ITC Maximization

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Taxation and Financial Management
How to Respond, Recover and Thrive in the face of
Change during the Pandemic?"
IRISGST in Association with CII
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How to cushion the COVID-19 impact with 100 GST
Reconciliation and maximizing ITC claim
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From Lockdown to Standing Up Again
Lockdown

• One area to help manage crisis is ITC utilisation
• Maximum utilisation for minimum outflow of cash

• Economy came to a standstill
• Growth curves suddenly turned flat
• Sales Impacted
• Operating Expenses As-is/increase
• Receivables Impacted

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The not-to-be ignored ITC support

• Sales picked up, liability payment due
• Govt relaxed rules, but not done away

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Quick Recap of ITC
SUPPLIER
CONSUMER
Life is Good.. But is it as easy as it seems?
MAKE/USE
SELL
BUY
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INVOICE
Taxpayer should be in possession of the tax
invoice or debit note or relevant tax paying
documents.
RECEIPT
He should have received the goods and services.
GSTR 3B
Taxpayer has furnished return under section 39
i.e. GSTR 3B
Rules to ITC - Internal
PAYMENT
Payment of invoice to the supplier should be done
within 180 days from the date of issue of invoice
DEPRECIATION
No ITC if depreciation claimed
TIME PERIOD
Claim in within time limit specified
APPORTIONMENT
Proper Apportionment of credit Personal vs
Business Purpose Exempt vs Taxable supply
BLOCKED CREDIT
Should not fall under the list of Blocked Credit.
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GSTR 2A
Invoices booked by you need to present in Govt
system (GSTR 2A)
GSTR 3B
Your Purchase Data and GSTR 2A data has to Match
Rules to ITC - External
VENDOR
Vendor should have put proper details in 2A and
charged proper tax.
ON-TIME FILING
Vendor should have filed his GSTR1 and GSTR3B on
time
PAYMENT
Payment of such tax is made to the government by
the vendor through his GSTR3B
AMENDMENTS
Amendments if any should also be done within the
time limit specified
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Key Aspects of ITC
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Available ITC to be Claimed
INVOICES IN 2A AS WELL AS IN PURCHASE REGISTER
INVOICES IN 2A BUT NOT IN PURCHASE REGISTER
DEFERRED CLAIM
INVOICES IN PURCHASE REGISTERS NOT IN 2A
PROVISIONAL CLAIM
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Provisional ITC
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Practical Challenges

• Are the tax amounts ok?
• Is the correct tax rate applied

• Not only you but also vendor

• What if supplier is quarterly filer, not yet
  uploaded
• What if supplier has filed but your invoice not
  included
• What if supplier has filed nil
• What if..

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How to Streamline ITC Processes
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Reconciliation the soul of ITC
Process of comparing data To know what is ok,
clear further processing release payments,
taking ITC To know what is not ok, for
corrective actions communication with vendor
for noncompliance or missing invoices or
mismatches
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Automated AdvancedReconciliation
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Reconcile across financial years as well
Automated Annual Recon
Compare invoices in 2A and purchase register with
same supplier invoice no.s across months within
financial year.
Timing difference between reporting of invoices.
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Ignore invoice no.s and compare based on amounts
and document month
Compare invoices even if invoice numbers are not
completely matching
Eg 2A has A001/19-20 and 2P as A001, then also
these invoices are comparable and should be
compared
exact values or user defined tolerances also can
be used
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Allowing user to define which invoices are
comparable
Deemed Match
Mismatch invoices with amount differences within
a user specified tolerance
If after all automated steps also still invoices
remain in Not Booked or Not Uploaded category
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Levels ofReconciliation
Line item level

• Comparing every line item of an invoice
• Limited to data available in GSTR 2A

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Tasks in Reconciliation
ACT
COMMUNICATE
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The Rich Recon data
Some reports and insights which are a must-have
for Indirect Taxation team are

• Analysis of GSTR 2A invoices from ITC perspective
• ITC on invoices which are booked earlier
• ITC on invoices uploading in different FYs
• Consolidated view on missing invoices at the
  group level,

• Provisionally claimed invoices
• Group level reconciliation results
• Comparative analysis of ITC as per 2A and claimed
  in 3B
• Non compliant vendors by fetching their filing
  status

which can help to identify wrong booking of
invoices
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Reporting ITC

• Check if provisional ITC appears now
• ITC reversal calculation

• Compute ITC
• File 3B

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The New Normal World
Effective cash flow management - Availably of
more ITC or not letting go of ITC that can be
claimed
Large Volumes
Automation
Alerts
Reports
Technology Matters
Customer Support
Secured Solution
Reliable Services
Cloud Solution
Lending /other funding options based on GST
data and hence compliances cannot be ignored
Safeguarding against vendor compliance risks
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THANK YOU
support_at_irisgst.com
httpsirisgst.com