GSTR 2 Return: Key Details & Changes Explained

GSTR-2 return was a monthly return that allowed taxpayers to report and summarise details of their inward purchases of taxable goods and services. However, since September 2017, the government suspended this form through amendments to the CGST Rules.

Although GSTR-2 is no longer in use, you must learn about its structure and significance help to grasp how GST compliance evolved. This blog explores the key aspects of the now-discontinued GSTR-2 form and its role in the earlier GST framework.

What Is GSTR-2 Return?

Under the GST system, the GSTR-2 return was the essential document which tracked purchase transactions and enabled tax compliance. GSTR-2 needs business owners to detail their complete inward supply transactions of goods and services and their modifications to previous returns and advance payment records. This form's proper management determined both financial stability and future funding opportunities for a company.

International traders requiring knowledge of LUT in GST needed it to export goods with no tax obligations. The proper management of tax obligations enhanced business credit profiles, which in turn improved companies' prospects for receiving business loans.

A company showcasing proper documentation of compliance through GSTR-2 established confident financial management skills to lenders which resulted in favorable borrowing terms.

Importance of GSTR-2 Return

GSTR-2 return played a crucial role in the GST framework by maintaining system integrity and ensuring financial transparency. Its significance in GST compliance came from its key functions in several areas:

• Input Tax Credit Reconciliation: Businesses used GSTR-2 to match input tax credits with the taxes reported and paid by suppliers in GSTR-1 (the form used by suppliers to declare their outward supplies), ensuring accurate and legitimate claims.
• Tax Liability Adjustment: This form helped businesses adjust their tax liabilities based on detailed inward supply data, ensuring precise tax payments.
• Compliance and Verification: By cross-checking supplier data from their sales return via GSTR-1, GSTR-2 strengthened regulatory compliance and enhanced transparency within the GST system.
• Prevention of Tax Evasion: The form played a vital role in identifying discrepancies that could lead to tax evasion, reinforcing accountability for all registered entities.

Additionally, businesses needed to monitor their total revenue for compliance, as specified under aggregate turnover in GST for registration. GSTR-2 return significantly contributed to the efficiency and accountability of the GST system by ensuring accurate transaction records and taxation.

Relevance of GSTR 2A with GSTR 2

Businesspersons can use GSTR-2A as a reference when filing GSTR-2 returns. This auto-generated document is available to all registered enterprises and is based on data from GSTR-1 and GSTR-5, where sellers report their sales.

Taxpayers can modify any discrepancies in GSTR-2A, triggering a notification to the respective sellers. These sellers must then verify and correct any mismatched details if necessary.

GSTR-1 and GSTR-2 must align. Any inconsistencies prevent businesses from claiming Input Tax Credit (ITC) on purchases.

Since GSTR-2 has not been in use since the September 2017 tax period, its relevance in GST has diminished. Taxpayers must now report their ITC in GSTR-3B while cross-checking details with GSTR-2A and GSTR-2B.

What Are the Details Included in the GSTR 2 Form?

The following are the details included in the GSTR 2A Form:

1. Basic details to be included like GSTIN, UIN, UQC, HSN code, POS, B to B (From one registered person to another registered person) and B to C (From registered person to unregistered person).
2. Inward supplies from registered persons (excluding reverse charge)
3. Inward supplies liable for reverse charge
4. Details that are included in Tables 3 and 4:

• Invoice-level inward supply details are categorised by tax rates, auto-populated in GSTR-2 based on GSTR-2A data from suppliers’ GSTR-1.
• Table 3 records inward supplies that do not attract a reverse charge, while Table 4 records those that do.
• The recipient can accept, reject, modify, or keep pending the auto-populated data.
• After making necessary updates, the recipient must declare ITC eligibility and the claimable amount.
• Taxpayers can also manually add invoice details if they have valid supporting documents.
• Table 4A will be auto-populated.
• If the recipient adds invoice details, they must specify the Place of Supply (PoS), unless the supply is from a registered person and PoS matches the recipient’s location.
• Only invoices related to reverse charge can be added when the tax liability arises per GST Act Sections 12 or 13.
• Column 12 requires taxpayers to classify inward supplies as inputs, input services or capital goods

5. Imports or Supplies from SEZ Units on a Bill of Entry

• Taxpayers must report imports of goods and capital goods, including supplies from SEZ units, categorised by tax rates.
• Bill of entry details must be provided.
• The taxable value in this table refers to the assessable customs value used to compute IGST.
• The GSTIN for such transactions belongs to the recipient taxpayer.

6. Amendments to details of inward supplies furnished in returns for earlier tax periods in Tables 3, 4 and 5 (including debit /credit notes)

• Table 6 is used for modifying previously reported inward supply details from Tables 3, 4 and 5.
• Any updates to debit notes or credit notes must also be recorded here.
• GSTIN is not required for export-related amendments.

7. Supplies from composition taxable persons and exempt/nil rated/non-GST supplies
8. ISD credit received

The credit distributed by the ISD (whether eligible or not) is directly provided to the recipient, who must assess its eligibility before claiming it.

9. TDS & TCS Credit Received

• Table 9 auto-populates TDS and TCS credit data.
• Sales return and net value columns do not apply to tax deductions at source.
• The eligible ITC from Tables 3, 4, and 8 is added to the taxpayer’s Electronic Credit Ledger once GSTR-3 is filed.
• Taxpayers can claim partial ITC based on business or non-business purposes.

10. Consolidated statement of advances paid and advance adjustments for reverse charge supplies

This section records advance payments made for reverse charge transactions and any tax adjustments related to them.

