December 26, 2022

GSTR 2: Return Filing, Format, Eligibility & Rules

The GSTR-2 is a monthly tax report that details your purchases for that month. When you make purchases from registered vendors, the information from their sales returns (GSTR-1) will be available as GSTR-2A on the GSTN site for you to utilize in your GSTR-2. Before filing your return, you can double-check this information, make adjustments as needed, and fill in any blanks that were not auto-populated.

If you make changes to your GSTR-2A and file it as a GSTR-2, the vendor will be notified and given the opportunity to amend their return using a GSTR-1A form.

Importance of GSTR 2

Until August 2017, every registered taxable person under GST was obliged to provide information on inward supplies, i.e., purchases, and Input Tax Credit (ITC), in the form GSTR-2 for each tax period.

GSTR-2 includes information on all purchases made by a registered dealer in a given month. It also covers purchases subject to reverse charge. The GSTR-2 filed by a registered dealer would have been compared to the sellers' GSTR-1 for buyer-seller reconciliation.

However, because it is no longer in use as of the September 2017 tax quarter, it has lost importance. Instead, taxpayers must declare their qualifying ITC on form GSTR-3B, alongside their GSTR-2B and GSTR-2A.

When to file GSTR-2?

The purchase information for a given month must be filed by the 15th of the following month. For example, if you are filing GSTR-2 for the month of March, you must do so by April 15th.

What happens if you fail to file GSTR-2?

If the GSTR-2 return is not filed, the subsequent return in form GSTR-3 (currently GSTR-3B) cannot be filed. As a result, late submission of GST returns has a cascade effect, resulting in significant fines and penalties.

However, GSTR-2 and GSTR-3 have been halted since September 2017.

If the filing was delayed, the person would have had to pay interest and a late charge. The annual interest rate is 18%. It has to be estimated by the taxpayer based on the amount of unpaid tax. The time period ran from the day after filing (16th of the following month) until the day of payment. The late fee would have been Rs. 100 per day per Act. So, it is Rs.100 under CGST & Rs.100 under SGST. The total will be Rs. 200/day. The maximum is Rs. 5,000. There is no late fee for IGST.

Prerequisites for filing GSTR-2

To submit the GSTR-2:

1. Individuals must be GST-registered taxpayers with a 15-digit PAN-based GSTIN.

2. You cannot be a composition seller or possess a Unique Identification Number (UIN). You should not also be a non-resident foreign taxpayer.

3. The information on your GSTR-2A must come from your GST site. To cross-check this data, preserve full invoices for all of your transactions, including intra-state and inter-state transactions, as well as business-to-business (B to B) and retail (B to C) purchases. This covers purchases for exempted and non-GST items, as well as stock transfers between your business sites in other states.

4. You either need an OTP from your registered phone to verify your return using an EVC (electronic verification code) or a digital signature certificate (of class 2 or higher). You can also file your GST returns using an Aadhar-based e-sign.

Documents Required for GST Registration

The following documents are required for registrations under GST:

1. The applicant's PAN.

2. Aadhaar number.

3. Certificate of incorporation or proof of business registration.

4. Promoters/Directors' identity and address proof with photographs

5. Proof of the company location's address.

6. Statement of bank account/Canceled check

7. Sign with a digital signature.

8. Authorized Signatory Letter of Authorization/Board Resolution

Penalty for failing to register for GST

An offender who does not pay tax or makes short payments (legitimate errors) faces a penalty of 10% of the tax owed, with a minimum of Rs.10,000.

When the offender has purposefully avoided paying taxes, the penalty will be 100 per cent of the tax amount owed.

GSTR 2 swipe

Who needs to file it?

Every registered person was required to file GSTR-2 irrespective of whether there are any transactions during the month or not. However, these registered persons do not have to file GSTR 2 as per GST law:

1. Input Service Distributors

2. Composition Dealers

3. Non-resident taxable person

4. Persons liable to collect TCS

5. Persons liable to deduct TDS

6. Suppliers of online information and database access or retrieval services (OIDAR), have to pay tax themselves (as per Section 14 of the IGST Act).

