GST Reconciliation

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 GSTR2A /GSTR2B.
• 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.