Reconciliation of GSTR 1 and GSTR 2 with GSTR 3B

What is GSTR 3B?

GSTR 3B is a simple return form introduced by the CBEC for the month of July and August. You have to file a separate GSTR 3B for each GSTIN. For uploading GSTR 3B you do not required to provide invoice level information. Only aggregatevalue of each rate of GST needs to be filled either of Inward Supply or Outward Supply.

What is GSTR 1?

GSTR 1 is a monthly return that should be filed by every registered dealer. It contains details of all outward supplies i.e sales. GSTR 1 contains details of all the sales transactions of a registered dealer for a month.

The GSTR 1 filed by a registered dealer is used by the government to auto populate GSTR 3 for the dealer and GSTR 2A for dealers to whom supplies have been made.

GSTR-1 should be filed even if there is NIL returns to be filed (no business activity) in the given taxable period.

What is GSTR 2?

Every registered taxable person is required to give details of Inward Supply, i.e., purchases for a tax period in GSTR-2.

GSTR-2 contains details of all the purchases transactions of a registered dealer for a month.

It will also include purchases on which reverse charge applies.

The GSTR-2 filed by a registered dealer is used by the government to check with the sellers’ GSTR-1 for buyer-seller reconciliation.

What is GSTR 3?

GSTR-3 captures the aggregate level outward and inward supply information which will be auto populated through GSTR 1 and GSTR 2.

Information would be updated in real time about Input Tax Credit ledger, Cash ledger and Liability ledger. Details of payment of tax and ITC under various tax heads of CGSTSGSTIGST and Cess would be auto-populated from the debit entry in credit/cash ledger, irrespective of mode of filing return.

Taxpayer will also have the option of claiming the excess payment of tax as refund for which there will be a field in this return. The return would also have a field to enable the taxpayer to carry forward the excess ITC balance.

CIRCULAR No. 7/7/2017

While filing GSTR 3B in August for the Month of July’17, a lot of mistakes were made, but not to worry the GST Department published a circular stating correction procedures to be followed in case of any error made while the filing of GSTR 3B ( July’17). The types of errors that could have been occurred with their respective correction procedures is as follows:

  1. Short/Excess Outward Supply Reported

In case the tax payer has filed GSTR 3B by reporting a Short/Excess Outward Supply, then the tax payer shall report the correct value of Outward Supply in Form GSTR 1. No details of Outward supply will be provided on Form GSTR 2 and after submitting both GSTR 1 and GSTR 2, Form GSTR 3 will be Auto Generated.

  1. Short/Excess Inward Supply Reported

In case the tax payer has filed GSTR 3B by reporting a Short/Excess Inward Supply, then the tax payer shall report the correct value of Inward Supply in Form GSTR 2. No details of Inward supply will be provided on Form GSTR 1 and after submitting both GSTR 1 and GSTR 2, Form GSTR 3 will be Auto Generated.

  1. Short Tax Payment- Due to Short Reporting Of Outward Supply

In case there is a short Payment of Tax By the Taxpayer due to short reporting of Outward Supply in GSTR

3B, then he can make the appropriate corrections in Form GSTR 1and after that the short tax paid will need to paid in Form GSTR 3 along with the Late Payment Of Tax Interest.

  1. Short Tax Payment- Due to Short Reporting Of Outward Supply

In case there is a Short Payment of Tax By the Taxpayer due to excess claim Of ITC in GSTR 3B, then he can make the appropriate corrections in Form GSTR 2 and after that the short tax paid will need to paid in Form GSTR 3 along with the Late Payment Of Tax Interest.

  1. Short ITC Claimed

In case there is a Short Claim of ITC by the Taxpayer in GSTR 3B, then he can make the appropriate corrections in Form GSTR 2 and after that the excess tax paid will be shown in the credit ledger after submission of Form GSTR 3.

  1. Excess Output Tax Liability

In case there is a Excess Output Tax Liability reported By the Taxpayer in GSTR 3B, then he can make the appropriate corrections in Form GSTR 1 And Form GSTR 2 and after that the excess tax paid can be utilized for decreased ITC as per Form GSTR 3B or it can be carry Forwarded to the next month return.

  1. Non Submission Of GSTR 3B/ NON Payment Of Tax Liability

In case the Tax Payer fails to file GSTR 3B or doesnot pay the tax liability, then the tax payer must furnish details appropriately in form GSTR 1 and GSTR 2. Then while filing Form GSTR 3 the tax payer should pay the Tax Liability along with the interest on Late Payment of Tax. As per Notification 28/2017 dated 01/09/2017, no Late Charges shall apply for Non Filing of GSTR 3B.

