GSTR-2 is a monthly return that enables taxpayers to report and summarise details of inward purchases of taxable goods and/or services.

However, since September 2017, the filing of GSTR-2 has been suspended through an amendment to the CGST Rules. It has been replaced by GSTR-3B, which serves as a consolidated return combining features of both GSTR-2 and GSTR-3. For more information, refer to our article “All about GSTR-3B return.”

This article explains the key aspects of the erstwhile GSTR-2 form.

About GSTR-2 and its significance

Until August 2017, every registered taxable person under GST was required to furnish details of inward supplies, including purchases and Input Tax Credit (ITC), for each tax period through the GSTR-2 form.

GSTR-2 contained details of all purchase transactions made by a registered dealer during a month, including those liable under reverse charge. The data submitted in GSTR-2 was used by the government to reconcile it with the sellers’ GSTR-1 for buyer-seller matching.

However, since the form has not been in use from the September 2017 tax period onwards, it no longer holds relevance. Taxpayers now report their eligible ITC in GSTR-3B, using information from GSTR-2A and GSTR-2B for verification.

What is Buyer-Seller Reconciliation?

Buyer-seller reconciliation, also known as invoice matching, is the process of matching a seller’s taxable sales with the buyer’s taxable purchases. This process is essential because Input Tax Credit (ITC) on purchases can only be claimed if the purchase details reported in the buyer’s GSTR-2 (currently GSTR-3B) match the sales details declared in the seller’s GSTR-1.

For instance, if Ajay purchases 100 pens worth ₹500 from Vijay Stationery, Vijay must report ₹500 as sales in his GSTR-1. Ajay, in turn, must declare the same ₹500 as a purchase in his GSTR-2 (now GSTR-3B) to claim ITC. If these figures do not match, Ajay will be unable to claim the ITC.

Currently, this reconciliation process is carried out between GSTR-2B and GSTR-3B, and at times, taxpayers may refer to GSTR-2A as well. Most fields in GSTR-2 were auto-filled from the supplier’s GSTR-1, making the process relatively simple.

When Was GSTR-2 Due?

Under the GST Act, the due date for filing GSTR-2 was the 15th of the following month. A five-day gap between filing GSTR-1 and GSTR-2 was provided to correct any errors or mismatches. However, for taxpayers filing quarterly returns, no due date was ever specified.

What If GSTR-2 Was Not Filed?

If a taxpayer failed to file GSTR-2, the subsequent return in GSTR-3 (now replaced by GSTR-3B) could not be filed. This caused a cascading delay, resulting in late fees and penalties.

Both GSTR-2 and GSTR-3 have been suspended since September 2017.

Previously, any delay in filing attracted an interest rate of 18% per annum, calculated on the outstanding tax from the 16th of the following month until the date of payment. The late fee was ₹100 per day under CGST and ₹100 per day under SGST, totalling ₹200 per day, with a maximum limit of ₹5,000. No late fee was applicable on IGST.

Who Should File GSTR-2?

Every registered taxpayer was required to file GSTR-2, even if there were no transactions during a particular month. However, the following registered persons were exempt from filing GSTR-2 under the GST law:

• Input Service Distributors (ISD)
• Composition Dealers
• Non-resident taxable persons
• Persons liable to collect TCS
• Persons liable to deduct TDS
• Suppliers of online information and database access or retrieval services (OIDAR) who are required to pay tax themselves under Section 14 of the IGST Act

How to Revise GSTR-2?

Once GSTR-2 was filed, it could not be revised. Any errors or omissions made in a particular month’s return had to be corrected in the next month’s return. For example, if a mistake was made in the GSTR-2 for July 2017, the correction could be made in the GSTR-2 for August 2017.

What is GSTR-2A?

GSTR-2A is an automatically generated purchase-related return created on the GST portal. When a seller files GSTR-1, the details of outward supplies are reflected in the buyer’s GSTR-2A. It compiles all purchase information for a registered buyer based on the data furnished by their suppliers.

Since GSTR-2A is dynamic in nature, its details can change if suppliers modify or revise their GSTR-1 in later tax periods. To provide a static summary for ITC reconciliation, the government later introduced GSTR-2B.

What is GSTR-2B?

GSTR-2B is a static, auto-drafted statement introduced for regular taxpayers, available on a month-wise basis. It was implemented on the GST portal starting from the August 2020 tax period. Unlike GSTR-2A, the details in GSTR-2B remain unchanged for a particular tax period, even if the supplier later modifies or updates their data. This makes it easier for taxpayers to refer to GSTR-2B for determining their eligible Input Tax Credit (ITC) while filing GSTR-3B for that specific period.