Content of GSTR-2

The government has specified 13 categories in the GSTR-2 format. Each heading is outlined below, along with the information that must be provided under GSTR-2

1. GSTIN: Each taxpayer will be assigned a state-specific 15-digit Goods and Services Taxpayer Identification Number based on their PAN (GSTIN). The graphic below depicts the proposed GSTIN format. The taxpayer's GSTIN will be auto-populated during the return filing process.

2. Name of the Taxpayer: The taxpayer's name, including legal and trade names (will be auto-populated)

Month and Year: Specify the month and year for which GSTR-2 is being submitted.

3. Inward Supplies from a Registered Taxable Person: The majority of purchases from a registered person will be auto-populated here from the seller's GSTR-1. It will include information such as the kind, rate, and amount of GST if ITC is eligible, and the amount of ITC. However, it will not include transactions made using a reverse charge.

Certain transactions may not be auto-populated due of the following reasons:

a. The seller failed to file GSTR-1.

b. The seller submitted GSTR-1, however, he did not complete the transaction.

In any scenario, the buyer can enter these transactions manually. In his GSTR-1A return, the seller will be notified to accept this addition/modification. If the supply is received in more than one lot, the invoice must be reported and documented in books of accounts in the return for the month in which the last lot is received.

4. Inward shipments subject to reverse charge taxation –

Certain goods and services are subject to reverse charge, which means the buyer must pay GST. A registered dealer who purchases more than Rs. 5,000 from an unlicensed dealer must pay a reverse fee. This section will detail any purchases that are subject to reverse charge.

a. 4A. All purchases on which reverse charge is particularly applicable by law must be specified under this heading. Buying cashew nuts from an agriculturist, for example.

b. 4B. Purchases from unlicensed merchants that exceed Rs. 5,000 per day shall be included under this heading.

c. 4C. The reverse charge GST paid on service imports will be listed under this heading.

5. On a Bill of Entry, inputs/capital items acquired from overseas or from SEZ units -

Under this heading, every import of inputs (items needed to create finished goods) or capital goods received against a Bill of Entry must be declared. SEZ-received goods are also reported here.

a. 5A. Imports: Any import of inputs (items utilized in the production of finished goods) or capital goods received against a Bill of Entry shall be recorded here. Bills of entry must be detailed, including 6-digit port codes and 7-digit bill numbers.

b. 5B. Inputs or capital goods obtained from a SEZ: Inputs or capital goods received from sellers in a SEZ shall be recorded here.

6. Amendments to details of inward supplies furnished in returns for earlier tax periods in Tables 3, 4 and 5 [including debit notes/credit notes issued and their subsequent amendments]

Once a GST return has been filed, it cannot be revised. Only in the next month's return under this topic is revision feasible. Any information of previous months' purchases of goods/services can be amended by the taxpayer. This information can be manually entered. Following that, the seller will be notified of the change. This adjustment must be accepted by the seller in his GSTR-1A return.

6A. This head will contain all revisions of input goods/services (except imports)

6B. Under this area, any adjustment in the amount/tax computed on imported goods and goods from SEZs can be made. The taxpayer must specify the adjustments made to the bill of entry/import report in this section.

6C. The taxpayer must report all debit and credit notes issued with respect to purchases. Any debit/credit note issued under the reverse charge mechanism will get auto-populated here from counter-party GSTR-1 and other applicable returns (eg. GSTR-5 filed by NR).

6D. Any changes in debit /credit notes of previous months will be reported under this heading.

7. Supplies received from composition taxable person and other exempt/Nil rated/Non-GST supplies received:

Purchases from composition dealers and another exempt/nil/non-GST supplies will fall under this heading. Non-GST supplies include commodities such as gasoline and diesel that are not subject to GST. Furthermore, both inter-state and intra-state supply must be documented here.

8. ISD credit received

Input tax credit details obtained from a registered Input Service Distributor (ISD) (usually a head office which has transferred its ITC to all its branches). This data will be auto-populated from ISD's GSTR-6.

