Case Study: SME Overcomes GST Hurdles, Recovers ₹2.5 Lakhs in ITC

Many Small and Medium Enterprises (SMEs) in India grapple with the complexities of Goods and Services Tax (GST) compliance. Incorrect filings, missed Input Tax Credit (ITC), and lack of clarity on GST provisions can lead to significant financial strain and potential penalties. This case study highlights how "Precision Parts Mfg." (name changed for confidentiality), a mid-sized manufacturing SME, partnered with Income Review to transform their GST management, resulting in substantial ITC recovery and streamlined compliance.

The Challenge: Mounting GST Issues and Lost ITC

Precision Parts Mfg. had been managing their GST filings in-house with limited expertise. Over time, they faced several challenges:

• Inconsistent ITC Claims: Due to improper reconciliation with GSTR-2A/2B, a significant amount of eligible ITC was being missed or incorrectly claimed.
• Frequent Errors in GSTR-1 & GSTR-3B: This led to mismatches, minor notices, and a constant fear of larger departmental actions.
• Lack of GST Know-how: The internal team struggled to keep up with frequent GST amendments and notifications, impacting their ability to apply correct tax rates and provisions.
• Blocked Working Capital: Missed ITC and potential interest on incorrect filings were straining their working capital.
• Fear of Penalties: The accumulation of small errors raised concerns about potential future penalties during GST audits.

The company realized they needed expert intervention to rectify past issues and establish a robust GST compliance system for the future.

The Income Review Solution: A Systematic Approach

Income Review's team initiated a comprehensive GST health check and rectification process for Precision Parts Mfg.:

1. Detailed Review of Past Filings: We meticulously reviewed GST returns filed over the previous two financial years, comparing them with purchase records, sales data, and GSTR-2A/2B statements.
2. ITC Reconciliation and Identification: Our experts identified discrepancies and pinpointed specific instances of missed or under-claimed ITC. This involved cross-verifying invoices and following up with suppliers where necessary.
3. Rectification of Errors: We guided the client on correcting errors in past returns where permissible and advised on adjustments in future returns for ITC that could still be claimed within the statutory timelines.
4. Streamlined Monthly Compliance Process: A new, standardized monthly process was implemented for data collection, invoice verification, GSTR-1 preparation, thorough GSTR-2B vs. purchase register reconciliation, and timely GSTR-3B filing.
5. Team Training and Advisory: We provided basic training to the client's accounting team on GST best practices, invoice management, and understanding GSTR-2B. Ongoing advisory was provided for any complex transactions.

The Results: Significant Financial Recovery and Peace of Mind

The systematic approach yielded tangible benefits for Precision Parts Mfg.:

• ITC Recovery of ₹2.5 Lakhs: Through diligent reconciliation and rectification, we were able to help the client identify and correctly claim previously missed Input Tax Credit amounting to approximately ₹2.5 lakhs.
• Elimination of Filing Errors: The new standardized process drastically reduced errors in monthly GST filings, leading to fewer mismatches and zero notices for the subsequent periods.
• Improved Cash Flow: Timely and accurate ITC claims directly improved the company's working capital position.
• Enhanced Compliance Confidence: The management gained peace of mind knowing their GST affairs were being handled professionally and accurately.
• Reduced Risk of Penalties: Proactive error correction and robust ongoing compliance minimized the risk of future penalties.

"Income Review didn't just file our returns; they overhauled our entire GST process. Recovering ₹2.5 lakhs in ITC was a huge boost, and the clarity they brought to our compliance is invaluable. We can finally focus on our manufacturing without worrying about GST errors." - Director, Precision Parts Mfg.

Conclusion

This case study demonstrates that with expert guidance and a systematic approach, SMEs can overcome common GST challenges, optimize their tax liabilities, and ensure robust compliance. Investing in professional GST services can lead to significant financial savings and allow business owners to concentrate on their core operations with greater confidence.

If your business is struggling with GST compliance or suspects missed ITC opportunities, contact Income Review for a consultation. We can help you navigate the complexities of GST and unlock potential savings.