GSTR 2: Meaning, Return Filing, Format, Eligibility and Rules

• GSTR-2 is a monthly return that helps taxpayers report inward supplies and claim input tax credit (ITC). However, it has been suspended and replaced by GSTR-3B since September 2017.
• Only certain registered taxpayers are required to file GSTR-2. Exemptions include input service distributors, non-resident taxable persons, and composition dealers, among others specified under GST law.
• Filing GSTR-2 involves steps like verifying auto-drafted GSTR-2A data, entering GSTIN, and reviewing inward supply details. Accuracy is critical to ensure the proper claim of ITC and to avoid penalties.

As a business owner, you diligently file GST (goods and services tax) returns every month. You ensure that all invoices are in place, suppliers are compliant, and tax payments are made on time. But one day, you receive a notice from the GST department stating discrepancies in your Input Tax Credit (ITC) claims. Panic sets in. You wonder, "Where did I go wrong?" The answer often lies in GSTR 2, the return that deals with ITC reconciliation.If you have struggled with mismatched invoices, supplier non-compliance, or ITC claims, this guide is for you. Let's break down GSTR 2, its format, eligibility, rules, and how to file it correctly. But before that, here is a quick discussion on reconciliation.

Buyer-seller reconciliation in GST is a crucial process that ensures the accuracy and consistency of tax data reported by both parties. It involves matching the sales and purchase data between the buyer and seller to identify any discrepancies or mismatches. This process is essential for claiming input tax credit (ITC) and avoiding penalties due to incorrect filings.For example, let's say you are a buyer who purchases goods worth ₹1,00,000 from a seller. The seller reported this sale in their GSTR-1, which appears in your GSTR-2A. However, your purchase register shows a different amount, say ₹95,000. This discrepancy must be reconciled to ensure the correct ITC is claimed. You need to communicate with the seller to verify the correct amount and make necessary adjustments in your records.

The GSTR-2 is a monthly return that allows taxpayers to declare and summarise the details of inward purchases of taxable goods and/or services. However, an amendment to the CGST Rules suspended the GSTR-2 form in September 2017. In its place, GSTR-3B, a combined version of GSTR-2 and GSTR-3, is currently in use.

As per the GST law, the following registered individuals are not required to file GSTR-2, regardless of whether they have any transactions during the month:

• Input service distributors
• Non-resident taxable persons
• Composition dealers
• Persons required to deduct TDS (tax deducted at source)
• Persons responsible for collecting TCS (tax collected at source)
• Suppliers offering online information and database access or retrieval services (OIDAR) who are liable to pay tax directly, according to Section 14 of the IGST (Integrated Goods and Services Tax) Act

GSTR-2: Rules and Regulations

Here is the information on the GSTR-2 due date and penalty. Due date:

• The deadline for submitting GSTR-2 was the 15th of the month following the reporting period. For instance, the GSTR-2 for January had to be filed by February 15th.
• Between the submission of GSTR-1 and GSTR-2, a 5-day window existed, allowing time to correct any errors or discrepancies.

Penalty:

• Failure to file the GSTR-2 would prevent filing the subsequent GSTR-3 return, causing a ripple effect of delayed submissions.
• Late submission of GST returns resulted in a penalty of ₹100 per day, with a maximum cap of ₹5000.

The GSTR-2A is an auto-drafted tax return statement generated for a taxpayer by the Goods and Services Tax (GST) system. It has information on all inward supplies (purchases) made by a taxpayer from registered suppliers during a particular tax period. The information in GSTR-2A is auto-populated from the suppliers' GSTR-1, GSTR-5, and GSTR-6 returns. This statement is dynamic and gets updated whenever the suppliers file their returns.The GSTR-2A helps taxpayers verify the details of their purchases and claim accurate ITC. It is a read-only document and cannot be edited. You can use GSTR-2A to reconcile their purchase data with the data uploaded by their suppliers, ensuring no discrepancies.

