What is GST reconciliation and matching?

In general, reconciliation means comparing two sets of data entries to identify any differences or variances. It is done to correct the unintentional errors earlier committed or any omissions.

Under taxation, reconciliation holds importance because it can give rise to tax short paid or not paid or excess paid as well. Following mismatches or differences can be noticed by taking up following matching and reconciliation exercise:

  • Differences between the amount of input tax credit shown in GSTR- 3B and the GSTR 2A/ GSTR-2B
  • Discrepancies in sales details between GSTR-3B and GSTR-1
  • Until 31st Dec 2021, differences in the provisional credit as claimed under CGST Rule 36(4) and the actual credit that is claimable as per GSTR-2B across return periods.
  • differences between ITC values available in GSTR-2B versus ITC available in books of accounts for rigorous vendor follow-ups especially from 1st Jan 2022 after removing provisional ITC by virtue of Section 16(2)(aa).
  • Differences in sales details between the books of accounts and GSTR-1 as auto-populated from the e-invoicing system.
  • Differences in tax payable upon comparing the auto-populated GSTR-3B with the books of accounts.

Any differences noticed between these returns will lead to scrutiny notices being issued to the taxpayers or worse suspension of GST registration.

There can be several causes for mismatches. Popular ones are:

  • The vendor has declared liability but credit is not availed in GST returns: Such credits should be availed at the earlier of due date of September returns or Annual returns.
  • The vendor has not declared liability on supplies made but businesses have availed credit on such procurements in the GST returns: Businesses should follow up with the vendor to ensure that the liability is declared. Else, risks of such credits being disallowed may arise.
  • Mismatch between liability declared by the vendor and credit availed: The reasons for differences should be identified and reconciled appropriately (e.g. by issuing debit notes/credit notes etc) 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.
  • Mistakes in the details furnished: There can be mismatch in the fields such as GSTIN of the supplier/recipient, number and date of the invoice/debit note etc. Make amendments in the GST returns of the month following the relevant month when mistakes were committed.

Reconciliation under GST although seems to be a simple process due to automation still consumes a lot of time and resources. One such example is that taxpayers are required to continuously communicate with vendors for making amendments in the returns filed by them or even to track ITC claims. 

It would not be tasking for businesses having a handful of transactions to monitor. However, in case you have thousands of invoices in a month, then even a single-digit percentile will be a significant volume. Therefore, one must reconcile the returns data on a regular basis under GST.

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.
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Why TaxBizz India as your service provider for Rectification of GST Reconciliation Services ?

Choose TaxBizz India as your service provider for Rectification of GST Reconciliation Services for unparalleled expertise, reliability, and personalized attention. With a proven track record of delivering accurate and efficient solutions, they ensure compliance and optimization of your GST reconciliation process, allowing you to focus on your core business operations with confidence.

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