facebook

GST Input Tax Credit Reconciliation

What is GST input tax?

Input tax is the central tax (CGST), state tax (SGST), integrated tax (IGST) or cess paid by a person having GST registration on supply of goods or services. GST input tax also includes tax paid on reverse charge basis and IGST charged on import of goods. However, input tax does not include tax paid under composition levy.

Input tax credit or the ITC is a tax that a business pays on a purchase and can use to reduce the tax liability when it makes a sale. The levy of taxation is based on the value-added at each stage of the supply chain until it reaches the consumer.

Goods and Service Tax Act was levied on goods and services based on the principle of value addition. In such a tax system to negate the cascading effect of the tax liability paid on procurement of raw materials, consumables, plants, and machinery, etc. This element used to offset the tax liability is called an input tax credit.

Under GST, every person having GST registration in the supply chain takes part in controlling, collecting the GST tax, and remitting the collected amount.

To avoid double taxation and the cascading effect of tax input, the tax credit is provided to set off tax paid on the procurement of raw materials, consumables, goods, or services used in the manufacturing, supply, and sale of goods or services.

Using the input tax credit mechanism, the business can achieve neutrality in the incidence of tax and ensure that such input tax element does not enter into the cost of production or the cost of supply of goods and services.

LEDGERS - Input Tax Credit Reconciliation

LEDGERS GST Software supports seamless matching and reconciliation of input tax credit at scale. The LEDGERS input tax credit reconciliation tool can be synced with the GST Portal to fetch GSTR-2A data through API.

Purchases that are not matched with the GSTR-2A data for flagged for further action like sending reminders to the supplier or updating purchase data, and more.

With LEDGERS, an individual can be assured that your business has received all the input tax credit due. A streamlined input tax credit reconciliation process will reduce the payable GST each month, streamline purchases and boost profitability.

Documents Required For Claiming GST

As a registered taxable person, the input tax credit can be claimed based on the following documents:

  • 1

    An invoice issued by the supplier of goods or services

  • 2

    Invoice issued by the recipient of goods and services supplied by an unregistered dealer. Such supply comes under the reverse charge mechanism. This mechanism involves supplies made by an unregistered person to a registered person.

  • 3

    A debit note issued by the supplier if the tax charged is less than the tax payable in respect of such a supply.

  • 4

    A bill of entry or any similar documents is required to document an integrated tax on imports.

  • 5

    An invoice or credit note issued by an input service distributor as per the rules under GST.

  • 6

    A supply bill by a dealer opting for a composition scheme or an exporter or supplier of exempted goods.

Eligibility for claiming the input tax credit

Who can claim the input tax credit?

  • The input tax credit can be claimed only by a person having GST registration and proper documentation and filing of GSTR-2 returns.
  • An individual needs to have the tax invoice or the debit note issued by the supplier of inputs or input services.
  • An individual must receive the goods or services or both.
  • The inputs supplier must have paid the government the GST charged in respect to such supply.
  • The returns should be filed as per Section 39.
  • In case the goods are received in lots or installments, the ITC can be claimed when the last lot is received.

Input tax credit refund

The taxpayers can claim GST refund for input tax, the CGST, SGST, or IGST, or tax paid by a person registered under GST on the supply of goods or services.

GST RFD-01 A form must be filed at the GST portal by the taxpayer to claim the refunds of input tax credit accumulated due to the inverted tax structure.

This was when the tax levied on the inputs is higher than the tax levied on output supplies.

Eligibility Criteria

Any person has an aggregate turnover of up to Rs.1.5 crore in the previous financial year or the current financial year opting to file Form GSTR-1 quarterly. Such individuals can apply for a refund every quarter.

Note: Refund on account of inverted tax structure is not available if exempted from tax or nil-rated supplies.(i.e) Supply of goods or services, on which GST rate of 0% is applicable, are called nil rated.

Transfer of Input Tax Credit

A registered taxpayer can apply for the transfer of matched input tax credit available in the Electronic Ledger to another business organization in case of transfer of the business by way of sale of business/ merger/ demerger by the filing of ITC declaration in Form GST ITC-02.

Given below are the ITC that can be transferred by filling the form GST ITC – 02.

  • Matched ITC balance available in the transferor’s Electronic cash ledger.
  • The ITC appears under major heads such as Central tax, State/ UT tax, integrated tax, and CESS can be transferred by filing form GST ITC – 02.