GSTR 3B GSTR 1 GSTR 2 GSTR 3
Short/Excess Outward Supply Reported FILL CORRECT VALUE NA AUTO FILL
Short/Excess Inward Supply Reported NA FILL CORRECT VALUE AUTO FILL
Short Tax Payment- Due to Short Reporting Of Outward Supply CORRECTIONS CORRECTIONS PAY TAX PLUS INTEREST
Short Tax Payment- Due to Short Reporting Of Outward Supply NA FILL CORRECT VALUE
Short ITC Claimed NA FILL CORRECT VAULE After Submission of GSTR 3, it will reflect in Credit Ledger
Excess Output Tax Liability FILL CORRECT VALUE FILL CORRECT VALUE C/f to next Month return ( Or can be utilized for decreased ITC as per GSTR 3B)
Non Submission Of GSTR 3B/ NON Payment Of Tax Liability FURNISH DETAILS FURNISH DETAILS PAY TAX PLUS INTEREST

 

NOTE: Calculation Of Interest On Late payment of Tax Liability shall be calculated @ 18% on daily basis. The interest shall be calculated from 26th August’2017 for the month of July’ 17

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Input Tax Credit Under GST

What is Input Tax Credit?

Input credit implies that at the time of paying tax on output, you can reduce the tax you have already paid on inputs and pay the balance amount.

When you buy a product/service from a registered dealer you pay taxes on the purchase. On selling, you collect tax. You adjust the taxes paid at the time of purchase with the amount of output tax and the balance liability of tax has to be paid to the government. This mechanism is called utilization of input tax credit.

What is the time limit to avail GST ITC?

ITC can be availed by a registered taxable person in a specific manner and within a specified time frame. The following are the different situations wherein the inputs can be claimed for semi-finished goods or stock or finished goods.

1. If a person has applied for registration or is liable to register or is granted registration then – Day from when he is liable to pay taxes.
2. When a person takes voluntary registration – Registration day.
3. When a taxable registered person stops paying taxes in composition levy scheme then day from when he is liable to pay tax normally u/s 7.

Input tax credit for these situations can be claimed only if it doesn’t exceed one year from the tax invoice date of issue related to supply.

For other cases, ITC should be claimed:

Before you file a valid return for the September month u/s 27 days after the end of financial year to which the invoice is related, or
Before you file the annual return, as u/s 30 days, the due date to file the annual return is December 31 after the end of the financial year.

The pre-requisites for availing credit by registered person are:

a. He is in possession of tax invoice or any other specified tax paying document.
b. He has received the goods or services. “Bill to ship” scenarios also included.
c. Tax is actually paid by the supplier.
d. He has furnished the return.
e. If the inputs are received in lots, he will be eligible to avail the credit only when the last lot of the inputs is received.
f. He should pay the supplier, the value of the goods or services along with the tax within 180 days from the date of issue of invoice, failing which the amount of credit availed by the recipient would be added to his output tax liability, with interest [rule 2(1) & (2) of ITC Rules]. However, once the amount is paid, the recipient will be entitled to avail the credit again. In case part payment has been made, proportionate credit would be allowed.

Documents on the basis of which credit can be availed are:

a. Invoice issued by a supplier of goods or services or both
b. Invoice issued by recipient alongwith proof of payment of tax
c. A debit note issued by supplier
d. Bill of entry or similar document prescribed under Customs Act
e. Revised invoice
f. Document issued by Input Service Distributor

The protocol to avail and utilise the credit of these taxes is as follows:

Sl. No. Nature Of ITC First Utilized Against Remaining Utilized against
1. IGST IGST CGST
SGST
(in above order)
2. CGST CGST IGST
3. SGST SGST IGST

Conclusively, credit of CGST cannot be utilized for paying SGST/UTGST and credit of SGST/UTGST cannot be utilized for paying CGST.

There are certain Items prescribed in the GST Law on which ITC cannot be claimed:-

• Motor Vehicle (Except when supplied in the usual course of the business or used to provide services of transportation)
• Capital Goods as described under Chapter 82,84,85,90 of the GST Law.
• Following Goods/Services when used for personal consumption:-
 Food & Beverages
 Outdoor Catering
 Beauty Treatment
 Health Services
 Cosmetics & Plastic Surgery
 Membership Of a Club
 Health &Fitness Centre
 Life Insurance
 Health Insurance
 Travel benefits
• Goods/Services on which Tax Levy has been paid by the supplier

 

For more information on Income Tax Credit under Goods and Services Tax (GST), feel free to reach us on, info@gapeseedconsulting.com or call +91-9599444639/+91-9599444630