Checking whether the Input Tax Credit (ITC) claimed by the assessee on the GST portal is in line with the Books of Accounts and GSTR-2A is an essential part of the GST audit process. The ITC claim should be accurate to ensure that the taxpayer is not claiming any unentitled credit or overlooking any eligible credit. Here’s a step-by-step process to verify the input tax credit claimed:

1. Gather Necessary Documents:

• Books of Accounts: Purchase invoices, payment receipts, GST paid on purchases.
• GSTR-2A: The auto-populated details of input tax credit available on the GST portal, which includes all inward supplies reported by the supplier.
• GSTR-3B: The monthly summary return where the taxpayer declares the total ITC claimed.
• GST Returns: Any other GST-related returns that provide details of credit claimed, including GSTR-9 (Annual Return).

2. Verify ITC Claimed in the Books of Accounts:

• Identify Purchase Invoices: Review the purchase register or accounts to ensure that all purchases made during the financial year are recorded. This includes:
  • Taxable purchases (Goods or Services)
  • Exempt supplies (if applicable)
  • Reverse charge mechanism (RCM) purchases
• GST Paid on Purchases: Ensure that GST paid on these purchases is accurately recorded in the books under the Input Tax Credit head.
  • The GST paid on purchase invoices should match the credit available for that period.

3. Verify ITC Claimed in GSTR-2A:

• Download GSTR-2A: From the GST portal, download the GSTR-2A for the relevant period. GSTR-2A is auto-populated with details of purchases from the seller’s GSTR-1 filings, including the corresponding GST paid.
• Cross-check ITC Entries: Compare the ITC details in GSTR-2A with the books of accounts for each supplier. This should include:
  • Matching the GSTIN of the supplier
  • Matching the invoice details (invoice number, date, and value)
  • Ensuring that the GST amount matches the credit available.
• Check Missing Entries: If any supplier’s details are missing in GSTR-2A, it might indicate that the supplier has not filed their GSTR-1 or reported the transaction. In such cases, the taxpayer should contact the supplier for corrections or adjustments.

4. Check ITC Claimed in GSTR-3B:

• Compare with Books of Accounts: Review the GSTR-3B filed for the period and compare the ITC claimed (in Table 4A) with the total GST paid on purchases in the books of accounts. Ensure:

  • The total claimed in GSTR-3B is consistent with the ITC in the books.
  • Any reverse charge mechanism (RCM) transactions are included correctly in GSTR-3B (Table 4B).

• Ensure Credit of GST Paid on Purchases: The GST credit for purchases reported in GSTR-3B should match the total GST paid on eligible purchases as per the books of accounts.

5. Reconcile GSTR-2A with Books of Accounts and GSTR-3B:

• ITC Discrepancies: Reconcile the differences between the ITC available in GSTR-2A and the credit claimed in GSTR-3B. Discrepancies can arise in cases like:
  • Purchases that are recorded in the books but not reported by the supplier in GSTR-1 (and therefore missing in GSTR-2A).
  • Purchases where the supplier has uploaded incorrect information (wrong GST amount, incorrect HSN code, etc.).
• ITC Restrictions: Make sure that only eligible ITC is claimed:
  • The goods/services should be used for business purposes.
  • The GST return of the supplier should be filed before claiming the ITC.
  • ITC should not be claimed for exempt supplies or non-GST supplies.
• Blocked Credits: Ensure that any blocked credits (e.g., ITC on motor vehicles, food and beverages, etc.) are not claimed, as these are not eligible under GST.

6. Reconciliation of Ineligible or Unclaimed ITC:

• Ineligible ITC: Ensure that any ineligible ITC (such as tax paid on personal expenses, non-business use, etc.) is not claimed.
• Unclaimed ITC: If the supplier has failed to report the purchase in their GSTR-1 (resulting in missing details in GSTR-2A), the taxpayer can claim ITC in the next period once the supplier updates their GSTR-1. Alternatively, the taxpayer should reach out to the supplier for correction.

7. Rectification of Errors and Reporting:

• Correct Discrepancies: If any discrepancies are found between the ITC in books, GSTR-2A, and GSTR-3B, they should be rectified. For example:
  • If the ITC was not claimed due to missing invoices in GSTR-2A, it should be corrected in subsequent filings.
  • If the ITC claimed was higher than eligible, it should be adjusted in the following month’s returns.
• Rectify Supplier Errors: If the discrepancy is due to the supplier’s error in reporting (missing invoice, incorrect GSTIN), the taxpayer must request the supplier to rectify their GSTR-1.

8. File Reconciliation Statement (GSTR-9C):

• Annual Reconciliation: If the business is required to file GSTR-9C (Reconciliation Statement), the auditor should provide a detailed reconciliation of the ITC claimed in GSTR-3B with the ITC as per the books of accounts and GSTR-2A.
• GST Audit: In the case of an audit (as required for businesses with turnover exceeding ₹5 crores), the auditor will verify the accuracy of ITC claims and ensure the reconciliation is properly done.

Key Considerations:

• Timely Supplier Filing: Ensure that the supplier files their GSTR-1 on time for the ITC to be available in GSTR-2A.
• Documentation: Proper documentation is essential for any ITC claims. Keep a record of purchase invoices, payments, and GST returns for audit purposes.
• Compliance with GST Law: Ensure that the ITC claimed is in full compliance with the GST law, and any non-compliance (e.g., claiming ITC on blocked items or non-business expenses) is avoided.