The notion of reconciliation is not unusual to taxpayers as it was widespread before the advent of the GST regime too. However, this concept gained unprecedented popularity after the GST Law in India as it enables businesses to ensure that no sales or purchases entry goes missing or gets wrongly reported when filing the GST returns.
GST reconciliation includes equalling purchases and sales data employing various GST returns and purchase and sales registers using a manual calculation or GST accounting software.
What is meant by GST reconciliation?
In general, a reconciliation implies analysing two data entries to distinguish any discrepancies or variations. However, GST reconciliation is a means that helps taxpayers to understand the disparity between their financial statements and GST returns.
Moreover, with the aid of GST reconciliation, you can amend the variations either by interacting with the supplier or making modifications to your accounting records. Apart from this, you should conduct the GST reconciliation process at every fixed interval to avoid any financial penalties that arise due to mismatch in your financial statements.
Types of GST reconciliation
Mentioned hereunder is a list of the most popular types of GST Reconciliation that you should take into account while filing your GST Return:
- GSTR2A and Inward supplies Reconciliation
- GSTR 2A and GSTR 3B Reconciliation (Input Tax Credit)
- GSTR 1 and GSTR 3B Reconciliation to understand discrepancies in sales data.
Any deviations marked between these GST returns can point to a show-cause intimation from the GST authorities.
Mismatches under GST reconciliation
Listed below are some significant mismatches that you may find during your GST Reconciliation.
- Discrepancies in bill details
There can be numerous errors in the provided information between you and your vendor. Also, some fundamental invoice data mismatches include the incorrect bill number, bill date or/and invoice price.
- Discrepancy in GSTIN
Mismatch in GSTIN is the most common discrepancy while carrying out GST Reconciliation. On the off-chance, due to a manual error, the supplier enters the wrong GSTIN. A situation like this will create a problem while claiming ITC. Hence, to overcome this discrepancy, you should employ online GST accounting software.
Why is GST reconciliation important?
GST reconciliation plays a significant role for your business due to various reasons. Firstly, GST reconciliation is essential in claiming 100% correct Input Tax Credit as it helps eliminate all the discrepancies between the GSTR 2A and purchase register. Also, GST reconciliation is beneficial in raising invoice issues with the supplier to fill errorless GST return.
How to do GST reconciliation?
Follow the below-mentioned steps to conduct GST reconciliation effectively:
- Start by reconciling within the GSTIN accurately.
- Next, reconcile the data provided to the PAN India level.
- Afterwards, perform the supplier-wise GST Reconciliation to get any unclaimed ITC.
What are the common challenges faced during GST reconciliation?
One of the significant challenges faced during GST reconciliation is that the people involved hold different methods for their bill numbers. This can make it more difficult for the implementation system to obtain an accurate match of the invoice number. Major issues faced during GST reconciliation are:
- The bill numbers employed by the buyer to register transactions do not match with the seller’s invoices collected in GSTR-2A.
- The buyer carries out business in various states, and the seller has raised the invoice utilising another GSTIN instead of the original buyer GSTIN.
- Both the purchaser and supplier hold registered invoices in separate GST return periods.
To sum up, we can say that GST Reconciliation plays a vital part in keeping your business on track. While it is easy for you to reconcile limited data, it can become challenging to match thousands of entries without proper GST accounting software in place. Hence to make your GST reconciliation seamless, opt for cloud-based accounting software from Ankpal today.