Data Reconciliation for GSTR 2
Once GST got implemented in India, companies got Input Tax Credit only once their supplier actually paid the tax to the government. (Credit is available on filing of return; however, if the tax is not paid by supplier then it will be reversed). This makes reconciliation of invoices very important. Under GST returns, companies/dealers are required to upload all their outward supplies (sales) and inward supplies (purchases) every month in a prescribed digital format. These returns are called GSTR-1 & GSTR-2 respectively. Thus any mismatches in transactions and resulting different in Input Tax Credit would be picked up by the system immediately.
Data reconciliation (DR) is a term which is typically used to describe a verification phase during a data migration where the target data is compared against original source data to ensure that the migration architecture has transferred the data correctly.
Importance of Data Reconciliation:
While data migration, it is possible for mistakes to be made in the mapping and transformation logic. Also, runtime failures such as network dropouts or broken transactions can lead to data being left in an invalid state. These problems can lead to a range of issues such as:
i) Incorrect values
ii) Broken relationships across tables or systems.
iii) Missing values
iv) Duplicated records
v) Missing records
vi) Badly formatted values
If data reconciliation doesn’t take place, these issues can go unnoticed, severely damage the overall accuracy of your data and lead to inaccurate insights and issues with customer service.
The reconciliation would happen between your purchase ledger and GSTR-2A which shall be auto-populated using the sales data uploaded in GSTR-1.
Reconciliation shall highlight errors in three cases:
i) Supplier missed an invoice that was there in your purchase ledger
ii) Supplier had added an invoice that was missing in your purchase ledger
iii) There was an amount mismatch between the invoice uploaded by supplier and entry made in purchase ledger
In case the supplier has missed out on any invoices or made an error, it needs to be resolved to get the input tax credit. Reconciliation would also help in keeping your accounting books in sync with the filing done. Let us see various scenarios and actions to be taken for each case.
Supplier Error Cases:
i) Purchase recorded in accounts but missing in GSTR-2A. The supplier did not mention it in GSTR-1.
Action: Add the invoice in GSTR-2 and take provisional credit. Ask the supplier to approve the same in GSTR-1A.
ii) Purchase appearing in GSTR-2A but missing in accounts. Supplier mentioned the wrong GSTIN in GSTR-1.
Action: Flag that invoice as rejected.
iii) Purchase appearing in GSTR-2A and accounts but the amount does not match. Supplier mentioned the wrong amount in GSTR-1.
Action: Modify it with correct amounts as per your purchase ledger. Ask the supplier to approve the same in GSTR-1A.
Purchaser Error Cases:
i) Purchase recorded in GSTR-2A but missing in accounts. Purchaser missed making the entry in purchase ledger.
Action: Add the invoice in accounts.
ii) Purchase recorded in purchase ledger but missing in GSTR-2A. Purchaser made an error in accounts, eg. wrong GSTIN entered.
Action: Modify/Delete the invoice in accounts.
iii) Purchase appearing in GSTR-2A and accounts but amount mismatch. Purchaser mentioned the wrong amount in accounts.
Action: Modify it with correct amounts in the accounts.
Filing of GSTR-2 is a complex task, requiring amalgamation and reconciliation of sales and purchase data, but Avalara TrustFile GST is an automated automation solution that has simplified this process through the use of cloud technology:
– Retrieving Data: GSTR-2 requires businesses to submit accurate sales and purchase data each month. Avalara TrustFile GST can either directly extract this sale & purchase data from an established ERP or accounting system, or gives a business a mechanism to upload a simple CSV file.
– ITC issues: In the GSTR-2, it’s important to enter the ITC claim amount for each invoice or C/D notes individually. Avalara makes this very easy through GSTR 2 input template in the CSV file.
– Reconciliation issues: GSTR-2 requires accurate reconciliation of invoices between businesses, including all debit/credit notes. Avalara TrustFile offers an auto-reconciliation feature and matching of invoices in GSTR2A.
Coupled with an additional advantage of prior GST experience (in Brazil and Canada) and Avalara’s experience in serving more than 20,000 clients globally, Avalara TrustFile GST is a cloud-based solution that helps with complete automation of GST compliance. TrustFile GST provides a huge array of benefits, including timely compliance, report generation, comparison of reports, decision making, cost-effectiveness with reduced staff, technical and online support, and more.
Avalara is an experienced application service provider (ASP) and partner of authorized GST Suvidha Providers (GSPs). To understand how our cloud-based application Avalara TrustFile GST can help you with GST compliance automation, contact us through https://www.avalara.com/in/products/gst-returns-filing.