GST reconciliation has been one of the major concerns of the taxpayers. GST compliances involve the filing of multiple returns. For instance, for reporting sales, we have GSTR-1 and GSTR-3B. For reporting purchases, we have GSTR-3B which involves auto-population of details from GSTR-2B. Further, the details reported in the GST returns shall match with the details furnished to the Income Tax Department as well.
Thus, a thorough GST reconciliation exercise needs to be carried out to ensure uniformity in the information furnished. But how can it be done?
To simplify things, here’s a checklist of the matching and reconciliation under GST that you should follow to keep your records clean and tallied:
1) Books Vs. GSTR-1 and GSTR-3B: Your net sales as per books should match with GSTR-1 and GSTR-3B.
2) GSTR-1 Vs. GSTR-3B: As the details of GSTR-1 get auto-populated in GSTR-3B, therefore, instances of mismatch between GSTR-1 and GSTR-3B have reduced considerably. However, this was not the case earlier. Also, in case any changes are made at the time of filing GSTR-3B, then a mismatch is bound to occur.
3)Books Vs. GSTR-2B & GSTR-2A: Your purchases (as per books) should match with GSTR-2B & GSTR-2A. GSTR-2B is the static return that shows the ITC that you are eligible to claim for a particular month. In case your supplier files his GST returns after the due date, then you cannot claim the relevant ITC in the current tax period as it won’t get reflected in GSTR-2B. Therefore, you will have to wait till the next tax period. This is because of Rule 36(4) [discussed later]. However, GSTR-2A is a dynamic return that shows the ITC for a particular month as per the invoices uploaded. It can be helpful to know all the invoices that are uploaded by the suppliers for a particular month.
As the ITC shall be claimed as per GSTR-2B, therefore, it is important to reconcile books with GSTR-2B in order to follow up on suppliers for timely filing of their GST returns.
If you find a mismatch between your records and GST returns, then the following might be one of the reasons for the mismatch:
1) ITC related Mismatch:
2) Supply Related Mismatch
GST reconciliation and matching is important because, in case of a mismatch between the books and information furnished through GST returns, it can attract proceedings by the GST department. Following can be the consequences of mismatch in GST:
Following are some of the legal provisions that make reconciliation under GST necessary:
Rule 36(4): It prescribes that a registered person cannot avail of the ITC for any invoice or debit note unless the supplier has furnished the details of such invoice or debit note in his GSTR-1 or Invoice Furnishing Facility and such invoice or debit note gets reflected in the GSTR-2B of the recipient of the invoice or debit note.
Section 16(2)(aa): It prescribes the condition for claiming ITC under GST. According to Section 16(2)(aa), it is important that the supplier furnishes the details of the invoice or the debit note in the statement of outward supplies (GSTR-1) and it has been communicated to the recipient of such supply.
Section 44 read with Rule 80: Section 44 requires every registered person [excluding person paying tax under Section 51 or 52 (TDS and TCS), input service distributor, non-resident taxable person and casual taxable person] shall furnish an annual return. It may include a self-certified reconciliation statement that reconciles the value of supplies as declared in the GST returns with the audited annual financial statements.
However, if the aggregate turnover of such person exceeds Rs. 5 crores during the financial year, then it shall be mandatory to furnish a self-certified reconciliation statement in Form GSTR-9C along with the annual return.
Both the annual return and the reconciliation statement in GSTR-9C shall be filed on or before 31st December following the end of the financial year.
However, vide Notification No. 31/2021 – Central Tax dated 30th July, 2021, registered persons whose aggregate turnover is up to Rs. 2 crores in the Financial Year 2020-21 are exempted from filing the annual return for the said financial year.
Finance Act, 2022 amended the last date for rectifying any changes in the GST returns. Therefore, while carrying your reconciliation under GST, if you find any discrepancies, then you need to make the relevant changes before the following due dates:
In case of any query, please feel free to contact the ASC Group.
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