GSTR-2B against the books: reconciling monthly instead of annually

Input tax credit is not a book entry you make and defend later. Section 16 of the Central Goods and Services Tax Act, 2017 makes the credit conditional: on possession of the tax invoice or debit note, on receipt of the goods or services, on the tax having actually reached the Government, on the supplier having reported the invoice so that its particulars are communicated to you, and on your own return having been furnished. Every one of those conditions is verifiable from outside your books.

GSTR-2B — the statement auto-populated for each period from what your suppliers have filed — is the Government's view of what you may claim. The reconciliation that matters is between that statement and your purchase records, and it is monthly. Run once a year, it becomes the process by which a business discovers in December that a credit taken in May was never available, from a supplier now eight months past the invoice.

The claim deadline is tied to the annual return

Section 16(4) fixes the outer limit for taking credit on an invoice or debit note for a financial year: the earlier of the thirtieth day of November following the end of that year, and the date the annual return for that year is furnished.

The words "the earlier of" do real work, and they are frequently missed. Filing the annual return early closes your own claim window early: a business that files in September has given up credit it could still have taken in October and November.

The order of operations is fixed by the statute itself: reconcile, chase what is missing, take what is available, and only then furnish the annual return under section 44 of that Act and Rule 80. It is the last step in the year's credit work, not a chore to clear early.

What a monthly reconciliation compares

Set the credit recorded in your books against the statement for the period, and sort every difference into one of three buckets.

• In your books, not in the statement. The supplier has not filed, has filed for a later period, or has reported the invoice against a different registration number. The credit is not available until it appears, and the remedy lies with the supplier — which is why the age of this bucket matters more than its size.
• In the statement, not in your books. Usually an invoice you have not recorded, which means credit you are about to lose and often a purchase you have not recognised. Occasionally it is a supplier reporting somebody else's supply against your number, which has to be kept out rather than quietly absorbed.
• In both, but different. The value differs, the tax sits under the wrong head — integrated tax where the supply was intra-State, or the reverse — or it falls in a different period. Head mismatches deserve attention out of proportion to their size: credit of one head cannot simply be applied as another.

Differences that are not errors

Not every mismatch is a mistake, and treating them all as mistakes buries the ones that are.

• Goods in transit. Credit depends on receipt, so an invoice dated in one month and delivered in the next properly appears in the statement before it appears in your credit.
• Reverse charge. Where you are liable to pay the tax, the credit does not arrive through any supplier's filing; it rests on your self-invoice and your own payment.
• Import of goods. Integrated tax paid at the customs frontier is supported by the bill of entry and flows in from the customs system on its own timing.
• Ineligible credit that populates anyway. The statement reports what suppliers filed; it does not apply section 17 for you. Blocked credits and apportionment between taxable and exempt supplies are your computation and your reversal.
• Credit reversed for non-payment. Where the supplier has not been paid within the period the Rules prescribe, credit taken must be reversed and may be taken again on payment. That moves credit between periods with nothing being wrong.

The working paper worth keeping

A reconciliation is only useful later if it survives as evidence. A month's file should hold:

• The statement for the period as downloaded, with the date it was generated — it changes as suppliers file.
• The purchase register for the period, classified on the same basis as the statement.
• The three-bucket summary, with a reason against every line above the value the business treats as material.
• The list of suppliers written to, and what they said. Correspondence is the difference between a credit you neglected and one you pursued and could not obtain, and it is the first thing an officer asks for.
• The workings for apportionment and for reversal on non-payment, tied to the figures reported in the summary return.

What the annual return then becomes

Where twelve monthly reconciliations exist, the annual return under section 44 and the reconciliation statement under Rule 80 are a compilation. Turnover ties to the audited accounts because it was tied every month. Credit claimed ties to the statement because each difference was explained while the supplier still remembered the invoice.

Where they do not exist, the annual return is where a year of differences surfaces at once, with the claim window closing on the same date. The work is identical either way; what differs is how much of the credit is still recoverable when it is done.