GSTR-2: A Guide on Eligibility, Format, Rules & Return Filing
The taxpayer can report and summarise the specifics of inward purchases of taxable goods and/or services on the GSTR-2 monthly return. However, due to a change in the CGST Rules, the GSTR-2 form has been suspended since September 2017. GSTR-3B, a return in a combined form of GSTR-2 and GSTR-3, is being used in its place. We go over the many facets of the former GSTR-2 form in this article.
Table of content
What is GSTR-2?
Up to August 2017, all GST-registered taxable persons had to fill out Form GSTR-2 with information on their inbound supply, including purchases and Input Tax Credit (ITC), for each tax quarter. All of a registered dealer's purchasing transactions for a given month are detailed in GSTR-2. Purchases on which a reverse charge is applicable are also included. For buyer-seller reconciliation, the government would have compared the sellers' GSTR-1 with the GSTR-2 that a registered dealer filed. However, it has lost its significance since it is no longer in use as of the September 2017 tax period. Instead, while comparing their GSTR-2B and GSTR-2A, taxpayers must declare their eligible ITC on form GSTR-3B.
What is GSTR-2A?
The data goes to GSTR-2A once a seller files their GSTR-1. The GST portal automatically creates the purchase-related tax return, GSTR-2A, for every entity. It uses data from each seller's GSTR-1 for a specific customer who is GST-registered. Due to its dynamic nature, the return may alter if sellers make updates or changes in subsequent tax seasons. Thus, the GSTR-2B return was implemented.
What is GSTR-2B?
For ordinary taxpayers, GSTR-2B is a new static auto-drafted statement. It was added to the GST portal for the August 2020 tax period and is accessible month-by-month. Even if the seller makes changes, the ITC information in this return remains unchanged for a specific tax period. For eligible ITC claims in GSTR-3B for a specific tax period, taxpayers can check the ITC shown in this return.
Who Should File GSTR-2?
Whether or not there were any transactions during the month, all registered persons were required to file GSTR-2. However, according to GST rules, these registered individuals are exempt from filing GSTR-2.
Persons liable to collect TCS
Persons liable to deduct TDS
Input Service Distributors
Composition Dealers
Non-resident taxable person
According to Section 14 of the IGST Act, providers of online information and database access or retrieval services (OIDAR) are responsible for paying their own taxes.
When to File GSTR-2
Purchase information for a given month must be submitted by the 15th of the subsequent month. For instance, you must file your GSTR2 by April 15th if you are filing it for the month of March. To submit the GSTR-2:
You must have a 15-digit PAN-based GSTIN and be a registered GST taxpayer.
You must not have a Unique Identification Number (UIN) or be a composition vendor. You shouldn't be among those foreign taxpayers who don't reside in the country.
The information on your GSTR-2A must be obtained from your GST portal. You must maintain thorough invoices for every transaction you make, including business-to-business (B to B) and retail (B to C) purchases, as well as intra-state and interstate transactions, in order to cross-verify this data. This also covers stock transfers between your company's locations in other states and purchase transactions involving exempted and non-GST products.
To validate your return using an EVC (electronic verification code) or a digital signature certificate (of class 2 or higher), you will require an OTP from your registered phone. An e-signature based on Aadhar can also be used to file your GST returns.
Consequences of Non-Filing of GSTR-2
The subsequent return in form GSTR-3 (formerly GSTR-3B) could not have been filed if the GSTR-2 return had not been lodged. As a result, filing GST returns beyond the deadline might result in severe fines and penalties. However, starting September 2017, both GSTR-2 and GSTR-3 have been suspended. One would have been responsible for paying interest and a late fee if they had delayed the filing. The annual interest rate is 18%. The taxpayer was required to figure out how much tax was still owed. The time frame ran from the following filing day (16th of the subsequent month) until the payment date. According to the Act, the late fine would have been Rs. 100 per day. Thus, it is Rs. 100 for CGST and Rs. 100 for SGST. The daily total will be Rs. 200. A maximum of Rs. 5,000 is allowed. For IGST, there is no late fee.
Components of GSTR-2 Form
The government-mandated GSTR-2 format has thirteen headings. The information that must be recorded under GSTR-2 is explained here for each heading.
1. GSTIN: Every taxpayer will receive a 15-digit Goods and Services Taxpayer Identification Number (GSTIN), which is based on state-specific PANs. The graphic below displays a potential GSTIN format. The taxpayer's GSTIN will be automatically entered when the return is filed.
2. Name of the Taxpayer: The taxpayer's name, including their legal and business names, will be automatically filled in. Month, Year: Indicate which month and year the GSTR-2 is being filed for.
3. Inward Supplies from Registered Taxable Person: The majority of purchases made by registered individuals are automatically entered here based on the seller's GSTR-1. It will include information on the kind, rate, and quantity of GST as well as whether or not the ITC is eligible and how much it is. Nevertheless, purchases made using reverse charge will not be included. Some transactions might not be automatically filled in because
The seller failed to submit a GSTR-1.
Despite missing the transaction, the seller submitted GSTR-1.
