Every month suppliers will be required to upload their invoices to GSTN portal and those will be matched with the purchases from customers. So, invoice matching is going to be a monthly affair for businesses.
Use of IT systems for bookkeeping and tax compliance work will be seen even in many small and medium businesses from now on.
Tightly integrated IT systems will also help the suppliers and buyers to match their invoices effectively. Invoice matching is a very important part when it comes to trading.
In this article, we’ll see what is invoice matching, how does it work, what tax payer needs to do every month and other 10 frequently asked questions.
What Is Invoice Matching?
Matching all supplies taxable, bought by a buyer and supplied by a supplier is known as Invoice Matching.
According to finance minister, “It is through the invoice matching and automated return mechanism that the government can ensure eligible input tax credit is accurately transferred between the states”.
GSTN is working towards the GST web application which is hosted on the common portal to make invoice matching easy.
How does Invoice Matching work?
Invoicing Matching is very important because, under the GST law, the input tax credit of purchased services and goods will be available only when the inward supply details filed in buyer’s GSTR-2 return matches the outward supplies details filed in supplier’s GSTR-1.
This interlink has been created by auto-population of the data filed in supplier’s GSTR-1 and buyer’s GSTR-2. Hence, if these two fields do not match then the buyer will be unable to claim the input tax credit of paid taxes of the purchased goods or services or both. Compliance rating is an incentive for businesses to file returns on time and the related compliance.
Basically, how invoice matching work is by matching all the taxable GST supplies with all the taxable supplies received by the buyer.
When the supplier files form GSTR1, the recipient can identify the purchase with the help of auto populated form GSTR2A. After necessary modifications are done, the recipient’s electronic credit ledger will be credited with the input credit on a provisional basis.
If any modifications or additions are done to the GSTR-2 form, it will be reflected on the GSTR-1A Form for the supplier.
When the Form GSTR-3 (Monthly Returns Form) is filled by the supplier the input credit becomes available; payment tax should also be considered while filling the monthly returns form. The acceptance of the input tax credit will be notified in the GST MIS-1 Form.
Frequently Asked Questions About Invoice Matching
1) Which items from the invoices are matched?
During filing of form GSTR-2, GSTN portal matches following fields:
- GSTN of the supplier
- GSTN of the recipient
- Invoice/Debit Note number
- Invoice/Debit Note date
- Taxable value
- Tax amount
2) Who should file GSTR-2?
GSTR-2 or Statement of Inward Supplies is supposed to be filed by recipient taxpayers. It should be filed on a monthly basis. In GSTR-2 they can accept, reject, modify, or keep the outward supplies information pending in the GSTR-1 to prepare the inward supplies details and credit/debit notes.
GSTR-2 has to be filed irrespective of any business activity during the given tax period.
Following entities are exempted from filing GSTR-2
- Citizens who pay tax under the composition scheme
- Distributors of input services
- Non-resident Taxable persons are filed in GSTR-5.
3) What is the time limit to file GSTR-2?
The last date for filing GSTR-2 will be on 15th of every month after the tax period.
For example – if you receive goods and services during the month of August, then it should be filed before September 15.
This means that if goods and services received in a month M, the GSTR 2 for the same should be filed on or before the day 15 in the next month, i.e., M+1.
4) What are the late fee charges?
A taxable receiver will be charged a late fee if filed past due date.
The late charges for late filing of GSTR-2 are automatically calculated after filing the return. These charges must be paid before GSTR-3 is filed, and without these charges, GSTR-3 is considered invalid.
The late fees if INR 100 a day as per the Act (IGST/SGST/CGST) and are based on the inward supplies which are received by the taxpayer (intra-state, interstate, or both). Based on the type of inward supplies received, the charges may vary up to INR 300 (100+100+100) a day (considering that the taxpayer is registered under all SGST/CGST and IGST acts).
Read about penalties under GST.
5) What are inward supplies under GST?
Inward supplies include – all inward supplies of services and goods, inward supplies of services for which reverse charge basis tax is payable and inter-state inward supplies, credit or debit notes and also supplementary invoices for the specified tax period.
6) What are the conditions to file the inward supplies details of month in the GSTR-2 before the month end (before the end of tax period)?
Following conditions have to be met .
- Non-resident taxable persons and casual dealers
- Those taxpayers who have applied for voluntary GST registration cancellation are allowed to file GSTR-2 before the current tax period end in case the taxpayers have received the cancellation order.
7) Until what time can a taxpayer claim ITC?
Input tax credit can be claimed till the end of 12 months from the date of issue of original debit note/invoice or from when the annual return is filed, whichever comes first.
