Some facts about Input Tax Credit

What is ITC in GST? Input Tax Credit is the credit of tax paid by the tax payer on his purchases and inward supplies of inputs and capital goods

• Check whether Goods or Services are received
• Check whether invoice in original is available
• Tax has been paid and return has been filed by the supplier
• Blocked Credits Are Broader Than You Think :- ITC is not available on certain goods/services even if used for business. For example: Motor vehicles (seating equal or less than 13) unless used for specific purposes (e.g., transportation of passengers). Club memberships, health insurance, and life insurance unless mandated by law or as a condition of employment. Works contract services for construction of immovable property (except if you are in the business of such contracts).
• ITC Denial on Fake Invoices Even Without Knowledge If your supplier issues a bogus invoice and you have claimed ITC in good faith, the department can still deny ITC and penalize you.
• Reversal of ITC for Non-Payment to Supplier If you do not pay your supplier within 180 days of the invoice date, the ITC claimed must be reversed with interest. You can re-avail it once payment is made, but most businesses forget this and face notices.......

All about Annual Return in GST

What is Annual Return in GST As per Section 44 of the CGST Act, if the taxpayer is having their turnover more than 2 Cr. they are required to file GSTR 9 Annual Return with GSTR 9A ( for turnover more than 5 Cr.). :

• reconciling the value of supplies declared in the return with the audited annual financial statement
• reconciliation of ITC availed in Returns with Books
• reconcile tax paid during a year
• Optional for Small Taxpayers - But Not Always Safe to Skip If your aggregate turnover is less than Rs.2 crore, filing GSTR-9 is optional. However, if you file it once voluntarily, future non-filing may raise questions during audits-like inconsistencies or mismatches with GSTR-3B / GSTR-1.
• You Cannot Revise GSTR-9 Once Filed Unlike income tax returns, GSTR-9 cannot be revised after filing. Any mistake in reporting (like incorrect ITC figures or turnover) is locked in permanently, and must be adjusted in the return of next year.
• ITC Cannot Be Claimed Through GSTR-9 GSTR-9 is not a return for claiming missed ITC. If you forgot to claim ITC earlier, GSTR-9 would not help you fix it. Many wrongly believe they can adjust ITC here, which leads to issues during assessments......

Reply of GST Notices

How to reply Notices Received from Department? It is for understanding the notices issued by the department and simple way to handle these

• Ignoring Even a -Minor- Notice Can Lead to Major Consequences Even a seemingly harmless notice like ASMT-10 (Discrepancy notice) can escalate into a SCN (Show Cause Notice) and penalty if not responded to on time. Many businesses ignore these early notices thinking -it is not serious yet -that is a mistake.
• Each Notice Type Has a Specific Reply Format Example: GSTR-3A (Non-filing): File return; no formal reply needed. ASMT-10: Use ASMT-11 to respond. DRC-01 (Show Cause Notice): Reply using DRC-06 only. Replying in the wrong format may lead to rejection or non-consideration.
• Response Time Is Very Strict - And No Extension Is Given Most notices have a 7-15 day reply time, and extensions are rarely granted. If you miss the deadline, the officer may pass ex parte orders (without hearing you), which are hard to reverse.
• Personal Hearings Can Be Demanded - But Must Be Formally Requested Under natural justice, you are entitled to a personal hearing before adjudication. However, if you do not explicitly request it in your reply, the officer may pass the order without one....

Audit by Tax Officers

If unit selected by Department for Audit Audit is a process of checking of documents by the department is an important way of checking by govt. and taxpayer tries to avoid problems including ways to avoid penalties and minimize disruption to your business

• Do a Self-Audit First Review all GST returns (GSTR-1, 3B, 9) and reconcile them with: Books of accounts Financial statements GSTR-2A / 2B (for ITC matching) Identify and fix issues before the officer does.
• Keep a Master Audit File Ready Create a ready-to-share file with: GST registration certificate Copies of GSTR-1, 3B, 9, 9C Trial balance, P&L, and balance sheet Ledger-wise purchase & sales registers ITC ledger and reversal records Vendor reconciliation and payment proofs
• Designate a Single Point of Contact Appoint one person (preferably from finance/accounts) to deal with the officer. Avoid letting multiple employees give inconsistent responses.
• Take Written Notes of Officers Queries Maintain a file of: Questions asked verbally Replies given Documents submitted This protects you if the officer claims non-cooperation later.....

Accounting Skills Overview

• Maintain GST-Compliant Invoice Format Ensure all tax invoices include: GSTIN of supplier and recipient Invoice number and date HSN/SAC codes Place of supply Tax breakup (CGST, SGST, IGST) Trick: Use automated software that locks invoice format and auto-generates IRN (if e-invoicing applies).
• Track ITC Eligibility at Entry Level At the time of recording purchases: Tag expense type as eligible/ineligible/blocked Avoid claiming ITC on: Food & beverages Club membership Motor vehicles (non-commercial) Trick: Configure defaults in your accounting software based on vendor type and nature of expense.
• Year-End Reconciliation Is Too Late - Do It Quarterly Do not wait till March! Match GSTR returns with books every quarter to catch: ITC mismatches, Wrong tax applied, Omitted invoices.....

Reconciliation Skills Overview - Reconciliation Tips & Tricks for GST Compliance

• Understand the Key GST Reconciliations You Must Do At a minimum, perform the following reconciliations regularly: GSTR-1 vs Books of Accounts (Outward Supplies) GSTR-3B vs Books of Accounts (Tax Payable & Paid) GSTR-2B vs Purchase Register (ITC Matching) Books vs GSTR-9/9C (Annual Return & Audit) E-invoices & E-way Bills vs Books (if applicable)
• Do Reconciliation Monthly - Do not Wait Till Year-End Monthly reconciliation helps you: Identify mismatches early Fix data before return filing deadlines Avoid interest, penalties, and ITC reversal Trick: Block the 7th-10th of every month for internal reconciliation before filing GSTR-1 & GSTR-3B.
• Watch for These Common Mismatches Supplier uploaded invoice in wrong month Invoice present in 2B but not in books (possibly goods not received) You claimed ITC but supplier did not file GSTR-1 Invoice numbers don ot match due to manual entry errors
• Run Trial Balance vs GST Returns Cross-Check Match: Sales as per books vs GSTR-1 Purchase accounts vs GSTR-2B Output GST collected vs 3B paid tax Tip: Use Excel Pivot Tables to compare ledgers vs returns effectively....