The buyer has the option to manually add these transactions in any scenario. To approve this addition or adjustment in his GSTR-1A report, the seller will receive a notification. If the supply is received in many lots, the invoice needs to be entered into the books of accounts and reported in the return for the month in which the final lot is received.
4. Inward supplies that require reverse charge tax payment: Some products and services have a reverse charge, meaning that the buyer must pay GST. Reverse charges may be incurred by a registered dealer who buys more than Rs. 5,000 from an unregistered dealer each day. This section will report any purchases for which a reverse charge is applicable.
4A. All purchases for which the law expressly permits reverse charging must be listed under this heading. For instance, buying cashew nuts from a farmer.
4B. Purchases from unregistered dealers that total more than Rs. 5,000 per day shall be listed by this head.
4C. Reverse charge GST paid on service import will be listed under this heading.
5. Capital goods and inputs received on a Bill of Entry from SEZ units or overseas: Any import of capital goods received under a Bill of Entry or inputs (items required to create finished goods) must be documented under this heading. Also noted here are goods acquired from SEZ.
5A. Imports: This section shall report any imports of capital goods or inputs (items required to make finished goods) that are received in accordance with a Bill of Entry. It is necessary to include information on the bills of entrance, as well as 6-digit port codes and 7-digit bill numbers.
5B. Acquired from SEZ: This is where inputs or capital products obtained from SEZ vendors are stated.
6. Modifications to the information about inbound supplies included in returns for previous tax periods in Tables 3, 4, and 5 [including issued debit and credit notes and their later modifications]: Once a GST return is filed, it cannot be amended by the taxpayer. Only the return for the following month may be revised under this heading. Any information pertaining to previous months' purchases of goods or services may be changed by the taxpayer. You can manually fill out this form. The seller will then receive a notification about this change as well. In his GSTR-1A return, the seller must acknowledge this modification.
6A. All adjustments to input products and services (apart from imports) will be included in this head.
6B. Any modification to the tax level or amount assessed on imported and SEZ goods may be imposed under this paragraph. The adjustments made to the bill of entry or import report must be mentioned here by the taxpayer.
6C. All debit and credit notes issued in connection with purchases must be reported by the taxpayer. Any credit or debit note issued using the reverse charge technique will be automatically filled in here using the counter-party's GSTR-1 and any other relevant returns (such as NR's GSTR-5).
6D. This heading will be used to record any modifications to the debit or credit note from prior months.
7. Composition taxable person provides as well as other exempt, zero-rated, and non-GST goods received: Purchases from composition dealers and other exempt, zero or non-GST supplies will fall under this category. Products like petrol and diesel that are not subject to GST are considered non-GST supply. Additionally, this is where intra-state and inter-state supply must be documented.
8. ISD Credit received: Information on the input tax credit that was obtained from a registered Input Service Distributor (ISD)—typically, a head office that has distributed its ITC nationwide. This information will be automatically filled in from the GSTR-6 that ISD filed.
9. TDS and TCS credit received:
TDS Credit Received: This section will only apply if you enter into specific agreements with specific parties, most often government agencies. A specific proportion of the transaction value will be subtracted by the recipient (the government) as a tax deduction at the source. All data from the deductor's GSTR-7 will be automatically entered here.
TCS Credit Received: Only online vendors who have registered with an e-commerce operator may use this heading. When an e-commerce operator pays these merchants, they must collect tax at the source. Once more, this data will be automatically filled in from e-commerce operators' GSTR-8. For additional information, see our Impact Analysis on E-commerce Marketplace Sellers.
10. Consolidated statement of advances paid and advances modified due to supply receipt: This is where any advance payments received during the month will show up. If you only got the bills this month but paid advance tax on products or services obtained during a previous tax period, please report the information here. This also applies to advance receipts that are issued under reverse charge. On getting any advance payment, a vendor often issues an advance receipt. If the buyer pays in advance for a purchase that is subject to a reverse charge, he must provide the advance receipt.
Part I: The advance payment for reverse charge supplies made during the current month will be covered by this section. Additionally, it will reflect the advances paid in previous months that were used to pay the invoices received this month. Both intra-state and inter-state purchases will be made.
Part II: Changes to Part I will be included in Part II in regard to a previous month.
11. Input Tax Credit Refund or Reversal: Only business-related items and services are eligible for ITC. ITC cannot be claimed if they are utilised for non-business (personal) purposes or to make exempt supplies. The taxpayer must enter information about ITC under this heading that cannot be claimed throughout the month because of different ITC regulations.
11A. All input tax reversals for the current month will be covered under this head. ITC reversal due to exempt and personal supplies will also be included.
Amounts for invoices that were not paid within 180 days of issue shall have their ITC reversed in accordance with rule 37(2).
The sum according to rule 39(1)(j)(ii)– This pertains to ISDs. The ITC that was subsequently decreased will be reversed if the seller provides a credit note to the HO.
For businesses that use inputs for both commercial and non-business (personal) reasons, the amount is determined by regulation 42(1)(m). ITC must be proportionately reversed when applied to the percentage of input goods or services used for personal use.
