Reconciling GSTR 1 with GSTR 3B

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When it is time to file ITC claims, businesses get busy making sure that the invoices they have filed on GSTN match with the GSTR 2A and that there are no mismatches in GSTR 1 and 3B records as well. This is important so that the ITC claims are not rejected ad they don’t receive any notice from the GST department.

The reconciliation of GSTR forms filed with GSTN

The GSTR 2A which is a self-generated form on the GSTN network needs to be matched with the purchase records filed by taxpayers. Ever since GSTR 2 has been scrapped by the government the only other purchase record that is filed by taxpayers is the GSTR 3B where consolidated monthly purchases along with consolidated sales are filed. ITC claims are also filed in this form whereby the taxpayers claim their rightful tax credits from the government.

Tax credits are a huge savings for any business and hence the entire reconciliation process is of prime importance for any business. However even when matching of GSTR 3B with 2A is important, there is another matching that needs to be done. The matching of GSTR 3B with the GSTR 1 that a taxpayer has filed.

Matching GSTR 1 with GSTR 3B

Many would think that this is not an issue since you are matching the records that were filed by you. It should obviously match. However, during the first year of GST there have been numerous changes in the way GST returns were filed. Starting with a GSTR 1, 2, 2A and 3 regime it drilled down to just filing GSTR 1 and GSTR 3B later.

Moreover GSTR 1 is an individual invoice level reporting that is done on GSTN whereas GSTR 3B is a consolidated declaration for sales and purchases in a month along with the ITC claims for that month. There can be mismatches in these records.

Reasons of mismatches in GSTR 1 and 3B

       1. Difference in the sales amounts

There is a gap in between the dates on which these forms are filed. It is common for businesses that the actual sales at the time of filing GSTR 3B were recorded at different amount than those that actually happened during the month.  GSTR 1 is an invoice record at an individual level and hence the figures between the sales recorded in books can be different from those reported in GSTR 1. As a result, it may result in higher GST liability if sales as per GSTR 1 are higher than those as per GSTR 3B. Ultimately leading to a delayed payment of taxes and an interest liability for late payment.

       2. Change in the calculation of liability

There is a possibility that the calculation of taxes may go wrong due to wrong values of sales in one of the forms where there is a mismatch in GSTR 1 and 3B.

 3. Difference in tax liability between dates of filing GSTR 1 and 3B

This is a common case with credit-debit notes coming in picture and hence the tax liability changing due to the difference in sales amounts. As a result, there is a mismatch between the GSTR 1 and 3B forms and a need to reconcile.

Impact of mismatches in GSTR 3B

       1. Wrong calculation of GST liability

The tax liability of the month will be miscalculated and hence there might be excess or short payment of taxes. Short payment may lead to late payment fees / interest to be paid on the GST for that month.

       2. Rejection of ITC claims

ITC claims may get rejected since the sales figures are not matching and hence ITC claimed is wrong.

       3. Notices from GST department

Due to short payment of taxes or erroneous ITC claims as a result of mismatch in invoices you may receive notices from the GST department.

Cygnet solution for GSTR 1 and 3B mismatch

The highly advanced reconciliation solution by Cygnet GSP is equipped to compare the GSTR 1 and 3B data and identify all the mismatch areas.

Once you use our solution to file your GST returns we make sure that the data is matched and validated at different stages. All the mismatches between the two forms are identified and reported to you by our reconciliation solution.

Once the errors / mismatches are identified half the job is done then you need to make sure that the relevant records are corrected.

Cygnet Solution for reconciliation also takes care of different kinds of reconciliations like GSTR 1 and 3B, purchases and GSTR 2A, E-way bills reconciliation with inward and outward supply. All the reconciliations are done monthly, yearly consolidated as well as vendor-wise. This helps have an idea of the overall situation of the errors and mismatches.

So make sure you match your GSTR 1 and 3B forms as well and not just purchases and GSTR 2A. This is very essential in order to claim accurate ITC and avoid any notices from GSTN.

Reconciling GSTR 1 with GSTR 3B

Cygnet GSP is committed to providing cutting edge technology driven solutions to file your GST returns easily with speed and accuracy. We strive to make your business a priority by simplifying GST return filing through our IT solutions. We live by our belief of ‘IT is about you’. Schedule a demo here.

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