Goods & Services Not Eligible for Input Tax Credit

Under GST, the input tax credit is not available in respect of the following goods or services:

  • Motor vehicles, except when they are supplied in the course of business or used for providing taxable services like:
    • Transportation of passengers
    • Transportation of goods
    • Providing training on driving, flying, navigating such vehicles
    • A further supply of such vehicles or conveyance
  • Supply of goods and services concerning food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery except where a registered taxable person uses such inward supply of goods or services of a particular category for making an outward taxable supply of the same category of service
  • Membership of a club, health, and fitness center
  • Rent a cab, life insurance, health insurance, except where it is statutorily obligatory for an employer to provide such services
  • Travel benefits extended to employees on vacation, such as leave or home travel concession.
  • Goods and services received by the principal in the construction of immovable property, other than plant and machinery except where it is an input service for the supply of works contract service
  • Goods and services received by a taxable person for constructing an immovable property on his account, other than plant and machinery, even when used in the furtherance of business.
  • Goods and services on which tax has been paid under composition scheme
  • Goods and services used for personal consumption
  • Goods lost, stolen, written off, or disposed of by way of gift or free samples.
  • Tax paid after detection of fraud, wilful misstatement, or suppression.
  • Tax paid for the release of detained or seized goods.
  • Tax paid for the release of confiscated goods.

Pay as you go grow pricing

All Inclusive Pricing - No Hidden Fee

Basic

4899/Year

Includes all features required to grow a micro business

  • Unlimited Users
  • Upto 500 Estimates
  • Upto 500 Invoices
  • Upto 500 Purchase Invoices
  • Upto 500 Purchase Orders
  • GSTR-3B Return Filing
  • GSTR-1 Return Filing
  • GSTR-4 Return Filing
  • GSTR-9 Return Filing
  • Import or Export to Excel
  • Phone, Chat & Email Support

Premium

9899/Year

Includes all features required to grow a medium business

  • Unlimited Users
  • Unlimited Estimates
  • Unlimited Invoices
  • Unlimited Purchase Invoices
  • Unlimited Purchase Orders
  • GSTR-3B Return Filing
  • GSTR-1 Return Filing
  • GSTR-4 Return Filing
  • GSTR-9 Return Filing
  • Input Tax Credit Reconciliation
  • GST eWay Bill
  • GSTN API Connect to File Directly
  • Import or Export to Excel
  • Import or Export to Tally
  • Phone, Chat & Email Support

Input Tax Credit FAQS

Can GST paid on reverse charge basis be considered as input tax?

Yes. The definition of input tax includes the tax payable under the reverse charge.

What are the conditions for availing input tax credit?

Following four conditions are to be satisfied by the registered taxable person for obtaining ITC: is in possession of tax invoice or debit note or such other tax paying documents as may be prescribed; he has received the goods or services or both; the supplier has actually paid the tax charged in respect of the supply to the

  • The taxpayer is in possession of tax invoice or debit note or such other tax paying documents as may be prescribed.
  • The taxpyaer has received the goods or services or both.
  • The supplier has actually paid the tax charged in respect of the supply to the government.
  • The taxpayer has filed the GST return

Can a person take input tax credit without payment of invoice?

Yes, the recipient can take input tax credit. However, the taxpayer would be required to pay the consideration along with tax within 180 days from the date of issue of invoice. This condition is not applicable where tax is payable on reverse charge basis.

What is the time limit for availing GST input tax credit?

A registered person cannot take input tax credit in respect of any invoice or debit note for supply of goods or services after the due date for furnishing the GST annual return. If annual return is filed before the due date, then no change can be made after filing of GST annual return.

Can input tax credit be claimed on lost or damaged goods?

No, a person cannot take input tax credit with respect to goods lost, stolen, destroyed or written off. In addition, input tax credit with respect to goods given as gifts or free samples are also not allowed.

How to avail ITC on goods or services used partly for business?

The input tax credit of goods or services attributable only to the purpose of business can be taken by registered person. The manner of calculation of eligible input tax credit is provided in GST rules.

What happens in case of invoice mismatch during reconciliation?

In case of mismatch, the supplier and recipient would be updated about the mismatch. If the mismatch is not rectified, then the amount will be added to the output liability of recipient in the return for the month succeeding the month in which discrepancy is communicated.

Is input tax credit allowed only after matching?

No, input tax credit is allowed provisionally for two months. The supply details are matched by the system and discrepancies are communicated to concerned supplier and recipient. In case mismatch continues, the ITC taken would be reversed automatically.

Can provisional input tax credit be used for GST payment?

