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GST Reconciliation is the evaluation and rectification of mismatched data in the GST Portal or between the GST Portal and the books of accounts due to unintentional manual errors or omissions, communication gap between the supplier and the purchaser, dissimilarity between the GST laws under CGST Act, 2017 and the Accounting Standards etc.
Reconciliation of Purchase Register with GSTR-2A –
• GSTR-2A is an auto-populated statement of inward supplies on the GST portal. It gets generated from the data uploaded by the supplier in GSTR-1 on the portal.
• Purchase register is a register of inward supplies maintained by a registered person or company at the registered office.
• The reconciliation of the mismatches between the purchase register and GSTR-2A is considered as Reconciliation of Purchase Register with GSTR-2A.
• It is more prone to get mismatched due to various reasons.
• For example, when the supplier provides wrong invoice or issues a credit note but fails to communicate this with the purchaser, or provides wrong invoice details in GSTR-1, there will be discrepancy between GSTR-2A and the Purchase Register.
• Again, when the GSTIN of the purchaser is wrongly provided or not provided, the invoice details as a whole won’t appear in GSTR-2A.
• Few common mismatches may also occur such as mismatch in invoice date, invoice no., HSN Code, etc.
• Reconciliation of such mismatches should be made by providing correct GSTIN to the supplier.
• The invoice values of the supplies, amount of GST, HSN code, RCM (Reverse Charge Mechanism) details should be matched by tallying GSTR-2A with the purchase register.
• If any discrepancy arises, it should be communicated to the supplier asking for the reason for such difference and amendment of such invoice details in the GST portal, if applicable.
Reconciliation of Sales Register with GSTR-1 -
• GSTR-1 is the statement of outward supplies on GST portal where data is provided on a manual basis.
• Sales register is the register of outward supplies maintained by a registered person at the registered office.
• The reconciliation of the mismatches between the sales register and GSTR-1 is considered as Reconciliation of Sales Register with GSTR1.
• Major discrepancies occur due to clerical errors between sales register and GSTR-1or differences due to auto-populated GSTR-1 due to e-invoicing facility.
• Mismatch may occur due to differences in invoice value, invoice date, invoice no., HSN Code, GST rate, etc.
• The supplier can reconcile the outward supply details of GSTR-1 with sales register by cross-checking the details like GSTIN of the purchaser, invoice value, rate of GST, etc. with other documents like invoices, challans, etc. before final submission of GSTR-1 in order to avoid such mismatches.
Reconciliation of GSTR-3B with GSTR-2B –
• GSTR-3B is the summary of GST returns filed in which the liability under GST gets reflected on the GST portal.
• GSTR-2B must be reconciled with GSTR-3B in order to ensure accurate eligible ITC claim under this regime.
• Although, GSTR-3B has become auto-populated w.e.f. 4th September, 2020, the exact credit amount may not get reflected due to quarterly returns filing system of the supplier or late filing of GSTR-1 or understating of invoice value in GSTR-1 by the supplier.
• ITC cannot be claimed for the excess GST reflecting in GSTR-2B.
• Also, invoice value may be overstated by the supplier. For this the supplier will make amendments in GSTR-1 in subsequent financial years but ITC should be claimed as per invoice details.
• The purchaser can reconcile such mismatches by regularly communicating with the supplier and keeping a list of the ITC already availed and required to be availed which is not reflecting in GSTR-2B. So that, no ITC remains unclaimed.
• The new update in provisional ITC w.e.f. 1st January, 2022, though reduced the probability of discrepancies yet has also compelled the purchaser to communicate with the supplier on a regular basis due to removal of such provisional credit as per Section 16(2)(aa).
• GSTR-2B gets generated on 12th of every following month. So, the ITC does not reflect in GSTR-2B in case the supplier fails to file his GSTR-1 within the due date of 11th of every following month. In such a case, the supplier will be able to claim the ITC in future months.
Reconciliation in Annual Financial Statement and GSTR-9 (Annual Return)
Discrepancies between the Annual Financial Statement and GSTR-9 (Annual Return) may occur due to the following reasons –
• A registered person may have multiple registrations due to different business verticals.
