line item
of an invoice
• Limited to data available in
GSTR 2A
Line item level

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Tasks in Reconciliation
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• Compare data
• Get results
• Approach for amended
invoices
COMPARE
• Reason for mismatches
• Internally solvable
• External dependencies
• Priorities for resolving
ANALYSE
• Compute ITC eligible
• Mark provisional;
ACT
• Communicate with vendor
COMMUNICATE
RECONCILIATION

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The Rich Recon data
• Analysis of GSTR 2A invoices from ITC
perspective
• ITC on invoices which are booked earlier
• ITC on invoices uploading in different
FYs
• Consolidated view on missing invoices
at the group level,
• Provisionally claimed invoices
• Group level reconciliation results
• Comparative analysis of ITC as per
2A and claimed in 3B
• Non compliant vendors by fetching
their filing status
Some reports and insights which
are a must-have for Indirect
Taxation team are
which can help to identify wrong
booking of invoices

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Reporting ITC
• Check if provisional
ITC appears now
• ITC reversal
calculation
• Compute ITC
• File 3B
Subsequent
month
After recon
other tasks
remain
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The New
Normal World
Safeguarding against
vendor compliance risks
Lending /other funding
options – based on GST data
and hence compliances
cannot be ignored
Effective cash flow
management
- Availably of more ITC or
not letting go of ITC that
can be claimed
Large
Volumes
Automation Alerts Reports
Technology
Matters
Custome
r Support
Secured
Solution
Reliable
Services
Cloud
Solution

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THANK YOU
support@irisgst.com
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