GST E-Invoicing: Changes brought to GSTR-2A Reconciliation by E-Invoicing under GST

Introduction:

E-Invoicing under GST has been implemented on large scale enterprises with Aggregate Annual Turnover (AATO) INR 500 Crores+ & will soon apply to businesses with an AATO INR 100 Crores+ as well.

The government will not stop there as the plan is to implement e-Invoicing to all the businesses by April 2020. E-Invoicing is a well-organized & well-working provision of GST & is making accounting processes simpler for businesses, both large & smaller.

E-Invoicing has also impacted various other aspects of GST, such as reconciliation of the purchase data & GSTR-2A. E-Invoicing will impact the GSTR-2A Reconciliation significantly & mostly make it more accurate & simpler.

This article explains the working of GSTR-2A Reconciliation in the e-Invoicing era.

Everything to know about e-Invoicing in GST:

E-Invoicing under GST is the new sub-rule that swaps the current invoicing method with a more electronically advanced method of invoice generation & management.

There are several myths about GST e-Invoicing solution so far, however, e-Invoicing is, in fact, a boon for both businesses & the Government. Under this new provision, the users will have to generate their B2B invoices normally, but in a specified SCHEMA format, in their billing systems.

You will then have to upload these invoices on the unified Portal- Invoice Registration Portal, & the portal will validate the invoices. Upon successful validation, the portal will generate a unique IRN using ‘Hash’ & a QR Code, for the e-Invoice.

From here, the invoices will automatically be shared with the GST Portal & the e-Way Bill Portal by the IRP. You can then download & print the invoice, and share it with the recipient as well as account for the same in your ERP/ Billing System.

E-Invoicing is specifically applicable to all businesses having an annual aggregated turnover of INR 500 Crores.

And unlike its name suggests e-Invoicing is not limited to invoices. E-Invoicing majorly applies to B2B invoices, however, the users are also required to report the following documents to the IRP:-

  1. B2B Invoices
  2. B2G (Business to Government) Invoices
  3. Export Invoices
  4. Reverse Charge Invoices
  5. Credit Notes
  6. Debit Notes
  7. QR Code generation for B2C Invoices

Note- Delivery Challans & Bill of Supply are exempted from e-Invoicing.

There is also a class of businesses that do have an annual turnover above INR 500 Crores and are still exempted for e-Invoicing, these are mentioned below:

  1. SEZ Units & Developers
  2.  Insurance companies
  3. Banking Companies
  4. Financial institutes
  5. Passenger transportation service, etc.

Role of GSTR-2A Reconciliation in ITC & GST:

Reconciliation of data is an essential practice in the GST Regime. Reconciliation is nothing but matching two data to tally their final outcome, which should ideally & precisely be the same.

In GST there are multiple types of GST:

  1. GSTR-1 vs GSTR-3B
  2. GSTR-2A vs GSTR-3B
  3. GSTR-2A vs Books of Accounts
  4. GSTR-1 vs e-Way Bill Data
  5. Annual Reconciliation for filing GSTR-9
  6. GSTR-9 vs Annual Accounts Books

These are the most important reconciliations that businesses need to carry out on a regular basis, and that determines their final tax amount to be paid to the Government.

Out of which GSTR-2A reconciliation is the most important reconciliation under GST as it deals with ITC & is the basis for an annual reconciliation return, GSTR-9C.

GSTR-2A Reconciliation determines the amount of Input Tax Credit to be claimed by the taxpayer. GSTR-2A Reconciliation helps you identify the most precise amount of Input Tax Credit, as per your books & as per the GSTR-1 declaration of the supplier.

In other words, these reconciliations directly influence the monetary flow of the business. Businesses essentially ensure that these reconciliations are accurate in order to avoid monetary losses in tax & to avoid the double payment of the same tax.

Effect of e-Invoicing on GSTR-2A Reconciliation:

It is clear from the previous sections that GSTR-2A Reconciliation is a critical & important process in GST & needs to be accurate. However, the same requires a lot of effort, manual input & time.

In this process, gstr2a reconciliation software like GSTHero helps businesses to calculate accurate Input tax credit. Now, e-Invoicing will have a direct effect on GST return Filing and thus on the Reconciliation of various returns & data.

Most importantly, e-Invoicing will affect the GSTR-2A Reconciliation process making it easier & more accurate. E-Invoicing will not just impact the supplier of the purchase process but also the recipient.

Recipients will receive the e-Invoices on their registered e-Mail IDs, making it easier for them to account for the transactions in their Purchase Account Books.

With automated & electronic-based accounting, the GSTR-2A reconciliation will become more systematic & specific. The accurate reconciliation of GSTR-2A & Purchase Books will ensure that the recipient can claim 100% precise & eligible ITC only.

ITC claiming before e-Invoicing was a tedious & time-consuming task. It requires attention & work input from the accounts team & consumes a lot of time in multiple areas, such as downloading GSTR-2A & matching each & every transaction with the Purchase data.

Even after consuming time & efforts, ITC reconciliation can be erroneous & you can end up claiming over or deficient ITC.

Either way, it is a monetary loss for the business, as claiming over ITC can end up in legal disputes & leaving your eligible ITC can lead to the fact that you paid the same tax twice.

But with e-Invoicing in the picture, Businesses can claim the exact amount of ITC in lesser time & with less effort. With e-Invoicing & all the details being available online in the presence of the government & on official web portals there will not be any discrepancies of missing data.

E-Invoicing portal shares the details of the sales not only with the recipient but with the e-Way Bill & GST Portal as well. A healthy, transparent & real-time circulation of the sales data will ensure transparent & systematic GSTR-2A reconciliation as the GSTR filings will be precise too.

So, e-Invoicing has made the reconciliation process less erroneous & simpler to conduct up to a large extent by making the process more electronic & transparent.

However, the Government has provided fewer resources & features in e-Invoicing itself. E-Invoicing software will reduce the overall GST Compliance but is itself an addition to the compliance load.

Conclusion:

The Government has appointed GSPs to help businesses comply better & easier with GST, which will enable businesses to manage their accounts & taxes with better-advanced features & utter ease.

GSTHero is the best GSP in the market currently that offers e-Invoicing & Reconciliation tools to make your work simpler. You can get the following features on GSTHero:

  1. Download GSTR-2A in a few seconds
  2. Store your e-Invoices for 8+ Years on GSTHero
  3. Advance Reconciliation with data configuration options
  4. Integration with top ERPs such as Tally, SAP, Marg, Oracle, Microsoft, etc.
  5. Desktop as well as Cloud-based Solution for Business Continuity
  6. Generate, Cancel, Edit, & Manage e-Invoices in the same dashboard
  7. Generate e-Way Bills along with e-Invoices
  8. Saves time & effort to enhance staff productivity.
  9. Auto-update the GST defaulting suppliers

Article Written By: Prachi Wankhede

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