Amount under rule 43(1)(h): This is comparable to the previous one, except it deals with capital goods.
Amount according to regulation 42 (2)(a): This is determined upon the submission of the yearly return. The difference will be added to output liability if the total ITC on inputs for exempted or non-business purposes exceeds the ITC that was actually reversed throughout the year. Interest will be charged.
Amount according to 42(2)(b)– The opposite of the above is this. The difference can be reclaimed as ITC if the overall ITC on inputs for exempted or non-business purposes is less than the ITC that was actually reversed throughout the year.
11B. Under 11A of previous months, the taxpayer has the option to manually change any ITC data. He will use a drop-down menu to choose the relevant data.
12. Increasing and decreasing the output tax amount due to mismatches and other factors: Any increased tax liability resulting from the changes made to the previous month's GSTR-3 will be recorded in this section.
a) ITC claimed on duplicate or mismatched invoices or debit notes: If invoices are not identical, there may be two ITC claims. The tax liability will be increased by the extra ITC that was claimed from duplicate purchase invoices.
b) Tax responsibility on mismatched credit notes: If the taxpayer issues inaccurate credit notes, the ITC will likewise be wrong. Your tax burden will now include the additional ITC that was claimed because of the mismatch.
c) Refund due to the correction of mismatched debit notes and invoices: This is point (a) in reverse. In this instance, the mismatch has resulted in a smaller ITC claim. The additional amount will be deducted from your output tax liability since you are eligible for greater ITC.
d) Reclaim due to reduction of mismatched credit note: This is the inverse of (b), meaning that a lower ITC has been claimed and will function similarly to (c).
e) Negative tax obligation from prior tax periods: This will be deducted from this month's output tax liability and is the result of excess tax paid in prior months.
f) Taxes paid in advance in previous tax periods and adjusted with taxes on supplies made in the current tax period (Reduce): This includes taxes paid in advance for supplies received in this month in previous months.
13. HSN summary of inbound supplies: A registered dealer must submit an HSN-wise account of the items they have bought in order to comply with this provision. This is what the taxpayer will enter. Lastly, conclude by stating that all information has been disclosed and is accurate.
Conclusion
Businesses all around India have had to adjust to a number of changes since the Goods and Services Tax was put into effect in 2017. Additionally, they were presented with a variety of forms, each of which had a distinct function within the framework of the GST. One such form is the GSTR 2. In certain ways, GSTR 2 has lost significance in relation to GST since it is no longer used as of the September 2017 tax period. In addition to verifying their GSTR-2A and GSTR-2B, taxpayers must now disclose their ITC in GSTR-3B.
FAQ
Q1. What is GSTR-2?
Taxpayers use the GSTR 2 return form to provide information about their inward supplies—that is, the supply they have received—and input tax credits (ITCs) that they have claimed for a specific time period. Depending on their GST turnover and other variables, taxpayers must file GSTR 2 either monthly or quarterly.
Q2. What is the GSTR-2 report?
The monthly inward supply report, GSTR-2, may also contain transactions involving reversal charges. The government uses it to do buyer-seller reconciliation, commonly referred to as invoice matching.
Q3. Is GSTR-2A and GSTR 2 same?
No, there is a difference between GSTR-2A and GSTR 2. The GST (Goods and Services Tax) system in India creates the GSTR-2A form, whilst taxpayers file the GSTR 2 return form.
Q4. What is GSTR-2A?
As stated in their GSTR-1 filings, a taxpayer's customers' or clients' outgoing supplies are summarised in GSTR-2A. It is sent to the taxpayer via the GST site and is automatically generated by the GST system using the data supplied in GSTR-1.
Q5. Is GSTR 2 applicable now?
A planned GST return known as GSTR 2 would have required taxpayers to submit information about their inbound supplies and claim the applicable Input Tax Credit. Nevertheless, GSTR 2 is no longer required to be filed and has been suspended.
Q6. Is GSTR 2B mandatory?
According to India's GST (Goods and Services Tax) legislation, GSTR 2B is not a required form. It is an automatic summary of the inward supplies (i.e., supplies received by a taxpayer) produced by the GST system using data from the taxpayer's clients' or customers' GSTR-1 forms.
Q7. How should GSTR 2 be revised?
Once filed, GSTR 2 cannot be changed. Any errors in the return can be fixed for the following month. This implies that if an error is found in GSTR 2 of July 2017, it can be fixed in GSTR 2 of August 2017.
Q8. When was GSTR 2 due?
The Act states that the 15th of the next month is the deadline for reporting GSTR-2. The GSTR-1 and GSTR-2 filings were separated by five days in order to address any mistakes or inconsistencies. The deadline for companies submitting quarterly filings, however, was never disclosed.
Q9. What is buyer-seller reconciliation?
The practice of matching the buyer's taxable purchases with the seller's taxable sales is known as buyer-seller reconciliation or invoice matching. It is essential because the buyer's GSTR-2 (formerly GSTR-3B) return details of purchases must match the seller's GSTR-1 sales details in order for the ITC on purchases to be accessible.
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