GST Input Tax Credit Reconciliation in Tally Prime
GST Input Tax Credit (ITC) reconciliation is an essential process for businesses to ensure that they have accurately claimed the credit on their purchases, as allowed under the Goods and Services Tax regime in India. It helps to verify that the input tax credit (ITC) claimed by the business matches with the details available in GSTR-2A and GSTR-3B reports. Tally Prime makes this process easier by automating GST computations and providing tools to reconcile the ITC.
1. What is GST Input Tax Credit (ITC)?
GST Input Tax Credit refers to the tax paid on business purchases that can be claimed by the taxpayer as a credit against their output tax liability. ITC ensures that GST is only paid on the value-added portion of a product or service, eliminating cascading tax effects. It is crucial for businesses to reconcile their ITC claims to avoid discrepancies during GST filing.
2. Steps for GST Input Tax Credit Reconciliation in Tally Prime
Step 1: Enable GST in Tally Prime
Go to Gateway of Tally → F11: Features → Statutory & Taxation → Enable GST.
Set Enable GST to "Yes".
Ensure that you enter your GSTIN number and configure the GST registration type (Regular, Composition, etc.) as per your business requirements.
Press Ctrl + A to save the settings.
Step 2: Create GST Tax Ledgers
Ensure that you have created the correct GST tax ledgers for claiming ITC. These may include CGST, SGST, IGST, and other relevant tax ledgers for purchases and sales. For example, create ledgers like:
CGST - Purchases for claiming ITC on purchases made with CGST.
SGST - Purchases for claiming ITC on purchases made with SGST.
IGST - Purchases for claiming ITC on interstate purchases with IGST.
Step 3: Record Purchase Transactions
To claim ITC, ensure that you accurately record all purchase transactions in Tally Prime using the Purchase Voucher. For example:
For a local purchase (intra-state), select the appropriate GST tax ledgers such as CGST and SGST.
For an interstate purchase (inter-state), select the IGST tax ledger.
Tally Prime will automatically calculate the applicable GST and update the ITC claim for each transaction.
Step 4: View GSTR-2A Report for Reconciliation
GSTR-2A is a read-only return that shows the details of all inward supplies (purchases) made by your business, based on the returns filed by your suppliers. To reconcile your ITC, compare the amounts in your purchase invoices with the information available in GSTR-2A.
Go to Gateway of Tally → Display → Statutory Reports → GST Reports → GSTR-2A.
Select the relevant period (e.g., monthly or quarterly) to view the GSTR-2A report.
The GSTR-2A report will display the GST amounts that your suppliers have reported for your purchases.
Step 5: Reconcile ITC Claim with GSTR-2A
You need to manually verify that the input tax credit claimed by you in Tally Prime matches with the data available in GSTR-2A. Here’s how to do it:
Ensure that the total purchase value and GST amounts in your GSTR-2A match the entries in your purchase vouchers in Tally Prime.
If any discrepancies are found, investigate the reasons behind them (e.g., missing invoices, incorrect tax rates, or unreported purchases by suppliers).
Step 6: View GSTR-3B Report for Total ITC
GSTR-3B is a monthly return that summarizes your total outward and inward supplies and helps calculate your GST liability. To view the total ITC claimed, use the GSTR-3B report.
Go to Gateway of Tally → Display → Statutory Reports → GST Reports → GSTR-3B.
Select the relevant period to view the summary of outward and inward supplies along with the input tax credit details.
Check the "Eligible ITC" section in GSTR-3B to ensure that the input tax credit claimed is accurate.
Step 7: Handle ITC Reversal (if applicable)
If any discrepancies are found in the GSTR-2A or if any purchases do not qualify for ITC (e.g., for exempt or non-business purposes), the ITC must be reversed. In such cases:
Go to Gateway of Tally → Accounting Vouchers → Journal.
Create a journal entry to reverse the ITC for the specific transaction that is ineligible for credit.
Ensure that the reversed ITC is reflected in the GSTR-3B return to avoid tax liability issues.
Step 8: Filing the Returns
Once the ITC reconciliation is complete, and all discrepancies are resolved, you can proceed to file your GST returns:
Export the GSTR-1, GSTR-2A, and GSTR-3B reports in JSON format from Tally Prime.
Upload the files to the GST portal for filing your returns. Ensure that the ITC claimed in the GSTR-3B matches the final reconciled figures.
3. Common ITC Reconciliation Issues and Solutions
Mismatch of Purchase Data: Ensure that the supplier has uploaded the correct details in GSTR-1. If not, follow up with them for correction.
Incorrect Tax Rates: Check whether the tax rates applied in the purchase invoices match the GST rates specified by the government.
Unreported Purchases: If a purchase is missing from GSTR-2A, manually add it in Tally Prime and reconcile the credit.
Ineligible ITC: Recheck purchases related to exempt goods or services that are not eligible for ITC and reverse the claim accordingly.
4. Conclusion
GST Input Tax Credit (ITC) reconciliation is crucial for businesses to ensure compliance with GST laws and avoid penalties. Tally Prime simplifies the process by providing automatic tax calculations and detailed GST reports like GSTR-2A and GSTR-3B. By following the steps outlined in this article, you can efficiently reconcile your ITC, resolve discrepancies, and file your GST returns accurately.