The Goods and Services Tax (GST) department frequently encounters various Input Tax Credit (ITC) mismatches.
Understanding these discrepancies is crucial for taxpayers to maintain compliance and avoid penalties.
In this blog, we’ll explore the concept of ITC mismatch, using a case study to illustrate how such situations arise and how they can be addressed.
What is an ITC Mismatch?
An ITC mismatch occurs when the Input Tax Credit claimed by a registered taxpayer in Form GSTR-3B does not align with the amount shown in the auto-generated statement in Form GSTR-2B.
This discrepancy can lead to notices from the GST department and may require taxpayers to provide additional documentation to rectify the issue.
Key Definitions
GSTR-3B: This is a summary return that registered taxpayers must file every month. It includes details of outward and inward supplies, along with the GST payable and the Input Tax Credit claimed for that period.
GSTR-2B: An auto-generated statement that reflects the eligible Input Tax Credit based on GSTR-1 filings by suppliers. It helps taxpayers reconcile their ITC claims against the credits available.
GSTR-2A: Unlike GSTR-2B, GSTR-2A is a dynamic statement that shows all inward supplies reported by suppliers in real-time. It updates continuously as suppliers file their GSTR-1 returns.
Case Study: Mr. X’s ITC Mismatch
Let’s consider the case of Mr. X, who filed his GSTR-3B for the financial year 2024-25, claiming an ITC of ₹2,50,000 to offset his outward tax liability. However, upon reviewing GSTR-2B, it was revealed that only ₹1,50,000 of ITC was available to him.
This situation indicates a clear mismatch: Mr. X claimed ₹2,50,000, but according to GSTR-2B, he could only claim ₹1,50,000.
The GST Notice
Following this discrepancy, Mr. X received a GST notice regarding the ITC mismatch for the financial year 2024-25.
Upon investigation, it was found that GSTR-1 had been filed under the wrong GSTIN instead of Mr. X’s GSTIN.
As a result, the ITC was recorded under an incorrect account. Furthermore, although the seller had submitted amendments, these changes were not reflected in Mr. X’s GSTIN.
Documents to Address the GST Notice
To resolve the notice and support his claim, Mr. X can submit the following documents:
- Invoices of goods sold to the seller.
- A copy of the amendment filed by the seller.
- A declaration from the seller stating that the amendment has been filed under Mr. X’s GSTIN.
- A copy of GSTR-2B where the ITC is not reflected under Mr. X’s GSTIN.
Resolution:
In this case, it is evident that Mr. X is justified in claiming the ITC of ₹2,50,000. By providing the necessary documentation and undergoing verification, he is eligible to claim an additional ITC of ₹1,00,000 for the financial year 2024-25.
Understanding ITC mismatches and the process to resolve them is essential for businesses to ensure compliance and optimize their tax liabilities.
By staying informed and organized, taxpayers can navigate the complexities of GST more effectively.
How We at PKC Management Can Help With ITC Mismatch in GST
At Prakash Kochar Consultancy, we have hands-on experience and a team of trained professionals dedicated to handling such GST notices.
Our expertise can help you navigate the complexities of ITC mismatches and ensure compliance with all GST regulations.