In the case of a gap greater than one year from the date of filing GSTR 3 and the original debit date/invoice, there will be no transfer of electronic credit ledger.
8) What are the conditions to be fulfilled before filing GSTR-2?
The following conditions need to be fulfilled before filing GSTR-2 the taxpaying receiver:
- One has to be a registered normal dealer and have a GSTIN which is active.
- One should have a valid User ID and password.
- One should have a valid and unrevoked/non-expired digital signature, if mandatory. (Digital signature is mandatory for LLPs, companies, and FLLPs).
- One should have an Aadhaar number along with a mobile number which is valid if they wish to use E-sign option.
- For canceled GSTINs, GSTR-2 can be filed, but it is not mandatory.
- The GSTR-1 filing due date of that tax period has lapsed.
9) What are the conditions to be fulfilled after filing GSTR-2?
- After the successful filing of GSTR-2 return, an ARN is generated. If filed offline by uploading XML file, then a temporary ID is generated. Only on successful submission is the ARN generated.
- On successful submission of GSTR-2, an email and SMS is sent to the taxpayer.
- The DSC or E-sign affixed return once submitted; the return passes on to ‘The Central Board of Excise and Customs – the central tax authority (CBEC)’ and The UT or state of registration’.
- If there are any additions or amendments, auto-population of counter-party supplier taxpayer’s details will happen in GSTR -1A/GSTR-5A.
- Electronic Credit Ledger should be updated.
10) Are there any rules for invoice matching?
Businesses need to upload the invoices and bills in a certain format. Government has published a list of mandatory elements that every GST invoice should contain. For example, its mandatory to mention GSTN of customer and place of supply of goods or services.
How To Avoid Mistakes During Invoice Matching
If you try to manually match the vendor invoices with purchase bills, errors are bound to happen. There are lot of GST return filing tools that can help you fetch the vendor bills and match it online. However, it will be tedious to spend time in importing bills and exporting invoices manually.
Here is a good news – ProfitBooks makes GST return filing super easy. Since your transaction data is already in the system, you can file your GSTR-1 in one click. ProfitBooks will automatically match invoices for you and you can file GSTR-2 in few clicks.
You can test drive ProfitBooks free for 2 weeks.Try ProfitBooks Free Today
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The only drawback is that you won’t get any Input credit, which hasn’t been charged by your raw material supplier in the first place. Yes it is absolutely legal and the entire GST amount which you collect from the customer has to be paid without any deductions.
i am purchasing a printer, for my office use..
to avail gst input, it is compulsory to add my GSTIN NO in the invoice of the printer.?
Could anyone please guide me with my question.
1) I am doing craft work in home and plan to sell it in online. I will get GSTin soon.
My question is I don’t have any bills for my raw materials, mostly from a very small shop or from bazzar where no invoice will be provided. But I will get GST from my customer during sale. Is it legal? If yes, while filing returns do I need to face some issues.
I am just a start up. Please explain. Thanks in advance. You can contact me in 9952902743
Oh Wow! You explained in a very detailed manner. I understood it completely.
Thanks alot for you help…..
He does not need to show his July sale in August. The only thing is that the recipient will accept such invoices in July against which goods received in July only and will keep pending acceptance of invoices for goods received in August for which he will give acceptance in August only. Thus there is no rejection of invoice but delayed acceptance of invoices is supplier which will not affect the supplier in any manner at all. His GSTR1 will remain valid for that purpose. He has to accept the acceptance of the receiver in his GSTR1A even if all invoices of GSTR1 remain to be accepted by the recipient since recipient will give delayed acceptance Pl Mark ” Not rejection”. GSTN will match invoices of both current and previous months invoices. Thus there will remain no mis match of invoices of July received in August. Hope you now will understand how invoices of such nature will be treated by GSTN.
Thanks Pradip for the reply. But the thing is, from the supplier’s angle, he has done nothing wrong. He actually shipped the goods in July only. And another thing is that how could he show his July Sale in August?
Recipient only accept invoices against goods received in July in his GSTR2 of July. He will accept such invoices in August whose goods were received in August inspite of such invoice reflected in his GSTR2A of July.
The Supplier has supplied/transported the goods in July and the Receiver has received the goods in August. Now the Supplier has uploaded his Sale in GSTR-1 for July and its appearing in GSTR-2A for July, in the Receiver’s dashboard.
But, the Receiver has received the Goods in August and he (the receiver) will upload the purchases details in GSTR-2 for August. How to deal this situation?? How will the Receiver treat the purchases appearing in GSTR-2A (because the receiver has received the goods in August only)