Know Everything about GST Reconciliation

Last Updated On: Nov. 2, 2021, 11:38 p.m.



What is Reconciliation?

In accounting terms, “reconciliation” is a process of matching balances at the end of a particular period to ensure both records matches with one another.
During the Finance Budget, 2021 there were few amendments brought forward, it has made been compulsory for every registered person excluding an Input Service Distributor to adhere to the following compliance mandates:

  • Furnish annual return, electronically
  • Furnish a reconciliation statement on a self-certification basis

Before the amendment in CGST Act, 2017 , GST audit and reconciliation statement were to be filed by a Chartered Accountant/ Cost Accountant. It was compulsory for registered persons who had a turnover of more than Rs. 2 crores. However, the limit is not prescribed anymore and all registered persons are required to stick to the compliance requirements.


What is reconciliation under GST?

The Form GSTR 9C is required to be prepared to reconcile the difference in the value of supplies declared in the annual return with the audited annual financial statement, which can occur due to:

  • The difference in data reflected in GSTR 2A with one’s books of accounts. GSTR 2A is a statement that compiles data relating to all inward supplies through the auto-population from multiple suppliers’ returns filed in GSTR-1, GSTR-5, GSTR-6, GSTR-7, GSTR-8.
  • The difference in data reflected in GSTR 1 and GSTR 3B.
  • The difference in ITC credit available as per auto-populated GSTR 2B and one’s books of accounts


Why is reconciliation under the CGST Act important?

It is important to ensure there is no difference between the furnished GST returns. The GST authorities can trace discrepancies quickly as the GST Returns are integrated and linked . In case there are difference between books of accounts and returns filed:]

  • The jurisdictional tax officer may issue scrutiny notices and penalties for evasion of tax
  • It may lead to the reversal of Input Tax Credit claim, which will result in increased tax liability.
  • In case discrepancies are found in your GSTR Form 1, Form 2B, and Form 3B, it will lead to suspension of GST registration.

Input tax Credit is introduced to ensure that registered persons are not liable to pay tax multiple times and it is very important for the removal of cascading effect. When in case, there are discrepancies in GST tax liabilities, it also causes heavy disruption in working capital flow.


What are the various reasons for mismatches in GST Returns?

With the amendment in Rule 36(4), suppliers are entitled to claim only 5 % of ITC credit over and above the credit available in GSTR 2A. Hence, reconciliation is important to ensure accurate ITC is claimed and mismatched and fallacies are avoided.

There can be multiple reasons for mismatches including:

  • Filing incorrect GSTIN while filing returns is one of the most common mistakes
  • Inappropriate invoice details including invoice number, invoice value, tax amount, etc.
  • Vendor fails to include certain invoices on which the registered person may have claimed ITC.
  • A mismatch between ITC availed by the registered person and the amount declared by the vendor due to incorrect liability declared by the supplier.
  • The registered person omits to avail ITC even when the vendor has declared his liability correctly.



Reconciling a small data is simple and easy but you will face difficulties when you have a huge data. Reconciling a huge data is not simple any mismatch in the reconciliation will lead to suspension of GST Registration. It is highly recommended to all the taxpayers to reconcile using fully automated solution to avoid notices from the GST Department





Copyright © 2013-2021 - All Right Reserved