11. Table 11 covers details of input tax credit reversal or reclaim.

12. Adjustments for mismatched invoices in output tax liability

This section addresses additional liability arising due to mismatches and adjustments in previously reported data.

13. HSN summary of inward supplies

This structured format ensures that businesses accurately record and reconcile their inward supply data, ultimately optimising their tax compliance.

What Are the Details Included in the GSTR 2A Form?

The GSTR-2A format prescribed by the government consists of 7 headings, as follows:

1. GSTIN: The unique 15-digit identification number of the dealer
2. Taxpayer’s Name: Displays both the legal and trade name of the taxpayer along with the month and year of the specific tax period for which GSTR-2A is generated.
3. Inward Supplies from Registered Persons (Excluding Reverse Charge): This section auto-populates most purchase details from the seller’s GSTR-1 filing. It includes GST type, rate, amount and eligible ITC. However, purchases subject to reverse charge are not reflected here.
4. Inward Supplies Subject to Reverse Charge: This part includes all purchases and supplies, whether from taxable or non-taxable persons, where the recipient is liable to pay GST under the reverse charge mechanism.
5. Debit/Credit Notes (Including Amendments) for the Current Tax Period: Here comes the records of all debit and credit notes received from sellers during the month. It also reflects any modifications by comparing the updated documents with the original ones.
6. ISD Credit (Including Amendments) Received: In case of branches, this section auto-populates based on the GSTR-6 return filed by the head office for the respective month.
7. TDS and TCS Credit (Including Amendments) Received:

• TDS Credit Received – Applicable if you engage in specific contracts with designated entities (typically government bodies). A portion of the transaction value is deducted as TDS, and details are auto-populated from the GSTR-7 return filed by the deductor.
• TCS Credit Received – Relevant for online sellers registered with e-commerce platforms. E-commerce operators deduct tax at the source when making payments to sellers, and this information is auto-filled from the GSTR-8 return filed by the operator.

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When Was the Due Date to File the GSTR 2 Form?

According to the law, the due date for filing GSTR-2 was the 15th of the following month. Businesses had a 5-day window between GSTR-1 and GSTR-2 filings to correct any errors or discrepancies. However, authorities never announced a due date for businesses filing returns quarterly.

Eligibility Criteria for GSTR 2 Filing

To file GSTR-2, you must meet the following criteria:

• You must be a registered taxpayer with a valid GSTIN (Goods and Services Tax Identification Number).
• You should be liable to pay tax under GST and engaged in supplying goods, services or both.
• You must have received goods or services (or both) during the relevant tax period. This includes supplies from registered and unregistered suppliers, as well as transfers between different branches or locations.

Initially, every taxable person had to file GSTR-2, even if they had no transactions in a given month. However, under GST regulations, the following registered entities were exempt from filing GSTR-2:

• Non-resident taxable entities
• Entities responsible for TDS deductions
• Input Service Distributors
• Composition dealers
• Persons collecting TCS
• Suppliers of Online Information and Database Access or Retrieval Services (OIDAR)

What Preconditions to Ensure When Filing GSTR 2?

To file GSTR-2, you must be a registered person under GST with a 15-digit PAN-based GSTIN. However, you cannot be a composition vendor, hold a Unique Identification Number (UIN) or be a non-resident foreign taxpayer.

It is essential for you to access your GSTR-2A data from the GST portal and cross-check it with your purchase transactions. All transactions from intra-state to inter-state and both business-to-business (B2B) and retail (B2C) purchases need to have their details recorded as well as the ones for exempt and non-GST supplies. Business owners must keep detailed invoices for each transaction. Businesses should document all inventory movements that occur between their facilities situated in different states.

For return verification, you can use an OTP sent to your registered phone for electronic verification (EVC) or a digital signature certificate (Class 2 or higher). Alternatively, GST returns can also be filed using Aadhaar-based e-sign authentication.

Contents of the Form GSTR-2

GSTR-2 served as an essential GST compliance form for businesses to record inward supplies while permitting them to claim correct input tax credits. The key components of GSTR-2 included:

• The section about inward supplies from registered suppliers recorded company purchases from GST-registered businesses to validate input tax credit claims.
• The form recorded details of imported goods and services procured from outside India, which were subject to GST and relevant for claiming input tax credits.
• GSTR-2 captured advance payments made for supplies where the buyer had to pay GST directly to the government under the reverse charge mechanism.
• The system allowed Input Service Distributor (ISD) companies to track how they distributed tax credits to their business units through this document.

What Would Happen if GSTR-2 Was Not Filed?

Failing to file GSTR-2 had serious consequences under the GST system, highlighting the importance of timely compliance. The key repercussions included:

• Businesses could not validate their ITC claims without filing GSTR-2, leading to financial losses as they missed out on reducing their tax liabilities.
• Taxpayers were required to pay 18% annual interest on outstanding tax amounts, calculated from the due date (16th of the next month) until payment. Additionally, late fees were ₹100 per day under CGST and ₹100 under SGST, totalling ₹200 per day, with a maximum cap of ₹5,000. There was no late fee for IGST.

Since September 2017 the authorities have suspended both GSTR-2 and GSTR-3, making current late submission penalties inoperative.

Conclusion

Under the GST compliance system, the GSTR-2 return served as an essential mechanism to monitor purchases while confirming input tax credits which generated transparent financial data. The requirement to file GSTR-2 return was abolished in September 2017 but companies need to check ITC details through GSTR-2A and GSTR-2B.

The past importance of GSTR-2 returns enables taxable persons to understand GST rules while keeping complete and exact tax documentation.

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