Itc maximization
- 1. https:irisgst.com Taxation and Financial Management Change during the Pandemic?" How to Respond, Recover and Thrive in the face of IRISGST in Association with CII
- 2. https:irisgst.com How to cushion the COVID-19 impact with 100% GST Reconciliation and maximizing ITC claim
- 3. https:irisgst.com 3 From Lockdown to Standing Up Again 0 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
- 4. https:irisgst.com 4 4 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
- 5. https:irisgst.comhttps:irisgst.com 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 5
- 6. https:irisgst.com 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 6
- 7. https:irisgst.com 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 7
- 8. https:irisgst.com 8 Key Aspects of ITC 8 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
- 9. https:irisgst.comhttps:irisgst.com Available ITC to be Claimed 9 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
- 10. https:irisgst.com 10 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
- 11. https:irisgst.comhttps:irisgst.com 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 11
- 12. https:irisgst.com 12 How to Streamline ITC Processes 01 02 04 03 ITC Process Lorem ipsum dolor sit amet, consectetur adipiscing elit. Praesent aliquet convallis pharetra. Internal Processes and Control Lorem ipsum dolor sit amet, consectetur adipiscing elit. Praesent aliquet convallis pharetra. Robust Reconcilaition Lorem ipsum dolor sit amet, consectetur adipiscing elit. Praesent aliquet convallis pharetra. Comprehensive Reports Lorem ipsum dolor sit amet, consectetur adipiscing elit. Praesent aliquet convallis pharetra. Vendor Compliance
- 13. https:irisgst.com 13 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
- 14. https:irisgst.com 14 Automated & Advanced Reconciliation 14 1 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
- 15. https:irisgst.com 15 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
- 16. https:irisgst.comhttps:irisgst.com Tasks in Reconciliation 16 • 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
- 17. https:irisgst.com 17 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
- 18. https:irisgst.comhttps:irisgst.com Reporting ITC • Check if provisional ITC appears now • ITC reversal calculation • Compute ITC • File 3B Subsequent month After recon other tasks remain 18
- 19. https:irisgst.com 19 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