Contents of Form GSTR-2

The GSTR-2 format prescribed by the government includes 13 main headings. Each section requires specific details to be furnished by the taxpayer.

1. GSTIN – Every registered taxpayer is assigned a state-wise, PAN-based 15-digit Goods and Services Taxpayer Identification Number (GSTIN). This GSTIN is automatically populated at the time of filing the return.

2. Name of the Taxpayer – The legal and trade name of the taxpayer will be auto-populated in the form.

Month and Year – Mention the specific month and year for which the GSTR-2 return is being filed.

3. Inward Supplies from Registered Taxable Persons – Most purchase details from registered suppliers will be auto-filled based on the sellers’ GSTR-1 filings. This section includes details such as type, rate, and amount of GST, eligibility of ITC, and the amount of ITC available. However, it excludes purchases made under the reverse charge mechanism.

In cases where:

• The seller has not filed GSTR-1, or
• The seller filed GSTR-1 but omitted a transaction,
  the buyer can manually add such purchase details. The seller will then receive a notification to accept or reject the change in their GSTR-1A. If goods are received in multiple lots, the invoice must be reported in the month when the last lot is received and recorded in the books of accounts.

4. Inward Supplies on Which Tax is Payable on Reverse Charge –
Some goods and services fall under the reverse charge mechanism (RCM), where the buyer, not the seller, is liable to pay GST. A registered taxpayer making purchases exceeding ₹5,000 per day from an unregistered dealer is required to pay GST under RCM.

• 4A: Purchases specifically subject to reverse charge under the GST law (e.g., purchase of cashew nuts from an agriculturist).
• 4B: Purchases from unregistered dealers exceeding ₹5,000 per day.
• 4C: Reverse charge tax on imported services must be reported under this head.

5. Inputs/Capital Goods Received from Overseas or SEZ Units on a Bill of Entry –
All imports of inputs or capital goods made against a Bill of Entry must be reported here. Purchases from SEZ units are also covered under this section.

• 5A: Imports – Report all imported inputs or capital goods with details such as Bill of Entry number, 6-digit port code, and 7-digit bill number.
• 5B: Received from SEZ – Report goods or capital items purchased from sellers located in a Special Economic Zone.

6. Amendments to Details of Inward Supplies Furnished in Earlier Returns (Tables 3, 4, and 5) –
Since GST returns cannot be revised once filed, any corrections or amendments to previous months’ data must be made under this heading in the following month’s return.

The buyer can manually update or correct earlier purchase details, and the seller will receive a notification in GSTR-1A to accept or reject the change.

• 6A: Contains all revisions related to domestic inward supplies (excluding imports).
• 6B: Includes changes in tax or value for imported goods and SEZ supplies. The taxpayer must specify the updated Bill of Entry or Import Report details.
• 6C: All debit and credit notes related to purchases are reported here. Notes issued under reverse charge will be auto-filled from the supplier’s GSTR-1 or other relevant returns (such as GSTR-5 for non-resident taxpayers).
• 6D: Covers any amendments to debit or credit notes from previous tax periods.

7. Supplies Received from Composition Dealers and Other Exempt/Nil-Rated/Non-GST Supplies –
This section includes all purchases from composition dealers and supplies that are exempt, nil-rated, or not covered under GST, such as petrol and diesel. Both intra-state and inter-state transactions must be declared.

8. ISD Credit Received –
Contains details of Input Tax Credit received from a registered Input Service Distributor (ISD), typically a head office distributing ITC to its branches. This information is auto-populated from GSTR-6 filed by the ISD.

9. TDS and TCS Credit Received –

• TDS Credit Received: Applicable to businesses engaged in specified contracts with government bodies or notified persons. The government deducts a certain percentage of the transaction value as Tax Deducted at Source (TDS). The data is auto-populated from GSTR-7 filed by the deductor.
• TCS Credit Received: Applies to online sellers registered on e-commerce platforms. The e-commerce operator collects tax at source (TCS) while making payments to such sellers. The details are auto-populated from GSTR-8 filed by the operator.

10. Consolidated Statement of Advances Paid/Advance Adjusted on Account of Receipt of Supply –
Any advance payments made during the month are to be reported here. If advance tax was paid for goods or services in an earlier period but invoices were received in the current month, such details must be included. Advances related to reverse charge transactions must also be declared.

Normally, sellers issue advance receipts upon receiving payment. However, for purchases under reverse charge, the buyer must issue the receipt if payment is made in advance.