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GST RECONCILIATION, Its Importance and Procedure

GST reconciliation is one those important tasks which are to be conducted by every entity at the end of the year which is registered under GST irrespective of its turnover.

This involves matching of sales and purchases data between the books of accounts and as well as the different returns filed. In this article we are trying to explain the same in a simpler manner.




Reconciliation means matching of 2 or more data sets to identify differences or variances if any and also correct these unintentional misstatements which could have occurred.

Reconciliation plays an important role in case of statutory dues as it can bring out the discrepancies like short payment or non-payment of taxes or excess taxes paid as well. The different types of misstatements that can

occur in case of GST are:




1. Differences in sales details or output liability between GSTR 3B and GSTR 1.


2. Differences in sales details or output liability in GSTR 3B and in books of accounts maintained.


3. Differences of Input credit claimed in GSTR 3B and in books of accounts maintained.


4. 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.


5. Differences between input credit shown in GSTR 3B and in GSTR 2A/ GSTR 2B.

May there be any of the above reasons, these can grab the attention of the tax officer and may also lead to scrutiny notices or at the worse suspension of GST registration.


There can be multiple reasons for these mismatches.


Some of those are:


  • Input credit is claimed by us in the 8/- but the vendor has not declared liability on supplies made: As these credits are not declared by the vendor, regular follow-up for the same must be taken to ensure that the liability is declared by the vendor or else is may lead to disallowance of credit.


  • Vendor has declared the liability but input credit is not availed by us: Any such credits should be availed at the earlier of due date of September returns or Annual returns.


  • 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 of GST even though look to be a simple process, it consumes a lot of time and resources. It would not be a big task 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. Need for GST Reconciliation. There are a number of reasons as to why we need to reconcile GST returns data for businesses under GST.


  • Taxpayers can claim ITC only if the invoice is present in their GSTR 2B. So, due to this the taxpayers have to now reconcile their ITC as per books and ITC as per GSTR 2B and claim the input credit accordingly. Earlier up to July 2020, the taxpayers were allowed to claim credit as per GSTR 2A while comparing it books of accounts. 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.


Read Free Book Summaries

  • Usually GST returns are filed on monthly or quarterly basis. After the end of financial year, annual returns are to be filed on or before 31st December of the subsequent year. This task requires gathering and consolidating the records of the whole year and reporting the same. In order to ensure correctness of declaration made and to avoid duplications, the taxpayer must reconcile and consolidate the values and then make the declarations.

  • Certain deadlines are provided 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 (*due dates are subject to change as per notification by CBIC) 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 out rightly 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


How can you do GST Reconciliation?



In order to start with reconciliation, the entity must first gather a list of all the GSTIN and then look at the same at PAN level. Reconciliation is to be done for all the months in the financial year along with considering the effects of amendments made to the GST returns in the current FY for the previous FY.


Input credit is one of the most important components to be reconciled. Like in the earlier time the tax authorities used to carry out this thing while processing the return,

but now the genuineness of the taxpayer is verified by the stage of filing of his returns by comparing the same with his GSTR 2B and GSTR 2A.

Therefore supplier wise reconciliation is needed to be done on a regular basis. (Preferably on monthly basis or at the most before filing the GST return for the month of September of the following financial year.)

This will help in identifying the unclaimed GST and also take follow from the vendors who have not declared their liabilities on the supplies made within deadline.

  • Claim ITC belonging to a relevant FY, if not claimed earlier or reverse the ineligible ITC, if not identified and done earlier.

  • Match Table of exports at 6A of GSTR-1 vis-à-vis Corresponding declaration in GSTR-3B

  • Matching Table of exports at 6A of GSTR-1 vis-à-vis details of shipping bills submitted on ICEGATE

  • Comparison between Annual Income Tax Return with Annual GST return Declaration of Turnover from Business (at PAN level)

  • Comparing Purchase register vis-à-vis GSTR-2A for the entire FY

  • Compare GSTR-1 vis-à-vis GSTR-3B

  • To Compare the ITC in GSTR-3B vis-à-vis GSTR 2A for the entire year.

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Some most common issues with GST reconciliation The primary questions that come to the mind of the taxpayer are as follows: Am I:

  • Being compliant in accordance with GST and it’s claiming of ITC?

