Restriction & Entitlement of ITC(Input Tax Credit)

Reconciliation between GSTR 2A 2B and 3B

To comply with the newly introduced provisions in the Finance Act, 2021 on Restriction of ITC, the following exercise would be performed.

For availment of ITC during the period FY 2020-21

  1. Capture the GSTR 2A for the relevant period.
  2. Capture the GSTR 2B for the relevant period.(as may be available)
  3. Capture the invoice wise availment in the GSTR 3Bs filed for the period.
  4. Identification of availability of the line items availed in GSTR-3B in GSTR-2A.
  5. Identification of line items availed in GSTR 2A not availed in GSTR-3B.
  6. Review of the invoices availed in GSTR 3B based on the eligibility of the credit as per section 16 [Basic conditions of credit availment].
  7. Review of the invoices availed in GSTR 3B based on the eligibility of the credit as per section 17(5) [Blocked Credits].
  8. Evaluation of applicability of section 17(1) and 17(2) [Reversal of ITC on account of exempted supplies or such other notified activities] and the reversal computations thereof.
  9. Evaluation of credit that has not been reverse on basis of 180 days period.
  10. Quantifying the exposure on account of non-compliance of Rule 36(4) based on data available.

Way forward, for availment of ITC in the coming periods from FY 2021-22

  1. Capture the GSTR 2A for the relevant period.
  2. Capture the GSTR 2B for the relevant period.
  3. Identification of line items reflecting in GSTR 2A but not in GSTR-2B.
  4. Evaluation of applicability of section 17(1) and 17(2) [Reversal of ITC on account of exempted supplies or such other notified activities] and the reversal computations thereof.
  5. Evaluation of applicability of section 17(5) [Blocked Credits] on the amount of ITC reflecting in GSTR 2B and reversal thereof.

The above-mentioned processes would be supplemented with advice on effective vendor management system that would be required to be implemented by the Company.