Chapter 8: How Important is Data Matching and Reconciliation Under GST

How Important Is Data Matching And Reconciliation Under GST?

In this video, we will discuss data reconciliation - its importance, some of the popular cases of data mismatch and reconciliation of the same.


Let us first start with what is data reconciliation and its importance?

Under the GST regime, the liability to pay tax arises at the time of supply as determined for goods and services. Thus, every registered person should compute his tax liability on a monthly basis by utilizing input tax credit against outward tax liability and make the payment for balance liability. 

However, since all registered taxpayers are required to file various returns such as GSTR-1, 2A and 3B and 9, on a monthly and annual basis, there could be cases where there are differences due to

  • Mismatch of input tax credit between GSTR-3B and the auto-generated GSTR-2A
  • Mismatch of outward supplies between GSTR-1 and GSTR-3B due to a time-lag in reporting

And several more that will be discussed in detail later.

These mismatches need to be reconciled on a regular basis and the shortfall in tax, if any, needs to be paid. If the shortfall in tax is not paid on time, the Department may issue a notice for such shortfall. Thus, it is very important on the part of a taxpayer to reconcile data on a timely basis in order to avoid notices and further adjudication proceedings.


So what are these notice issued by the GST Department?

A Department may issue a Notice for violating the rules under GST such as short payment/non-payment of taxes, for claiming a wrong refund or the wrong availment of input tax credit, etc. under Section 73 and Section 74.

Section 73 deals with cases where there is non-payment/under-payment of tax without any intention or invocation of fraud.

Section 74 deals with cases where there is non-payment/under-payment of tax with intention or invocation of fraud.

In both cases, a taxpayer can make voluntary payment of tax, with interest and penalty as applicable, within 30 days of issue of the Notice. Failing which, the Department can take further action as deemed necessary.

Let us find out more about the Returns under GST, and learn about the reconciliation process.

What is GSTR-2A?

GSTR-2A is an automatically-generated return on the GST Portal. It captures purchase related details from the sellers GSTR-1 return. This return is for information purposes only and need not be filed.

GSTR-1-

GSTR-1 is a monthly/quarterly return to be filed by taxpayers to disclose their outward supplies for the month/quarter along with tax liability. 

GSTR-3B-

GSTR-3B is a Summary Return where the taxpayer has to disclose his outward supplies, tax liability, input tax credit claimed, etc. for the month. 

There may be cases of differences in reporting between the GSTR-1 and GSTR-3B returns, such as:

  1. The difference in the timing of reporting invoices in GSTR-1 and GSTR-3B.
  2. Issue of debit/credit note in a month later than the month of issue of the invoice.
  3. Supplies reported under the wrong table in GSTR-3B whereas the same is correctly reported in GSTR-1. 
  4. Interstate supplies to unregistered persons eliminated in GSTR-3B whereas the same is correctly reported in GSTR-1.
  5. Tax paid is reported under the wrong head. For e.g IGST instead of CGST & SGST or vice- versa.

Resolution: Any shortfall in tax arising due to such differences needs to be paid off along with interest. If not paid on time, the same may lead to the initiation of Demand Notice from the Department. Thus, reconciling GSTR-1 with GSTR-3B is an important exercise which needs to be done on a regular basis.


GSTR-3B vs GSTR-2A

It is very important to reconcile GSTR-2A and GSTR-3B, as the taxpayer can claim input tax credit on a particular invoice only if that invoice is present in the GSTR-2A. This also helps the Department in verifying whether all transactions which occurred in a particular time period are correctly recorded and posted in GSTR-3B.

Some of the popular cases of mismatch are:

  1. The supplier has failed to upload the invoice in his GSTR-1 and thus the same is not getting reflected in the recipients GSTR-2A.
  2. The supplier has shown incorrect excess/duplicate outward supplies in GSTR-1 but the same is obviously not reported by the recipient in his GSTR-3B.
  3. The credit of IGST on import of services is claimed by the recipient in GSTR-3B whereas the corresponding GSTR-1 is not required to be filed by the supplier in this case as it is an import.
  4. ITC for goods and services received in FY 2017 – 18 but availed in FY 2018 – 19.
  5. The credit of GST paid on reverse charge basis.
  6. Transitional credit claimed in TRANS-I and TRANS-II.

Resolution: Any excess credit claimed by the taxpayer due to certain differences needs to be paid along with interest. And in other cases, the mismatches need to be intimated to the supplier in case the error is committed from his side, so that he can make the necessary amendments. If not paid/rectified on time the same may lead to the initiation of Demand Notice from the Department.

Reconciliation at the time of GSTR-9

A taxpayer should reconcile his books and returns before filing GSTR-9 and take corrective action on mismatches in the returns, as well as rectify the same in the books of accounts, if necessary. 

Timely action on the mismatches ensures consistency in data reported in all the returns i.e GSTR-1, GSTR-3B, GSTR-2A and GSTR-9.