  • Losing out on any working capital by claiming less ITC than what I should be claiming?

  • Doing some mistake anywhere and hence the possibility of getting notices later?

  • Who are the suppliers from whom I am getting the most amount of pain reconciling and how can I make it easier for them and for myself?


The common issues with the reconciliation of GST between GST returns are:

  • There may be difference in the invoice number uploaded by the supplier in GSTR 2B and one received by the recipient.

  • The purchaser may have his work in multiple states, and the seller might raise an invoice with another GSTIN/HQ GSTIN instead of the actual purchaser GSTIN location. In this case it might not reflect the correct details at a GSTIN level.

  • The invoice date by the purchaser might not match with the seller. Difference may arise because the date of recording the invoices may be different at both places. Mostly purchasers are at fault here as they should’ve entered the same date as in the Sales invoice.

  • The purchaser and supplier have recorded invoices in different return periods.

  • Invoice value of Supplier and Purchaser may differs by a small value because both parties have different conventions of rounding off.

  • The invoice value differs at supplier and purchaser’s end in case a CN/DN is issued and they fails to match in a recon row.

  • When invoice number and date do not match while only the invoice value matches between two parties.

  • 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.


Tools/software’s to reconcile GST data faster and ensure better compliance




In order to solve the above problems and make it easy, we need a technological solution. This will add a lot of value to the businessmen.

Some basic that features that one must look for in a good reconciliation tool or system for matching and reconciling GST returns data are:


  • The tool should be capable of handling massive amount of data.

  • It should make it easy for the businesses to get data into the system for reconciliation and also take it back to his ERP after GST reconciliation. It should be able to get the data into the reconciliation system from any kind of source – ERP, Excel, bill books, etc.,

  • It should be able to provide insights which can help answer the pain points above.

  • Overall, it should also make the whole process month over month easy and largely efficient that the business owner does not feel a burden.

  • It should allow for easy data sharing and collaboration between the businessmen and their accountant(s).

  • The GST rules keep changing over time, the system should have the capability to evolve fast and in- line with changes by the government. This will abstract the real problem away from the businessmen and make it still seamless for them.

  • The tool must be extremely intelligent to handle any case of missing/wrong information. It can be wrong dates, wrong invoice numbers, missing items, wrong tax rate, wrong sale value and a lot more. The system should be able to provide the most effective reconciliation in any such scenarios.

  • Proactive reminders and automatics to reduce human intervention will also make the system more efficient.

Execkart GST Reconciliation Template offers one the most effective and

efficient Reconciliation Tool that comes packed with a lot of features

and intelligence to auto-identify, match entries and assure 100% ITC

claims.

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  • Books vs GSTR-3B vs GSTR-1 Tax Comparison Report: This sheet compares books with GSTR 3B and then it compares GSTR 3B with GSTR 1. Gives a numerical representation for GSTR-3B vs GSTR-1 as well. This enables clients to understand the difference in the tax liability which helps clients avoid penalty or Notice from GSTN.

  • GSTR-3B vs books ITC Comparison Report: it compares GSTR-3B with books. Gives a numerical representation for GSTR-3B vs books. If ITC is claimed in excess, this can be identified here for each month. Thus ensuring that the clients are prepared for any notice that comes their way or take necessary corrective actions.

  • Monthly Tax and ITC summary Report: Month on Month view for the top management on the tax paid and ITC taken by each of the GSTINs. Updates on the way:

We, at Execkart are very soon coming with many more exciting tools and knowledge templates which would be helpful for you to carry your business at an improved speed and in a much efficient manner (one such product on the way is a tool for GSTR 2A vs Books reconciliation).


OUR TDS RECOCILIATION FORMAT IS OUT NOW ON WEBSITE.



Conclusion

Though reconciling a handful of data is simple, but the problem emerges when the data is in bulk. And reconciling huge data manually is not only time-consuming but can also lead to GST registration suspension due to discrepancies in data. So, it is highly recommended that a taxpayer uses a fully automated solution to avoid notices from the GST authority. One such Template is EXECKART GST RECO that helps you to perform reconciliation irrespective of data quantum.


NEXT BLOG - TDS RECO. Coming Soon.........

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