GST Reconciliation: What, Why, and How?

GST reconciliation is matching sales and purchase data using different GST returns and sales and purchase registers. The concept of reconciliation is not new to taxpayers as it was prevalent in pre-GST-regime too. However, under the GST regime, reconciliation gained popularity as every data in the business records is closely monitored by the GST authorities. Moreover, reconciliation under GST plays a vital role because all the GST returns are inter-connected. 

What is GST Reconciliation? 

In typical terms, reconciliation is matching two sets of data to evaluate differences. In addition, reconciliation helps in keeping a tab on manual errors. 

Under GST, reconciliation helps the taxpayers know if the taxes are short/excess paid or not paid at all. Here are the different types of GST reconciliation that: 

1. Reconciliation between GSTR- 3B and the GSTR 2A or GSTR-2B to match Input Tax Credit (ITC) 
2. Reconciliation between GSTR-3B and GSTR-1 to know discrepancies in sales details 
3. Reconciliation between the provisional ITC and the actual ITC claimable under GSTR-2B 

Why is GST Reconciliation Important? 

There are various why GST reconciliation is important and some of the major ones are: 

1. To claim accurate Input Tax Credit for any invoice raised in any previous financial year 
2. To keep a tab on the duplicity of data 
3. To validate data by reconciling different GST returns 
4. To issue CDNs or file amendments in case if there is any mismatch due to human error or duplicity of data 

How to Perform GST Reconciliation? 

A GST reconciliation must be performed at different levels: 

1. Reconciling the data of every GSTIN 
2. Reconciliation of PAN-level data 
3. Reconciling supplier-wise data to claim any unclaimed ITC or reverse any ineligible ITC 

Reason for Data Discrepancies under GST 

1. The supplier has declared the tax liability but ITC is not claimed in the GST return 
2. The supplier does not declare the tax liability but the recipient has claimed ITC in the GST return 
3. Data discrepancy between the liability declared and ITC claimed 
4. Mistakes due to human intervention such as the wrong GSTIN of the supplier or recipient. 

Consequences of Not Reconciling Data under GST 

If a taxpayer fails to reconcile GST return data, it may result in scrutiny notices from the GST authorities. However, in some cases, a GST officer can even suspend the GST registration of a taxpayer in form REG-31. List of instances where the GST officer can suspend the GST registration of a taxpayer: 

1. The discrepancy in the sales data furnished in GSTR-1 and GSTR 3B 
2. The discrepancy in the purchase data furnished in GSTR-2B and GSTR-3B 

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 software is GSTrobo® GST software that helps you to perform reconciliation irrespective of data quantum.