9. TDS and TCS Credit received

TDS Credit Received: This part will only apply if you enter into specific contracts with specified people (usually government bodies). As Tax Deduction at Source, the receiver (government) will deduct a set proportion of the transaction value. All information from the deductor's GSTR-7 will be auto-populated here.

TCS Credit Received: This section applies exclusively to online merchants who are registered with the e-commerce operator. E-commerce operators are obligated to collect tax at the point of sale from such merchants. This information will be auto-populated once more from e-commerce operators' GSTR-8.

10. Consolidated Statement of Advances paid/Advance adjusted on account of receipt of supply:

Any advance payment made during the month will appear here. If you paid advance tax on goods or services received during an earlier tax period, but only received the invoices this month, declare the details here. Advance receipts issued under reverse charge are also covered here.

Normally the seller issues an advance receipt when he receives any advance payment. In case of purchases attracting reverse charge, the buyer must issue the advance receipt if he pays in advance.

Part One:

1. This section will address the advance payment for reverse charge supplies made in the current month.

2. It will also include any advances made in previous months against which invoices were received in the current month.

3. The purchases will be divided into interstate and intrastate transactions.

Part Two will contain changes to above part I in relation to an earlier month.

11. ITC can only be used for business-related goods and services. ITC cannot be claimed if they are utilized for non-business (personal) purposes or to make the exempt supply. The taxpayer must fill out this section with information on ITC that cannot be claimed during the month due to various ITC laws.

11A. This category includes all input tax reversals for the current month. It will also include ITC reversal for exempt and personal supplies.

a. Amount in accordance with Rule 37(2): ITC will be revoked for invoices not paid within 180 days of issue.

b. Amount in accordance with Rule 39(1)(j)(ii): This is for ISDs. If the seller-provided a credit note to the HO, the ITC that was later decreased will be reversed.

c. Amount in accordance with regulation 42(1)(m): This is applicable to firms that utilize inputs for both commercial and non-business (personal) purposes. ITC applied on a part of input goods/services utilized for personal use must be reversed proportionally.

d. Amount in terms of rule 43(1)(h): This is similar to the above except that it concerns capital goods.

e. Amount in terms of rule 42 (2)(a): This is calculated after the annual return is furnished. If the total ITC on inputs of exempted/non-business purposes is more than the ITC actually reversed during the year then the difference amount will be added to output liability. Interest will be applicable.

f. Amount in terms of rule 42(2)(b): This is the opposite of the above. If the total ITC on inputs of exempted/non-business purposes is less than the ITC actually reversed during the year then the difference amount can be reclaimed as ITC.

11B. The taxpayer can manually amend any details of ITC under 11A of earlier months. He will select the appropriate information from a drop-down menu.

12. Addition and reduction of the amount of output tax for mismatch and other reasons:

This part will record any additional tax liability that may emerge as a result of the previous month's GSTR-3 revisions.

a. ITC claimed on mismatched/duplication of invoices/debit notes: In case mismatch of invoices, there may be double claiming of ITC. The excess ITC claimed from duplicate purchase invoices will be reversed and added to the tax liability.

b. Tax liability on mismatched credit notes: Incorrect credit notes issued by the taxpayer will also result in incorrect ITC. Extra ITC claimed due to mismatch will now be added to your tax liability.

c. Reclaim on account of rectification of mismatched invoices/debit notes: This is the opposite of point (a). In this case, the mismatch has led to claiming lower ITC. You are entitled to more ITC and so the additional amount will be reduced from the output tax liability.

d. Reclaim on account of rectification of mismatched credit note (Reduce): This is opposite to (b), i.e., lower ITC has been claimed and will work in the same way as (c).

e. Negative tax liability from previous tax periods: This is due to excess tax paid during the previous months and will be reduced from output tax liability of this month.

f. Tax paid in advance in earlier tax periods and adjusted with tax on supplies made in the current tax period (Reduce): This refers to tax paid along with advance payments in earlier months for supplies received during this month.

13. HSN summary of inward supplies: This section requires a registered dealer to provide HSN wise summary of goods purchased. It will be entered by the taxpayer. Finally, sign off with a declaration that all information has been declared and is correct.


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