ITC Some Common GST Compliance Challenges Faced By Manufacturers

Are you a manufacturer dealing with ITC challenges? Let’s start with the basics. The Goods and Services Tax (GST), the biggest tax reform in India, is driven by term reconciliation. It can be termed a GST compliance challenge that is unavoidable, tedious, and highly time-consuming. GST reconciliation is not just a single-time obligation but an ongoing process. In India, it is acknowledged as one of the typical GST difficulties you will face as a manufacturer. 

What is an Input Tax Credit?

ITC stands for Input Tax Credit. The mechanism is the GST system, which allows businesses to offset the tax. They pay for inputs such as raw materials, goods, and services against the tax and are liable to pay for their output supplies, such as final products or services. 

To simplify the term for you, it's like a discount on the tax you owe, based on the taxes you have already paid on your purchase.

Once certain requirements are met, the taxable person may be eligible to deduct input tax credit from the GST due on sales. It is under the GST law that is more or less in line with the pre-GST regime, except for a few additional ones for ex-GSTR-2B. These rules are direct and strict for everyone, you should be aware of them.

GST Reconciliation

To understand the clear picture of GST reconciliation, you should be aware of the comparison of two sets of data

  • Details submitted 
  • The ongoing process of submitting GST returns with actual purchase, sale, and credit

Through this article, you will discover the basics of types of GST reconciliation and various challenges of GST faced by manufacturing units in (ITC) Input tax credit reconciliation.

Types of GST Reconciliation

To discover the difference in sales registers, a reconciliation between Form GSTR-1 & Form GSTR-3B is essential to be carried out. 

Two ways of input tax credit reconciliation can be carried out; check the following:

1 Reconciliation between provisional input tax credit that is claimable based on the books of accounts and actual ITC is claimable as per the auto-populated statement in GSTR-2B.

2 Reconciliation between input tax credit shown in Forms GSTR-2A/ GSTR-2B and Input Tax credit reflected in Form GSTR-38.

Here are common challenges faced by Manufacturer units in (ITC)

You can understand the prevailing errors in reconciliation that are causing multiple challenges for manufacturing. 

Looking For GST Return Filing

Are you aware of different comparisons of Input Tax Credits?

According to the ITC reflected in the book of accounts, it must be compared with the credit reflected in Form GSTR-3B. The credit that is automatically generated under Forms GSTR-2A and GSTR-2B should be compared with the ITC shown in Form GSTR-3B.

Initially, the total reflected figure ought to be compared, and in case of any difference, individual reflection should be compared. The ITC reconciliation process as a whole is challenging and time-consuming because of this meticulous examination of every invoice.

Input Tax Credit Vis-a-vis Non-Compliance on the part of the supplier.

  • (ITC) Vis-a-vis non-compliance on the part of the supplier

Input tax credit stands for ITC, it is largely dependent on the accomplishment of various compliances on the part of the supplier. As per the case of supplier non-compliance risks from the suppliers' end, ITC is inclined to be denied or blocked.

Be aware that manufacturing facilities must interact with a variety of suppliers. As per that, figuring out due compliance or non-compliance on the part of every supply and for each invoice is completely pain-giving.

6 Steps of ITC 

Here is a step-by-step guide to GST for manufacturers to process in a hassle-free manner:

Step 1: Correct the period for Input Tax Credit Reconciliation.

Step 2: Gather all the relevant data for that particular period.

Step 3: Figure out the available Input Tax Credit for the particular period.

Step 4: Verify entry-wise ITC availed as per Form GSTR-3B and books of accounts.

Step 5: Verify entry-wise input tax credit availed as per Form GSTR-3B with Input Tax Credit available as per Form GSTR-2A or GSTR-2B.

Step 6: Make a summary of the differences and rectify the errors.

Why must you choose JR Compliance?

  • We will educate you on the complicated and complex process of ITC, and make it simpler.
  • JR Compliance analyzes the requirements and gives clear guidelines.
  • They will assist you in the documentation, evaluation, and examination of the ITC.
  • We believe in punctuality and expert advice. 
  • In case of any query, they are available 24*7 to resolve it.


Do you agree that GST reconciliation can be a hard task for any manufacturing unit? It is necessary to maximize the ITC (Input Tax Credit) availed and avoid unwanted levies of interest and penalties that are likely to be suffered for availing excess ITC. Avoid any time-consuming GST compliance challenges and contact JR Compliance