Input Tax Credit under GST is an essential activity to keep the working capital of the businesses flowing. However, there's still confusion among the taxpayers regarding claiming Input Tax Credit based on their GSTR-2A or GSTR-2B.
This short article will clear the air of confusion amongst the taxpayers and give you a solid explanation regarding which one you should choose to claim your maximum eligible Input Tax Credit, GSTR-2A or GSTR-2B?
We will also shed some light on the critical differences between the GSTR-2A form and the GSTR-2B form.
What is GSTR-2A & GSTR-2B?
Let me give you a very brief introduction of these two forms, which are very much required to decide your eligible Input Tax Credit.
GSTR-2A is an auto-generated draft, which gets generated every month.
It’s a purchase-related tax return & gets generated by the GST portal for every GST registered taxpayer.
A recipient’s GSTR-2A is generated based on the data furnished by his Supplier in the Supplier's GSTR-1, GSTR-5, GSTR-6 or GSTR-7.
GSTR-2A is a dynamic statement and keeps on revising every month.
To relieve the taxpayers from keeping a tab on all the previously generated GSTR-2A, the government introduced the GSTR-2B form.
A recipient generates GSTR-2A as per the details furnished by his suppliers in their GSTR-1 form.
GSTR-2B is the essential document to give you an accurate overview of the eligible Input Tax Credit that you can claim for any month.
GSTR-2B is a static document, unlike its dynamic counterpart, GSTR-2A.
GSTR-2B applies to the normal category of taxpayers and the taxpayers falling under Special Economic Zones (SEZs).
GSTR-2B for the preceding month is generated on the 12th of every month.
In the latter part, we will understand the importance of the GSTR-2B form in claiming the maximum eligible Input Tax Credit.
Input Tax Credit Under GST | Rule 36 (4) of CGST Act, 2017
According to Rule 36(4) of the CGST Act of 2017, a taxpayer can avail provisional ITC on the available eligible ITC to the extent of 5% only while filing his GSTR-3B returns.
Now, this provisional ITC solely depends on the invoices and debit notes that the Supplier has uploaded.
NOTE: The 5% slab for the provisional Input Tax Credit is applicable from 1st January 2021. Previously the percentage was fixed to 10%.
For this reason, it is significant that you claim only the eligible Input Tax Credit, and for doing this, you require a highly automated GSTR-2B & GSTR-2A reconciliation solution, which will give you an error-free report so that you can claim up to 105% of the eligible ITC.
Without going into many technical details, let me show you how this works with the help of an example:
On Supplier Side (Appu Traders)
Appu, the Supplier, sells some raw materials worth Rs 2,00,000.
On this sale, he collects 28% GST from the Recipient.
Total amount Appu collects= 2,56,000
Appu files this detail of collecting 56,000 in his GSTR-1 return filings.
On the Recipient’s Side (Raju Enterprises)
Appu Traders (Supplier) accurately & on-time files his GSTR-1
The Recipient will get the Input Tax Credit of Rs 56,000.
These ITC details of 56,000 will be auto-populated in his GSTR-2A & GSTR-2B.
So now the Recipient can avail his Input Tax Credit for this month as per his GSTR-2B and GSTR-2A.
The recipient ‘Raju Enterprises has one more supplier, 'Jethalal Electronics’.
On Supplier Side (Jethalal Electronics)
Jethalal supplies goods of Rs.1,50,000 to the Recipient.
He collects 12 % GST from the Recipient. = 18,000
Total amount collected by Jethalal = INR 1,50,000 + INR 18,000 = INR 1,68,000
But, he has never filed GSTR-1 for this transaction.
On the Recipient’s Side (Raju Enterprises)
Supplier Jethalal does NOT file his GSTR-1 for this transaction; hence the ITC details will NOTgetreflected in the recipients GSTR-2A & GSTR-2B.
The Recipient will NOT be able to avail of this ITC of INR 18,000.
In a nutshell,
Eligible ITC of Raju Enterprises as per their books of Accounts:
Eligible ITC as per books = 56,000 + 18,000 = ? 74,000
ITC available as per the Recipient's GSTR-2A & GSTR-2B?
ITC Available = ? 56,000
Supplier #2 Jethalal has NOT filed his GSTR-1, so the tax paid to this Supplier will NOT get reflected in either your GSTR-2A or GSTR-2B. So the Recipient CAN NOT claim any Input Tax Credit for this transaction.
How is GSTR-2A different from GSTR-2B?
We will look at the significant differences between GSTR-2A & GSTR-2B with continuing the above example:
Transaction between Supplier #2 Jethalal & the Recipient Raju Enterprises
On the Supplier’s Side (Jethalal):
W.r.t. the above example shows that Jethalal files his GSTR-1 for the transaction with Raju but files it AFTER the deadline.
Sale of 3 Lac to the Recipient
Collects 18% GST = 54,000
Total amount collected= ? 3,54,000
Files GSTR-1 after the due date (i.e. 11th of the month)
He files the GSTR1- for July’ 21 on 16th August’21.
Here, he has filed GSTR-1 but has filed it beyond the deadline.
How will it impact the Recipient, Raju?
On the Recipient's side (Raju):
ITC details will NOT be auto-populated in Recipient’s GSTR-2B for THIS month, i.e. August 2021, as the Supplier filed his GSTR-1 after the due date.
But since the Supplier has filed the GSTR-1 though late, the ITC details shall get auto-populated in the GSTR-2A of the Recipient for August’ 21.
Raju is confused now!
He sees an ITC of 54,000 in his GSTR-2A, but he doesn't find this entry in his GSTR-2B.
What should he do now?
In such circumstances, CBIC has clarified that; Input Tax Credit shall be availed basis the invoice details available in GSTR-2B.
SO for Raju,
The ITC available for August 2021 will be ‘NIL’. (as per GSTR-2B)
Raju can avail of this pending ITC in the upcoming month of September 2021.
With provisional credit of 5%, the total eligible ITC that Raju can avail is as follows:
Total ITC available for September 2021 = 54,000 + 5% of (54,000) = 54,000+2,700 = 56,700.
Hence, from the example, it's cleared that the invoice details in your GSTR-2B shall prevail for claiming your eligible GST Input Tax Credit for a particular month.
From the examples, we can understand that the details in the GSTR-2B form are essential to claim the maximum eligible Input Tax Credit and the 5% provisional ITC based on your eligible ITC.
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