Reconciliation
The context of Reconciliation under Goods and Services Tax (GST) means keeping records of each transaction that occurred during a specific period of time along with confirming that the information submitted by the supplier and the recipients is accurate. By doing so, one can ensure that no sales or transactions are either missed or falsely reported in the GST reports.
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NATURE OF GST RECONCILIATION:
Comparing two sets of data is what it means to reconcile. One of them is the original data, and the other is the data that was entered utilising that original data. Reconciliation is done to ensure that there are no differences between the two sets of data. Discovering that none of the data contain errors. Since even a minor error could result in a significant difference and a chain reaction of issues.
The context of Reconciliation under Goods and Services Tax (GST) means keeping records of each transaction that occurred during a specific period of time along with confirming that the information submitted by the supplier and the recipients is accurate. By doing so, one can ensure that no sales or transactions are either missed or falsely reported in the GST reports.
For taxpayers, the idea of reconciliation is not new because it was widely used during the previous GST regime as well. Although every information contained in the business records is thoroughly analysed by the GST authorities, the taxpayers must regularly reconcile their data with that of the vendors in order to be eligible for the input tax credit (ITC). Although the reconciliation procedure is easy, it may be time consuming for the taxpayers to constantly monitor any irregularities or mismatches. So, before any return or finalisation, reconciliation is necessary.
TYPES OF GST RECONCILIATION:
Data from sales and purchases are matched through the use of various GST returns and sales and purchase registers. The GST reconciliation enables taxpayers to determine if their taxes were underpaid, overpaid, or never paid at all. Here are the many GST reconciliation methods that fall under GST.
- Reconciliation of the Sales Register with GSTR-1, in order to confirm that all sales information is entered accurately.
- Sales register and GSTR-3B reconciliation, in order to confirm that total sales and taxes are accurate or not.
- Purchase Register with GSTR-2A/2B reconciliation, in order comparing purchase information recorded in our books with that provided by suppliers.
- Purchase Register with GSTR- reconciliation, to verify the purchase details and total purchase information.
- GSTR-1 and GSTR-3B reconciliation, in order to check the sales details entered invoice by invoice and overall in the return.
- GSTR-2A/2B and GSTR-3B reconciliation, in order to check the purchase details entered invoice by every supplier’s invoice and overall in the return.
- GSTR-1with E-invoices reconciliation, All generated electronic invoices appear on GSTR-1.
- GSTR-1 with E-way bill reconciliation, E-way bills are generated whenever there is a transaction involving the movement of goods.
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GST RECONCILIATION IS IMPORTANT FOR MANY REASONS, SOME OF WHICH ARE AS FOLLOWS:
- In order to properly claim Input Tax Credit for any invoice issued during a previous financial year
- To keep track of data duplication
- To verify data, compare various GST returns
- In the event of any mismatch brought on by human error or data duplication, to issue CDNs or file changes.
CAUSE FOR GST DATA DISCREPANCIES UNDER GST:
- Although the supplier has reported their tax liability, they have not claimed their ITC in their GST return.
- The supplier has claimed ITC in the GST return even though the provider did not disclose the tax liability.
- Between the liability declared and the ITC claimed, there is a data difference.
- Human error, like entering the recipient’s or supplier’s GSTIN in the wrong way.
HOW TO DO GST RECONCILIATION:
Every GSTIN requires reconciliation, which is a constant operation that cannot be done once. A registered person is required to perform monthly reconciliations and annual consolidations. Additionally, vendor-wise reconciliation must be performed more frequently than monthly reconciliations in the case of large-scale operations.
- It is essential to take into account any amendments made to the GST returns from the prior FY in the current FY.
- It is important to make sure that the ITC is claimed, used in its entirety, and that no portion is missed or expires.
- The information from the GST Annual Return and the Income Tax Return should also be compared.
- For the whole FY, the purchase register should be contrasted with Form GSTR 2A.
- The details in Form GSTR 2A should match those in the register pertaining to the acquisition of input services.
- For the whole FY, the sales register should be contrasted with Form GSTR 1.
- The input tax credit claimed in Form GSTR 2B should match the credit claimed in the books of accounts.
- Form GSTR-1 should be compared to the information in Form GSTR-3B.
- It is necessary to restore any lapsed input tax credits that were not reinstated by the deadline.
FAQs ON GST RECONCILIATIONS
Q1: What is GST reconciliation?
GST reconciliation refers to the process of matching and reconciling the data reported in the GST returns with the corresponding data in the books of accounts. It helps in identifying and rectifying any discrepancies or variances between the two sets of records.
Q2: Why is GST reconciliation important?
GST reconciliation is important to ensure the accuracy and consistency of financial records. It helps in identifying and rectifying errors, preventing any mismatches between GST returns and books of accounts, and maintaining compliance with GST regulations.
Q3: When should I perform GST reconciliation?
GST reconciliation should ideally be performed periodically, preferably on a monthly basis, after filing the GST returns. This allows for timely identification and resolution of any discrepancies, ensuring accurate reporting and compliance.
Q4: What are the common reasons for discrepancies in GST reconciliation?
Discrepancies in GST reconciliation can occur due to various reasons, including errors in data entry, mismatched invoice details, incorrect tax calculations, missed or duplicate entries, differences in classification of goods or services, and delays in reporting by suppliers or recipients.
Q5: How can I perform GST reconciliation effectively?
To perform GST reconciliation effectively, it is important to maintain proper documentation, reconcile each element of the GST return with the corresponding entries in the books of accounts, identify and rectify any discrepancies, and ensure accurate reporting in subsequent returns.
Q6: What steps can I take to resolve discrepancies in GST reconciliation?
To resolve discrepancies in GST reconciliation, you can start by identifying the nature and cause of the discrepancies. This may involve cross-checking invoices, validating tax calculations, contacting suppliers or recipients for clarification, and making necessary adjustments in the books of accounts or subsequent returns.
Q7: Can I make changes to my GST returns during the reconciliation process?
Changes to GST returns can be made through the appropriate amendment process. If any discrepancies are identified during the reconciliation process, you can revise the relevant returns within the specified time limits and as per the guidelines provided by the tax authorities.
Q8: What are the consequences of failing to perform GST reconciliation?
Failing to perform GST reconciliation may lead to inaccurate reporting, potential non-compliance with GST regulations, and difficulties in claiming input tax credit (ITC). It is essential to reconcile GST returns to ensure the accuracy of financial records and maintain compliance.
Q9: Can I seek professional assistance for GST reconciliation?
Yes, seeking professional assistance from tax consultants, accountants, or GST practitioners can be beneficial for performing GST reconciliation accurately. They can provide expertise and guidance in identifying and resolving discrepancies, ensuring compliance, and maintaining proper records.
Q10: Is GST reconciliation mandatory for all businesses?
While GST reconciliation is not explicitly mandated by law, it is highly recommended for all businesses. It helps in maintaining accurate records, minimizing errors, and ensuring compliance with GST regulations. Additionally, tax authorities may request reconciled data during audits or assessments.
