GST ITC Reconciliation
Deliverables - Timeline
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Deliverables
GST Reconciliation Workings
ITC Reconciliation Report
Discrepancy Report
ITC Eligibility Review
Mismatch Reconciliation
Supplier Compliance Check
Timeline
2 Days
(from receipt of all documents)
GST Reconciliation and Matching Overview
GST Reconciliation:
Reconciliation refers to the process of comparing different records and returns (such as GSTR-1, GSTR-3B, and purchase invoices) to ensure they align. It helps identify any discrepancies and correct them before final submission to the GST authorities.
It involves cross-checking sales (outward supplies) and purchase (inward supplies) details, tax payments, and input tax credits across multiple returns.
GST Matching:
GST matching is the process of ensuring that the details of outward supplies (sales) and inward supplies (purchases), including the tax paid, reported in different forms like GSTR-1 (sales) and GSTR-3B (summary return) are consistent.
It also involves matching the input tax credit (ITC) claimed in GSTR-3B with the details shown in GSTR-2A/2B (auto-generated by the GST system based on GSTR-1 filed by suppliers).
Why is GST Reconciliation required ?
There are several reasons why reconciliation for GST returns data is required by businesses under GST.
Taxpayers will be able to claim ITC only if the invoice is present as a part of their GSTR-2B. Due to this, taxpayers will now need to do a reconciliation wherever the ITC as per their purchase register and GSTR-2B data is not matching. Upto July 2020, taxpayers were comparing the GSTR-2A with purchase register. Due to the introduction of static return in form GSTR-2B, the monthly reconciliation has moved from GSTR-2A to GSTR-2B. However, for the yearly reconciliation, GSTR-2A which is dynamic return is preferred. But as an exception, one must still refer to GSTR-2A for TDS and TCS credits.
GST returns are filed monthly or quarterly basis. Finally, after the financial year gets over, annual returns must be filed before the 31st December of subsequent FY. This would need consolidation of the data reported over the FY. In order to ensure the correctness of the declaration made and to avoid duplications, taxpayers must reconcile the data, then consolidate the values and make the declaration.
Certain deadlines are stipulated in the GST laws for making amendments to GST returns data or to claim ITC. As per CGST Act, following actions must be taken, at the earlier of filing the return under section 39 for the month of September* following the end of the financial year to which a particular invoice pertains, or the furnishing of the relevant annual return:
Claim eligible ITC against any invoice raised in a FY.
Any apportionment of ITC belonging to a FY, as eligible and ineligible not made earlier must be affected before the deadline.
Declare CDNs issued against any Invoices raised in a FY.
File Amendments to information reported in the GST Returns filed in a FY.
With effect from 1st January 2021, if the tax officer may outrightly suspend GST registration of taxpayer and send show cause notice to cancel registration in form REG-31 if he finds any discrepancies:
On comparing details of outward supplies furnished in GSTR-1 versus GSTR 3B
On comparing details of inward supplies reflecting in the GSTR-2B when compared to GSTR-3B
Major and common issues with GST reconciliation
The primary concerns of the taxpayer revolve around the following:.
Am I:
Being Tax compliant in accordance with GST and it’s claiming of ITC?
At fault anywhere and hence the possibility of getting notices later?
Missing out on possible working capital by claiming less than what I should be claiming?
Who are the suppliers from whom I am getting the most amount of pain reconciling and how to make it easier for them and for myself?
The major issues with the reconciliation under GST between GST returns are:
1. The invoice number that the purchaser has recorded does not match with the seller’s invoice received in GSTR-2B. Both follow a different convention.
2. The purchaser may work in multiple states, and the seller has raised an invoice with another GSTIN/HQ GSTIN instead of the actual purchaser GSTIN. In this case it might not reflect completely at a GSTIN level.
3. The invoice date by the purchaser doesn’t match with the seller. Difference because the date of recording the invoices is different at both places. Most purchasers are at fault here as they should’ve entered the same date as in the Sales invoice.
4. The purchaser and supplier have recorded invoices in different return periods.
5. Invoice value from Supplier and Purchaser differs by a minor value because both parties have different conventions of rounding off.
6. The invoice value differs at supplier and purchaser’s end in case a CN/DN is issued and it fails to match in a recon row.
7. When invoice number and date do not match while only the invoice value matches between two parties.
8. There are multiple invoices between a purchaser and supplier where every invoice is of the same value at different dates and one of the parties has recorded invoices higher than the other. This happens in the case of regular fixed supply business.
One of the major challenges in doing a reconciliation is that both parties involved may have different nomenclature of storing the invoice numbers, while the implementation has a hard match around invoice number.
GST Reconciliation involves :
GST reconciliation is a crucial exercise for ensuring that your business remains compliant with GST laws and regulations. It involves systematically checking and matching the data from various GST returns such as GSTR-1, GSTR-3B, and GSTR-2A/2B, as well as verifying the tax liabilities, ITC, sales, and purchase figures. By performing regular reconciliation, you can avoid penalties, ensure correct ITC claims, and maintain a smooth GST filing process.
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FAQs
There are close to 10 different types of GST reconciliation, some being three way reconciliation and some at annual level.