The GSTR-2B is a fixed, system-generated statement that became available on the GST portal in August 2020. It offers a monthly summary of both eligible and ineligible ITC for regular taxpayers. Unlike GSTR-2A, which updates dynamically, GSTR-2B remains constant for a given period, simplifying the process of reconciling ITC with purchase records. Step Guide to Filing GSTR-2 Filing a GSTR-2 requires the completion of the following steps:

• Step 1: Visit the GST portal using your username and password. Proceed to the 'Services' tab and select 'Returns' under the 'GST Returns' section.
• Step 2: Choose the financial year and the month for which you are filing the return.
• Step 3: Before filing, verify the auto-drafted details in GSTR-2A, which contains information from your suppliers’ GSTR-1 returns.
• Step 4: Share the following information in the GSTR-2 form: GSTIN, the registered name of your business, and details of inward supplies.
• Step 5: Review the entered data for any discrepancies or errors. Once all details are verified and corrected, submit the GSTR-2 form. You can utilise an electronic verification code (EVC) sent to your registered mobile number, a Digital Signature Certificate, or an Aadhaar-based e-sign to authenticate the submission.
• Step 6: An acknowledgement will be generated after submission, indicating that your GSTR-2 has been successfully filed.
• Step 7: Ensure that the details in your GSTR-2 match those in your suppliers’ GSTR-1 to avoid any mismatch and facilitate smooth input tax credit (ITC) claims.
• Step 8: Once GSTR-2 is filed, proceed to file GSTR-3, which consolidates the details of both inward and outward supplies.

Format of GSTR-2 The GSTR-2 form contains 13 headings. Here are the details.

As a taxpayer, you will receive a 15-digit goods and services taxpayer identification number (GSTIN) based on your PAN card and state. The proposed GSTIN format is displayed in the image below. The taxpayer's GSTIN will be automatically filled in when filing a return.

Here, the legal and trade names of your business will be displayed. Since the name is auto-filled, you only need to enter the applicable month and year for the GSTR-2 filing.

Inward supplies from registered taxable persons for GSTR-2 refer to purchases of goods or services from suppliers registered under GST. This section includes invoice details, tax amounts, and input tax credit (ITC) eligibility. Most of the information is auto-populated. In case the seller has not filed a GSTR-1 or has missed any transaction, you need to fill in those details manually.It is also important to mention that transactions subject to reverse charges are not included.

This section documents transactions where GST liability falls on the buyer under the reverse charge system. If a registered dealer purchases goods exceeding ₹5,000 daily from an unregistered seller, they are responsible for paying GST.Here is the information required under this section:

• Section 4A: This section should include all purchases subject to a legally mandated reverse charge. For instance, acquiring cashew nuts directly from a farmer.
• Section 4B: This section will cover purchases from unregistered dealers that exceed ₹5,000 in a single day from the same unregistered dealer.
• Section 4C: This section will report the reverse charge GST paid on imported services.

• 5A Imports: This section records any import of inputs or capital goods received via a Bill of Entry. The submission must include the bill details, along with the corresponding 6-digit port code and 7-digit bill number.
• 5B Received from SEZ: This section will capture inputs or capital goods acquired from suppliers within an SEZ (special economic zone).

Once a GST return is filed, it cannot be revised. However, corrections can be made in the following month’s return. Taxpayers can manually amend purchase details from previous months. The seller receives a notification and must approve the modification in their GSTR-1A return.

• Section 6A: This section will include all revisions related to input goods and services, excluding imports.
• Section 6B : Taxpayers can record any modifications in the amount or any tax calculated on imported goods and those from SEZ under this section. The taxpayer must specify the adjustments made in the Bill of Entry or Import Report.
• Section 6C: All debit and credit notes issued for purchases must be reported here. Debit or credit notes issued under the reverse charge mechanism will be auto-populated from the counterparty’s GSTR-1 and other relevant returns, such as GSTR-5 filed by non-residents.
• Section 6D: Report any amendments to debit or credit notes from previous months under this section.

This category will encompass purchases from composition dealers and exempt, nil-rated, and non-GST supplies. Non-GST supplies refer to items such as petrol and diesel, which do not fall under the GST. Additionally, it is necessary to report interstate and intrastate supplies under this section.

The input tax credit information received from a registered input service distributor (ISD), typically a head office transferring its ITC to its branches, will be automatically populated from the GSTR-6 filed by the ISD.

