In India, the introduction of the Goods and Services Tax (GST) was aimed at streamlining the taxation system of the country. GST is a destination-based tax levied on all goods and services, from the point of manufacture to the point of consumption. It has helped eliminate the cascading effect of taxes and brought about a more transparent and efficient tax system.
However, despite the best intentions of the government, there are still instances of mismatch between the supplier's GSTR 1 and the recipient's GSTR 2. This blog post will explore the reasons for this mismatch and how it can be rectified.
GSTR 1 is a monthly or quarterly return that must be filed by all registered taxpayers. It contains details of all the outward supplies made during the given period.
GSTR 2, on the other hand, is a return that summarizes all the inward supplies received by the taxpayer during the given period. It is used to claim input tax credit (ITC) on these supplies.
There are several reasons why there may be a mismatch between the supplier's GSTR 1 and the recipient's GSTR 2:
One of the most common reasons for mismatch is the non-filing of GSTR 1 by the supplier. If the supplier does not file their GSTR 1, the details of outward supplies will not be available to the recipient. As a result, the recipient will not be able to claim ITC on those supplies.
Another reason for mismatch is the delayed filing of GSTR 1 by the supplier. If the supplier files their GSTR 1 after the due date, there may be a delay in the availability of details on the GST portal. This delay can result in the recipient not being able to claim ITC on time.
If the supplier provides incorrect information in their GSTR 1, it can result in a mismatch with the recipient's GSTR 2. For example, if the supplier provides the incorrect GSTIN of the recipient, the details of the outward supplies will not be available to the recipient.
Another reason for the mismatch could be the non-matching of invoices. The details of the outward supplies in the supplier's GSTR 1 and the inward supplies in the recipient's GSTR 2 must match. If there is a discrepancy between the invoices, it can result in a mismatch.
If the recipient fails to report the inward supplies in their GSTR 2, it can result in a mismatch with the supplier's GSTR 1. This can happen if the recipient forgets to report some of the inward supplies or if they do not have the necessary details to report them.
A mismatch between the supplier's GSTR 1 and the recipient's GSTR 2 can have several implications:
If there is a mismatch between the two returns, the recipient may not be able to claim ITC on the supplies. This can result in a loss of input credit and an increase in the cost of goods or services.
If the mismatch is due to the non-filing or delayed filing of returns, the supplier may have to pay a penalty and interest. This can result in additional costs for the supplier.
If there is a mismatch in the returns, it can also lead to a delay in the refund process. This can result in cash flow issues for the recipient.
If there is a mismatch between the two returns, it can be rectified by following these steps:
The supplier and recipient must verify the invoices to ensure that they match. If there is a discrepancy, it must be resolved before filing the returns.
If there are errors in the returns, they must be rectified before filing the returns. This may involve the correction of information in GSTR 1 or the addition of missing details in GSTR 2.
If there are errors in the original returns, revised returns can be filed to correct them. However, this must be done within the prescribed time limit.
Mismatch between the supplier's GSTR 1 and the recipient's GSTR 2 can have several implications for businesses. However, it can be rectified by following the correct procedures and verifying the details of the invoices. It is important for businesses to ensure that all their GST returns are filed on time and accurately to avoid any penalties or interest.
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