As a small or medium business owner in India, you must be aware of the Goods and Services Tax (GST) and how it affects your business. GST is a value-added tax that replaced several other taxes, such as excise duty, service tax, and value-added tax (VAT). One of the significant changes introduced by GST is the concept of invoice matching.
Invoice matching is the process of matching the invoices issued by the supplier with the invoices received by the recipient. Under GST, the invoices issued by the supplier are uploaded to the GST portal, and the recipient can see these invoices in their electronic cash ledger. The recipient can then accept or reject these invoices, depending on whether they match the invoices they have received from the supplier or not.
The objective of invoice matching is to ensure that the recipient claims input tax credit (ITC) only for the taxes paid by the supplier to the government. If there is a mismatch between the invoices issued by the supplier and the invoices received by the recipient, the ITC claimed by the recipient will be disallowed, and the supplier will have to pay the tax due.
Invoice matching under GST is not a simple process, and there are several challenges that small and medium business owners face. Some of the significant challenges are as follows:
Invoice matching requires the recipient to check the invoices received from the supplier against the invoices uploaded by the supplier on the GST portal. This process is time-consuming and can be prone to errors. Small and medium business owners may not have the resources to match invoices manually, leading to delays in claiming ITC.
There may be cases where the invoices uploaded by the supplier do not match the invoices received by the recipient. This could be because of several reasons, such as errors in the invoice or delays in uploading the invoice on the GST portal. In such cases, the recipient has to contact the supplier to rectify the mismatch, leading to further delays in claiming ITC.
The GST portal is often prone to technical glitches, making it difficult for small and medium business owners to upload their invoices or claim ITC. This can lead to delays in claiming ITC and can affect the cash flow of the business.
To address the challenges faced by small and medium business owners in invoice matching under GST, the government has introduced several measures. Some of these measures are as follows:
E-invoicing is the process of generating invoices electronically and uploading them on the GST portal. E-invoicing is expected to simplify the process of invoice matching and reduce the chances of errors. The government has made e-invoicing mandatory for businesses with a turnover of more than INR 500 crores from October 1, 2020, and for businesses with a turnover of more than INR 100 crores from January 1, 2021.
The government has introduced auto-population of the GSTR-2A form, which contains details of the invoices uploaded by the supplier. This will simplify the process of invoice matching by reducing the need for manual matching.
The government has introduced the concept of GST compliance rating, where businesses are given a rating based on their compliance with GST regulations. This will incentivize businesses to comply with GST regulations and ensure timely uploading of invoices on the GST portal.
Invoice matching under GST is a crucial aspect that small and medium business owners need to be aware of. While there are several challenges in the process, the government has introduced several measures to simplify the process and ensure timely claiming of ITC. Business owners should ensure compliance with GST regulations and take advantage of the measures introduced by the government to make the process of invoice matching easier.
Retail Invoice Template: Elements & features
Impact of GST on the Indian Economy
How to Determine Place Of Supply of Service Under GST