The Central Board of Indirect Taxes and Customs (CBIC) has issued Notification No. 20/2024 – Central Tax dated October 8, 2024, introducing an important amendment to the reconciliation of Input Tax Credit (ITC) in FORM GSTR-9. This amendment replaces the earlier reconciliation requirement with FORM GSTR-2A and now mandates that ITC be reconciled with FORM GSTR-2B. The change aims to simplify the reconciliation process and ensure greater accuracy in ITC claims.
Key Changes in ITC Reconciliation
Before:
Previously, taxpayers were required to reconcile the ITC availed in FORM GSTR-3B with the details reflected in FORM GSTR-2A. This was based on the provisions inserted in Rule 36(4) of the CGST Rules w.e.f. October 9, 2019, and reflected in Table 8 of FORM GSTR-9.
The format of Table 8(A) of FORM GSTR-9 before the amendment was:
| Table 8: Other ITC Related Information (Before Amendment) |
|---|
| Description |
| ————————— |
| A: ITC as per GSTR-2A |
This reconciliation process was cumbersome, as GSTR-2A was dynamic in nature and kept changing with every update made by the supplier.
After:
With the amendment, FORM GSTR-2A has been substituted with FORM GSTR-2B for reconciliation purposes, which is now reflected in Table 8(A) of FORM GSTR-9.
The new structure, effective from November 1, 2024, is as follows:
| Table 8: Other ITC Related Information (After Amendment) |
|---|
| Description |
| ————————— |
| A: ITC as per GSTR-2B |
With this substitution, taxpayers are now required to reconcile their ITC as per FORM GSTR-2B, a static document that is generated monthly, providing more stability and clarity in the reconciliation process.
Understanding FORM GSTR-2B and its Importance
FORM GSTR-2B was introduced w.e.f. January 1, 2021, via Notification No. 82/2020 – Central Tax. Unlike GSTR-2A, GSTR-2B is a static form generated on the 14th day of each month, capturing the details of the ITC for the previous month. The Finance Act, 2021, through Section 16(2)(aa), introduced a clause mandating that the ITC claimed by the taxpayer must be reflected in FORM GSTR-2B.
This was further strengthened by Notification No. 39/2021 – Central Tax and Notification No. 40/2021 – Central Tax, which required that from January 1, 2022, taxpayers could only claim ITC based on FORM GSTR-2B, ensuring better accuracy and preventing discrepancies in the ITC claims.
Comparative Overview: Before and After the Amendment
| Provision | Before Amendment (Using GSTR-2A) | After Amendment (Using GSTR-2B) |
|---|---|---|
| ITC Reconciliation in FORM GSTR-9 | ITC was reconciled with the details reflected in FORM GSTR-2A. | ITC is now required to be reconciled with the details in FORM GSTR-2B. |
| Dynamic or Static | Dynamic: GSTR-2A updates in real-time as suppliers update their data. | Static: GSTR-2B is generated monthly and remains unchanged for that period. |
| Compliance Requirement | Taxpayers had to reconcile ITC claims with a fluctuating GSTR-2A. | Taxpayers will reconcile ITC with the stable and fixed FORM GSTR-2B. |
Impact of the Amendment
The transition from GSTR-2A to GSTR-2B for ITC reconciliation in FORM GSTR-9 offers several advantages for taxpayers and the GST system:
- Simplicity and Clarity: Since GSTR-2B is a static document, the reconciliation process becomes easier, and there are fewer chances of discrepancies or mismatch issues between GSTR-3B and GSTR-2A.
- Stability in ITC Claims: GSTR-2B provides a consistent basis for claiming ITC, reducing the need for constant adjustments and recalculations, which were common with GSTR-2A.
- Enhanced Compliance: The static nature of GSTR-2B helps in ensuring timely and accurate filing of returns and minimizes compliance challenges for businesses.
- Reduction in Litigation: By providing a clear and stable reconciliation mechanism, the chances of disputes between taxpayers and tax authorities over ITC claims are expected to reduce significantly.
Our Comments:
The substitution of FORM GSTR-2A with FORM GSTR-2B in FORM GSTR-9 via Notification No. 20/2024 – Central Tax is a welcome change. Since January 1, 2022, taxpayers have already been required to claim ITC based on FORM GSTR-2B. This latest amendment aligns the reconciliation process in FORM GSTR-9 with the updated rules.
By shifting from a dynamic form like GSTR-2A to the static GSTR-2B, the amendment simplifies compliance, reduces the risk of mismatches in ITC reconciliation, and enhances the accuracy and transparency of ITC claims. Taxpayers must ensure that they comply with the updated requirement to reconcile ITC in FORM GSTR-3B with GSTR-2B for the purposes of filing FORM GSTR-9 for the financial year.
Visit www.cagurujiclasses.com for practical courses
