GST Filing & Registration Service & Maximize ITC Claim: Here are 4 things you need to do!

The main goal of every taxpayer is to get the most ITC while following all of the rules and conditions of GST law. The success of this goal depends on the internal processes and tools used, as well as some external factors like vendor compliance. In this article, we’ll talk about four important ways to get the most out of your ITC claim.

Note: According to GST Notification 18/2022, you have until November 30, 2022 to claim ITC, issue a CDN, or change a return.

4.1. Internal Processes and Controls

Keeping in mind what the law says, there are a number of steps and events that taxpayers need to keep track of. This can help them figure out when and how much input tax credit they can claim. As we’ve already said, to figure out ITC, you need information from the GST system (GSTR 2A and GSTR 2B) as well as information from accounting or ERP systems. Some of the most important points are:

  • Defining processes and validations: Identifying the checkpoints, such as when the invoice is received and when the goods are received, or, if the goods are received in batches, when the last batch is received. These conditions must be met because they are one of the requirements for an ITC claim.
  • Maintaining Products & Services Master:The Negative List for ITC is based on the taxpayer’s business. So, keeping a master list of products and services that shows whether or not they are on the negative list can be helpful. So, when a purchase is made, a credit that isn’t valid or has been blocked is marked.
  • Capturing Details at Invoice-level: Also, other information, like the type of goods (input or capital), the reason for the transaction (business or personal), etc., will help automate the ITC calculation and keep track of transactions that should not be included in the ITC calculation.
  • Highlighting exceptions: Internal processes and systems should have ways to find events that are related to the reversal of ITC, such as the terms of payment and the status of invoices, accounting for depreciation, etc. Bringing up any oddities or exceptions within the time limit so that the ITC that was claimed earlier on these invoices doesn’t get taken back.
  • Automating Invoicing: Most of the time, businesses deal with the same vendors every month, and the products they buy from them follow a set pattern. So, it’s always a good idea to automate the recording of Supplier invoices for things like GSTIN, product quantity, product codes, etc., so that the information is correct and there are fewer problems with making changes.

4.2. Robust GST Reconciliation

ITC calculation was more of an internal process until GST came along and changed the rules. Now, with GST and the new rules, ITC calculation depends more on data from outside sources, like vendors posting invoices on the GST portal. The data reported by vendors gives the government a way to track ITC claims made by the recipient. So, it’s important to match and compare the internal and external versions of the same data. In other words, to get the most ITC claim, GST Reconciliation is more of a must than a choice.

Read GST Reconciliation for IDT Teams to learn how to do reconciliation, its types, how to do it, why it’s important, how to figure out ITC, common problems, etc.

4.3. Comprehensive Reports

After reconciliation, the results need to be put together in a way that makes sense so that you can really look into the transactions that need your attention. To reach the goal of maximising ITC claim, it is important to get insights from the same data and look at it from different points of view. Also, since a business entity could have many GST registrations, it would be nice to be able to get a group-level view with the option to drill down to the GSTIN level.

The GST MIS report is an extra feature that lets top management or people in charge of making decisions quickly evaluate the level of compliance. Mismatches, total GST turnover, maximum ITC usage, and other criteria for making decisions will be carefully looked at in MIS reports.

GST MIS reports give a full picture of the company’s GST compliance status and other GST-related issues. This lets teams make quick, well-informed decisions that will either keep the company from losing money or help it find new ways to make money.

Some MIS Reports which could be extremely useful are –

  1. A summary of the results of the reconciliation at the group level
  2. Cross-GSTIN bills inside of the PAN
  3. Putting bills into groups based on whether or not they qualify for ITC
  4. Bills for which ITC has been provisionally claimed
  5. Summary of vendor-wise reconciliation

4.4. Keeping a Check on Vendor Compliance

Whether you’re using internal processes or a GST solution to reconcile and track ITCs, it won’t work if it doesn’t have a way to know and track vendor compliance. When the government tightens its rules, not only does the ITC from a vendor that doesn’t follow the rules get blocked, but other operational activities, like making an e-way bill, also suffer.

You need to know if the GSTR 1 and GSTR 3B returns have been filed for all of your vendors in the purchaser register. The status of filing GSTR 1 and how often it is filed should both be known.

If your vendors have chosen to file GSTR 1 every three months, the invoices may show up at the GST portal every three months, which will affect your ITC claim. As part of GSTR 2A, the government has made it possible to look up a taxpayer’s compliance history and find out how often they’ve filed.

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