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Matching and Reconciliation under GST involves matching of data from different sets of data with a view to reach a conclusion whether the tax paid in excess, or paid short or not paid at all.
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In common parlance, reconciliation means when two sets of data get compared in order to find out any variances and differences between the two and correct and rectify any unintentional errors if any.
Reconciliation under GST is a process where the matching of data related to both sales and purchase between sales and purchase registers and different returns is done to find out whether tax paid is short or not paid or excess paid.
After conducting the exercise of Reconciliation under GST, mismatches and differences can be found out in the following cases:
If any differences are found while filing the above mentioned returns, the scrutiny notices can be issued against the tax payer or even to the extent of suspension of notices.
Following are some of the causes of mismatches:
The process of matching of sales and purchase details or reconciliation is not a unique process for any taxpayer. This process has been carried forward since the days of VAT and excise tax. However, this process of reconciliation before the advent of regime of GST was much easier because of familiarity with the process and lower penal provisions.
The communications from the tax department were sent only when the department discovered discrepancies in the regular as well as annual return filings. Only after this did the process of further scrutiny and audit was carried out by the authorities.
This relatively easier process of scrutinising of the returns has completely undergone a change under GST because now the ITC that is claimed by the businesses is being closely watched by the GST authorities with the help of online taxation system. Further, the taxpayer has to regularly keep on reconciling their data from the entries made by his vendors.
It has become important now to accurately claim ITC and avoid any instances of mismatches between returns as the same may result into suspension of the registration. The GST system has inter-linkages with the filing and processing are automated.
Following are the reasons why reconciliation is required under GST for the businesses:
Following are some of the concerns of the taxpayer related to the reconciliation under GST:
The following issues arise at the time of reconciliation under GST between GST returns:
Reconciliation under GST is done for every GSTIN and then done at the PAN level. Reconciliation under GST is done continuously for every month throughout the financial year. The amendments made in the GST returns regarding the previous financial year are also considered in the present financial year.
The most important part of GST returns is the ITC since it holds more importance than any other part of the GST returns. The level of scrutiny that is prevalent in the present GST regime is way higher than what it used to be in the previous tax regime. In the present system of GST returns, the tax payer gets to know about the genuineness of the returns at the stage of filing of GST returns itself through Form GSTR-2B or GSTR-2A whereas in the previous regime, the tax authorities used to carry out the check whether processing of returns is good or not.
Hence, the taxpayer must do a vendor-wise reconciliation on a regular basis or at the time filing of GST returns before the September of the subsequent Financial Year of the relevant financial year. This helps the taxpayer to identify and declare any unclaimed ITC within the deadline set as per the GST law.
Following steps can be taken by a taxpayer at the time of Reconciliation under GST:
Declaration of Turnover generated from business (at PAN level)
Reconciliation under GST may seem to be very simple process due to automation of the system, but still it consumes a lot of time and resources for the simple reason that both taxpayer has to continuously communicate with the vendor to changes in the claims of ITC or the returns filed by them. Reconciliation under GST is not difficult when a taxpayer has few invoices to reconcile. However, in organisations where the invoices run in thousands, then reconciliation becomes difficult. Therefore, reconciliation must be done regularly to prevent claiming of less ITC or non-payment of ITC or worst case suspension of the GST registration.
Read our Article:GST Portal Updates every person must be aware of
Prabhat has done his BA LLB (Hons) and has been writing research papers since his law school days. His interest in content writing made him pursue a career in legal research and content writing. His core areas of interest are indirect taxes, finance and real estate.
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