• TDS Credit Received: This section applies when you enter into specific contracts with designated entities, typically government bodies. In such cases, the government will deduct a certain percentage of the transaction amount as tax deducted at source (TDS). The relevant details will be automatically filled in from the GSTR-7 submitted by the deductor.
• TCS Credit Received: This section is relevant only for online sellers registered with e-commerce operators. The e-commerce operator is required to collect tax at source when making payments to these sellers. The information will be auto-filled from the GSTR-8 of the e-commerce operators.

Any advance payments made within the month will be shown here. If you paid advance tax on goods or services from a previous tax period but received invoices this month, include the details here. This also applies to advance receipts issued under reverse charge. Typically, the seller issues an advance receipt upon receiving payment. However, the buyer must issue the receipt for reverse charge purchases if payment is made in advance.

• Part I: This section discusses the advance payments made for reverse charge supplies in the current month. It also covers any advances paid in previous months for which invoices were received in the current month. The purchases are categorised into interstate and intra-state transactions.
• Part II: It will include modifications to the previously mentioned Part I, reflecting changes from a prior month.

ITC can only be claimed on goods and services used for business purposes. It cannot be claimed if it is used for personal use or exempt supplies. Taxpayers must fill in details of non-claimable ITC for the month in this section. Here is the breakdown of the information required: Section 11A : This section will address the reversal of input tax for the current month, including ITC reversals related to exempt and personal supplies.

• Amount Under Rule 37(2): ITC will be reversed for invoices that remain unpaid for more than 180 days from the date of issuance.
• Amount under Rule 39(1)(j)(ii): Applicable to ISDs. If the seller issues a credit note to the Head Office, the ITC that was previously claimed will be reversed accordingly.
• Amount under Rule 42(1)(m) : For businesses that use inputs for both business and personal (non-business) purposes, the ITC on the portion of goods/services used for personal purposes must be reversed on a proportional basis.
• Amount under Rule 43(1)(h): Similar to the previous point, but this pertains to capital goods.
• Amount under Rule 42(2)(a): It is determined after submitting the annual return. If the total ITC on exempted or non-business inputs exceeds the ITC reversed, the difference is added to output liability, with interest applicable.
• Amount Rule 42(2)(b): if the total ITC on exempted or non-business inputs is less than the reversed ITC, the difference can be reclaimed as ITC.

Section 11B: You can manually update the ITC details for previous months under 11A by selecting the relevant information from a drop-down menu.

This section will address any additional tax liability arising from corrections made to the GSTR-3 of the previous month.

• ITC Claimed on Mismatched or Duplicate Invoices/Debit Notes: If there is an invoice mismatch, it may lead to double claiming of ITC. Any excess ITC claimed due to duplicate purchase invoices will be reversed and added to your tax liability.
• Tax Liability on Mismatched Credit Notes: Incorrectly issued credit notes can lead to inaccurate ITC claims. The excess ITC claimed due to the mismatch will be added to your tax liability.
• Reclaim Due to Rectification of Mismatched Invoices/Debit Notes: This is the reverse of point (a). If a mismatch results in lower ITC claims, you are entitled to additional ITC. The extra amount will be subtracted from your output tax liability.
• Reclaim Due to Rectification of Mismatched Credit Note (Reduce): This is the opposite of (b), where a lower ITC was claimed, and it works similarly to (c).
• Negative Tax Liability From Previous Tax Periods: This arises from excess tax paid in earlier months and will be deducted from the output tax liability for the current month.
• Tax Paid in Advance in Prior Tax Periods and Adjusted With Tax on Current Supplies (Reduce): This refers to tax paid as part of advance payments in previous months for supplies received in the current month.

This section mandates that a registered dealer provide a summary of goods purchased, categorised by HSN. The taxpayer will be responsible for entering this information. Lastly, a declaration must be signed, confirming that all details are accurate and complete.

Using a GST calculator can simplify tax calculations, ensuring precise input tax credit claims.The GSTR-2 was once an essential return for reporting inward supplies and claiming ITC. However, its suspension in 2017 led to the adoption of GSTR-3B, streamlining the filing process. While GSTR-2 is no longer in use, understanding its format, reconciliation process, and the role of GSTR-2A and GSTR-2B remains crucial for accurate ITC claims. Using a GST calculator can simplify tax calculations, ensuring precise input tax credit claims. Ensuring compliance through proper invoice matching and supplier verification helps businesses avoid penalties and discrepancies.