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What is GST Reconciliation?

June 07, 2021

Reconciliation Under GST

What is GST Reconciliation?

GST matching and reconciliation is a regime in GST in which the business organization should do monthly. The matching concept is a mechanism implemented by the government allowing input tax credit to the recipient only if the corresponding outward supply of the recipient is matched. Under GST, reconciliation means analyzing every transaction that took place during a period to ensure that the supplier’s data matched with the recipient's data. This will make sure that there are no malpractices and missing data.

In GST, the reconciliation procedure gained significance because the input tax credits utilized by the businesses are closely monitored by the GST authorities through an online taxation system. The taxpayers should reconcile their data in every month if any discrepancies occur

Why is GST Reconciliation Required?

Reconciliation of data every month is necessary to claim the Input Tax credit. The reconciliation process makes sure that sales and purchase details are not omitted or wrongly filled in the GST returns. Major mismatches and differences in data will lead to the suspension of GST registration.  

Reconciliation of taxes should be done at every month. Then only the recipient can claim regular ITC. Taxpayers can claim ITC only if they submit GSTR 2B which shows the eligible and ineligible amounts of ITC for a particular month and cannot be changed. If the GSTR 2B are not matched with the purchase register then they need to do a reconciliation

  • For yearly reconciliation one must ensure that ITC claimed as per books of accounts are matched with GSTR 2A. For TDS and TCS credits, one must still refer to GSTR-2A.
  • When the financial year gets over, annual returns must be filed before 31st December of next FY. For this process, the taxpayer should reconcile data and consolidate the value. To ensure correctness, avoid duplication and omission of data reconciliation must be done by every taxpayer.
  • From January 1st, 2021, the tax officer can suspend GST registration of taxpayers if he or she finds any discrepancies in comparing details of outward supplies shown in GSTR 1 versus GSTR 3B and comparing details of inward supplies shown in GSTR 2B with GSTR 3B. Invoice matching under GST is a mechanism by which all the taxable supplies invoices issued by the supplier must be matched with taxable supplies invoices of the recipient.

How to do GST Reconciliation?

Reconciliation must be done every month for the entire financial year. The amendments made to GST returns in the previous financial year should also reflect in the current financial year.  The following steps will help you while framing a GST reconciliation : 

  • Start Reconciliation with GSTIN
  • Next, you should reconcile data to the pan level
  • Afterward, you should do supplier-wise GST reconciliation to find whether there are any unclaimed ITC.

GST reconciliation is a great task if there is a lot of data. To make the reconciliation process facile people can use GST reconciliation software or they can do GST reconciliation online.

Types of GST Reconciliations

There are various types of reconciliations. Some of them are

  • Vendor Reconciliation
  • Customer Reconciliation
  • Business-specific Reconciliation

Reconciliation processes are to ensure clarity and correctness in accounting. The vendor reconciliation format and procedure are different from the customer reconciliation format. Vendor-wise reconciliation must be done regularly. If it is not done, the taxpayer must do it before filing GST returns of September of the financial year. It will help to identify unclaimed Input Tax Credit before the end of the period.

Challenges in the GST Reconciliation?

One of the major challenges in doing reconciliation is that the parties involved in the GST reconciliation were it use different methods for their invoice numbers. Some of the major issues with the reconciliation between GST and GST returns are listed below:

  • Due to following different conventions, the purchaser's invoice number does not match with the seller's invoice number in GSTR 2B  and may lead to many perplexities.
  • In some cases, the invoice date of the purchaser does not match with the seller because the date of recording will be different for them.
  • Both the purchaser and seller recorded invoices in different return periods.
  • There may occur a slight difference in invoice value because both of them round off the value in different ways
  • The purchaser may work in different locations and the seller has raised another GSTIN rather than the actual one. This will lead to a mismatch.
  • There are more than one invoices between supplier and purchaser in which every invoice is of the same value at different dates. If one of the parties has recorded invoices higher than the other the problem may occur. This happens in the case of regular fixed supply business.

How to choose a Tool or Software to do the GST Reconciliation Process?

Technological support may help people to untangle reconciliation headaches. Choosing the right tool or software will make their work much easier. Let us see tools with what features will help you to resolve reconciliation complexities.

  • A tool with a larger efficiency
  • It should handle a massive data
  • Should be easier for business owners to get data into the system and the data for reconciliation should be available from any kind of sources including ERP, Excel, etc. This ensures proper integration. 
  • It should easily share matching and reconciling GST data with the owner and accounts team.
  • Should be a proactive reminder and reduce human interventions
  • Ability to absorb and understand the law changes in GST laws
  • Identify the wrong piece of information and data




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