• The books of accounts are required to be examined separately as it may impact the reported turnover as per AS-17.
• In order to keep a track on the transactions related to inter-branch transfer on goods, data may be derived from delivery challans, e-way bills or other such documents from the principal place of business.
• Unbilled revenue is the revenue which was accounted in the earlier years due to accrual basis of accounting system and revenue recognition as per AS-9 for which invoice has been raised in the current financial year.
• As per Section-12/13 of CGST Act, 2017, the time of supply is the date of invoice or date of receipt of payment whichever is earlier (in case invoice is not raised within 30 days of service, then the time of supply is the date of provision of service or date of receipt of payment whichever is earlier) and the liability to pay tax under GST regime arises upon supply of goods or services as per Section-9.
• So, as per GST regime, the tax is required to be paid in the current financial year. So, differences will arise between the Annual Return and the Annual Financial Statement of the Registered Person.
• Unadjusted advance is the advance on which GST has been paid as per Section-12/13 of CGST Act, 2017 but not yet recognised as revenue in the Financial Statement and recorded as either current liability or long-term liability. Hence, the reconciliation of such discrepancies should be taken into consideration.
• The turnover in GSTR-9 (Annual Return) should exclude the amount of Deemed supply under Schedule I yet it remains included in the Annual Financial Statements of the Registered Person.
• Credit notes issued after 31st March for a supply accounted for in the current financial year reflects in the annual return.
• Also the credit notes that have been accounted for in the financial statements but not allowable under CGST Act, 2017 create differences between the annual financial statements and the annual return.
• The turnover in GSTR-9 (Annual Return) of the supplier should not include the amount of supplies attracted to Reverse Charge Mechanism (RCM) as on this GST has already been paid by the purchaser of the goods or services under this mechanism.
• The purchaser must not include the amount of tax paid under RCM in output tax and the amount of outward supplies should also exclude the amount of inward supplies on which tax has been paid under RCM as per GST laws. So, reconciliation of such discrepancies should be considered.
Variance in Invoice details:
• There can be various reasons for which differences may arise in the invoice details of the supplier and the purchaser.
• Variation can be due to invoice number and invoice value mismatch and mismatch or non-availability of the GSTIN of purchaser.
• If there are wrong details of invoice and purchaser with the supplier then the registered purchaser will fail to claim Input Tax Credit (ITC) or claim lesser amount of GST ITC.
Input Tax Credit (ITC): Variation may arise in ITC due to mismatch in the amount of credit reflecting between the returns like differences between GSTR-2B and GSTR-3B. This happens in the following circumstances:
• Liability declared by the supplier yet ITC unclaimed.
• Failure to declare liability on the part of the supplier yet ITC claimed by the purchaser.
• Differences between the amount of liability declared by the supplier and ITC claimed due to manual errors, issue of CDNs (Credit notes and Debit notes) left unposted or uncommunicated, etc.
Auto-populated GST Portal: Auto-population of GSTR-3B w.e.f. 4th September, 2020 and GSTR-1 due to e-invoicing w.e.f. 26th November, 2021 has given rise to the discrepancies on the above returns with the books of accounts. These discrepancies need to be kept in track and rectified in order to avoid non-compliances.
Dissimilarity between GSTR-9 and Annual Financial Statements – Discrepancies may occur between the Annual Financial Statements and Annual Return due to various reasons like multiple registrations, unbilled revenue, unadjusted advances, RCM, etc.
Human errors: Major discrepancies occur due to clerical errors or omissions on part of the supplier as well as the purchaser.
GST reconciliation is very important and should be done on a regular basis in order to adhere to compliance under GST and avoid the consequences of non-reconciliation of GST returns.
In case the taxpayer fails to reconcile the GST return and remove the discrepancies, scrutiny notices are issued by the GST authorities. In some case, the GST registration of the taxpayer may also get suspended in form REG-31.
*(Exclusive of Government fees & taxes)
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