Invoice Matching under GST for ITC
Under GST, a recipient of a supply can avail input tax credit (ITC) of the supply only on successful matching of invoice details with the supplier. The invoice wise details furnished by suppliers in Form GSTR-1 will be matched with the details of inward supplies furnished by recipients in Form GSTR-2. Input tax credit in GST will only be allowed to be availed for invoices where the details match.
Hence, it is important to know the details that will be cross checked by the GST portal to ensure that the invoice details are matching.
Details cross- checked for invoice matching under GST
The invoice details which will be cross-checked for invoice matching under GST are:
- GSTIN of the supplier
- GSTIN of the recipient
- Invoice or debit note number
- Invoice or debit note date
- Tax amount
The claim of ITC in GST will be treated as matched for:
- Invoices or debit notes which are accepted by the recipient in Form GSTR-2A, without any modification, will be considered as matched if the supplier has furnished a valid return.
- Supplies for which the claim of input tax credit by the recipient is equal to or less than the tax paid on the invoice or debit note by the supplier will be considered as matched.
Communication of discrepancy in ITC claim
A discrepancy in claim of ITC by the recipient will be communicated to both the recipient and the supplier, on or before the last day of the month in the following manner:
GST MIS-1: Discrepancy in ITC claim on inward supplies will be communicated to the recipient
GST MIS-2: Discrepancy in ITC claimed by the recipient will be communicated to the supplier
The supplier and recipient can make suitable rectification in the return furnished for the month in which the discrepancy is communicated. If the discrepancy is not rectified, the amount of discrepancy will be added to the tax liability of the recipient for the month succeeding the month in which the discrepancy is made available.
For example: Mr. Ram supplies apparel to Mr. Shyam on 20th October, ’17. The amount of tax liability on the supply furnished by Mr. Ram in Form GSTR-1 on 10th November, ’17 is Rs. 2,000. However, ITC claimed on the supply by Mr. Shyam in Form GSTR-2 furnished on 15th November, ’17 is Rs. 2,500.
In this case, Mr. Ram will be intimated about the modification to the invoice in Form GSTR-1A. Mr. Ram can either accept or reject the modifications. If Mr. Ram accepts the modification, Mr. Shyam will be eligible for full ITC of Rs. 2,500.
However, if Mr. Ram rejects the modification, the discrepancy will be communicated to Mr. Ram in Form MIS-1 and Mr. Shyam in Form MIS-2 by 30th November, ‘17. If the discrepancy is not rectified by Mr. Ram and/or Mr. Shyam, the amount of discrepancy, i.e. Rs. 500, will be added to Mr. Shyam’s liability for December ’17. Mr. Shyam will be liable to pay Rs. 500 + interest while furnishing Form GSTR-3 on 20th January, ’18.
Hence, matching of invoice in GST is crucial for claim of Input Tax Credit. Tax payers should ensure that invoice details are entered correctly and discrepancies are resolved in a timely manner to avoid loss of ITC.