No, provisionally allowed input tax credit can be used only for the payment of self-assessed output tax in the return.

Input Tax Credit in State

Input Tax Credit in City

Input Tax Credit In Mumbai

Input Tax Credit In Bangalore

Input Tax Credit In Chennai

Input Tax Credit In Ahmedabad

Input Tax Credit In Pune

Input Tax Credit In Agra

Input Tax Credit In Ajmer

Input Tax Credit In Aligarh

Input Tax Credit In Amravati

Input Tax Credit In Amritsar

Input Tax Credit In Asansol

Input Tax Credit In Aurangabad

Input Tax Credit In Bareilly

Input Tax Credit In Belgaum

Input Tax Credit In Bhavnagar

Input Tax Credit In Bhiwandi

Input Tax Credit In Bhopal

Input Tax Credit In Bhubaneswar

Input Tax Credit In Bikaner

Input Tax Credit In Chandigarh City

Input Tax Credit In Nagpur

Input Tax Credit In Cuttack

Input Tax Credit In Dehradun

Input Tax Credit In Dhanbad

Input Tax Credit In Bhilai

Input Tax Credit In Durgapur

Input Tax Credit In Erode

Input Tax Credit In Faridabad

Input Tax Credit In Firozabad

Input Tax Credit In Ghaziabad

Input Tax Credit In Gorakhpur

Input Tax Credit In Gulbarga

Input Tax Credit In Guntur

Input Tax Credit In Gwalior

Input Tax Credit In Gurgaon

Input Tax Credit In Guwahati

Input Tax Credit In Indore

Input Tax Credit In Jabalpur

Input Tax Credit In Jaipur

Input Tax Credit In Jalandhar

Input Tax Credit In Jammu

Input Tax Credit In Jamnagar

Input Tax Credit In Jamshedpur

Input Tax Credit In Jhansi

Input Tax Credit In Jodhpur

Input Tax Credit In Kakinada

Input Tax Credit In Kannur

Input Tax Credit In Kanpur

Input Tax Credit In Kochi

Input Tax Credit In Kottayam

Input Tax Credit In Kolhapur

Input Tax Credit In Kollam

Input Tax Credit In Kota

Input Tax Credit In Kozhikode

Input Tax Credit In Kurnool

Input Tax Credit In Ludhiana

Input Tax Credit In New Delhi

Input Tax Credit In Hyderabad

Input Tax Credit In Kolkata

Input Tax Credit In Lucknow

Input Tax Credit In Madurai

Input Tax Credit In Malappuram

Input Tax Credit In Mathura

Input Tax Credit In Goa City

Input Tax Credit In Mangalore

Input Tax Credit In Meerut

Input Tax Credit In Moradabad

Input Tax Credit In Mysore

Input Tax Credit In Nanded

Input Tax Credit In Nashik

Input Tax Credit In Nellore

Input Tax Credit In Noida

Input Tax Credit In Palakkad

Input Tax Credit In Patna

Input Tax Credit In Pondicherry

Input Tax Credit In Allahabad

Input Tax Credit In Raipur

Input Tax Credit In Rajkot

Input Tax Credit In Rajahmundry

Input Tax Credit In Ranchi

Input Tax Credit In Salem

Input Tax Credit In Sangli

Input Tax Credit In Siliguri

Input Tax Credit In Solapur

Input Tax Credit In Srinagar

Input Tax Credit In Thiruvananthapuram

Input Tax Credit In Thrissur

Input Tax Credit In Tiruchirappalli

Input Tax Credit In Tirupati

Input Tax Credit In Tirunelveli

Input Tax Credit In Tiruppur

Input Tax Credit In Tiruvannamalai

Input Tax Credit In Ujjain

Input Tax Credit In Vadodara

Input Tax Credit In Varanasi

Input Tax Credit In Vijayawada

Input Tax Credit In Vellore

Input Tax Credit In Warangal

Input Tax Credit In Bilaspur

Input Tax Credit In Perinthalmanna

Input Tax Credit In Purulia

Input Tax Credit In Shimla

Input Tax Credit In Tirur

Input Tax Credit In Surat

Input Tax Credit In Visakhapatnam

Input Tax Credit In Gandhinagar

Input Tax Credit In Coimbatore

Input Tax Credit In Trichy

Input Tax Credit In Anand

Input Tax Credit In Patiala

Input Tax Credit In Roorkee

Input Tax Credit In Etawah

Last updated: May 19, 2021

X
User

Hi there,

We are available online!

loading...