There have been recent changes to the Goods and Services Tax (GST) law. Just increase the mandatory reconciliation of GST data so there are no discrepancies among GSTR-1, GSTR-3B, and GSTR-2B. Similarly, the technology addresses the challenges to the new business.
Changes to the GST Law
Businesses would be unable to claim ITCs from 1st January 2022 if their GSTR-2Bs do not match. The form provides qualified and ineligible Input Tax Credit (ITC) that a business would be entitled to every month. In this way, the monthly information remains comparable regardless of any GST amendments made through the vendor’s suppliers.
It will be possible for the business to claim an input tax credit if the vendor reports the invoice or debit note on their GSTR-1 or Invoice Furnishing Facility (IFF). Excess avail or failure to comply with the given condition will result in these businesses incurring penalties or facing suspension of their GSTIN.
A revamp is being made to self-assessed tax in light of the new GST amendments starting in January 2022. The businesses are required to file the sales invoices in GSTR-1 and the sales summary, ITC claims, and the net tax they have to pay in GSTR-3B.
When an assessee fails to furnish the self-assessed tax in the GSTR-3B, the tax officer will recover the taxes excluding the show cause notice and process the recovery as soon as possible. Taxes for outward supplies reported in GSTR-1 but not reported in GSTR-3B would be involved.
A GSTR-1 form isn’t required to provide GST, only a GSTR-3B form. A similar amendment is planned to stop bogus invoicing by sellers reporting their bigger sales in GSTR-1 so that buyers can claim input tax credit. The same would authorize actions to recover the under-reported tax liability in GSTR-3B pertaining to GSTR-1.
There will be no GSTR-1 submissions made by businesses for the duration of the GSTR-3B period that is not currently in effect. As it stands now, the GST portal will restrict the business from furnishing GSTR-1 if it has not filed GSTR-3B for the past two tax periods.
Affect the companies
Additionally, buyers or recipients cannot claim another input tax credit in the form of GSTR-2B if the sellers failed to report the purchase invoice.
Communication and reconciliation could only be done manually, which would require a lot of time and effort. Furthermore, if the vendor is delayed, businesses should face an additional GST in cash until the vendor follows, thus being out of cash.
Due to these reasons, businesses maintain regular and accurate reporting of the return without delay. Thus, companies should check for variances and form a communication link with their business partners.
Business Solutions based on Systems
Companies should use a dynamic system of input tax credit reconciliation every week or at least several times a week. For a tech-based solution to reveal missing ITCs, they would have to match their purchase invoices between their books and GSTR-2B.
Communicate effectively with non-compliant vendors and pressure them to report the invoices. Additionally, following their two-way vendor communication and vendor compliance grading is crucial.
Business owners should discipline their vendors who are not compliant with business policies by holding vendor payments. GST registration value can be calculated on an invoice level at each payment cycle. In addition, having the real-time automated payment restrictions built into their accounts payable AP system is advantageous.
It is important to enabling companies to automatically prepare GSTR-3B forms by automatically populating GSTR-1 and GSTR-2B forms. By doing the same, errors in GSTR-3B caused by manual interruptions are prevented. In addition, compliance solutions should facilitate the production of quick difference reports like GSTR-3B vs GSTR-1 vs books and GSTR-3B vs GSTR-2B vs books for their teams.
In the solution, GSTINs under a PAN are shown on a single dashboard with filing status for GSTR-1, GSTR-3B, GSTR-9 (Annual Return Form), and GSTR-9C across periods.
Companies would benefit from a cloud-based solution that would automatically update for portal and legal updates. The solutions are based on artificial intelligence and machine learning, which is a technology of the future. The proposed solutions would ensure that the company is not impacted financially or noticed by the government by following them.