In the ever-evolving landscape of GST compliance, businesses continually strive to streamline their processes and maintain accurate tax filings. Among the key challenges faced by taxpayers is ensuring perfect synchronization between GSTR-1 and GSTR-3B returns. Aligning these two critical components of GST reporting is essential to avoid discrepancies and potential issues with tax authorities.
In this article, we dig into the significance of harmonizing GSTR-1 and GSTR-3B, exploring why it is more prudent to strive for consistency rather than explain differences. Also, learn proactive strategies to explain and minimize discrepancies. By understanding the importance of maintaining uniformity in these returns, businesses can navigate the complexities of GST compliance with confidence, fostering a smoother and more efficient taxation journey.
The interconnected nature of GST returns
The interlinking of all GST returns, including e-invoice, GSTR-1, and GSTR-3B, establishes a seamless connection throughout the tax reporting process. While there may be an option to update or make changes in these returns, it is important to note that exercising this option is not recommended.
The initial data captured in the e-invoice should ideally flow through to GSTR-1 and subsequently, GSTR-3B without alterations, ensuring consistency and accuracy in the reporting. Making changes at later stages can introduce complexities and increase the risk of discrepancies. Therefore, it is prudent for businesses to adhere to the recommended practice of maintaining the integrity of the data across the interconnected GST returns, minimizing the need for modifications, and promoting a streamlined and reliable compliance process.
New Advisory: Liability / Difference Appearing in R1 – R3B (DRC-01B)
A New advisory has been released by the government related to online compliance pertaining to Liability / Difference Appearing in R1 – R3B (DRC-01B). GSTN has developed functionality to enable the taxpayer to explain the difference in GSTR-1 & 3B return online as directed by the GST Council.
The functionality compares the liability declared in GSTR-1/ IFF (Invoice Furnishing Facility)
with the liability paid in GSTR-3B/3BQ for each return period. If the declared liability exceeds the paid liability by a predefined limit or the percentage difference exceeds the configurable threshold, the taxpayer will receive an intimation in the form of DRC-01B.
In the context of GST, businesses are increasingly being served with notices by the GST Network (GSTN) highlighting differences in their tax filings or financial records. To facilitate a transparent and collaborative resolution process, the introduction of the new form DRC-01B holds significant value. This form empowers businesses to provide detailed explanations, supported by relevant information, which can assist the government in making well-informed decisions.
This proactive approach not only enhances communication between businesses and the government but also ensures that the government receives comprehensive insights to enable a fair and accurate assessment. If further action is deemed necessary, the government may then issue a Show Cause Notice (SCN), initiating a formal process where the business can respond and provide additional evidence to support its case.
Prioritizing The Right Processes and Tools
Businesses should prioritize establishing robust processes and utilizing effective tools to minimize differences in GST returns, thereby avoiding the need for extensive explanations. By implementing streamlined workflows and leveraging technology solutions, organizations can reduce the chances of inconsistencies and discrepancies in their GST filings.
By investing in the right processes and tools, businesses can not only minimize differences in their GST returns but also enhance efficiency, compliance, and overall financial management.
Here are some best practices and recommendations:
Ensuring seamless alignment between GSTR-1 and GSTR-3B filings is paramount for businesses seeking to maintain compliance efficiency. To achieve this, adopting smart practices and utilizing appropriate tools can significantly reduce discrepancies and the need for explanations. Here are some invaluable recommendations:
- Streamline Data Management: Utilize a single source of data and avoid making edits after generating the e-invoice. Instead, ensure that any necessary adjustments are managed through Credit or Debit Notes (CDN) where applicable. By minimizing changes post-e-invoicing, businesses can create a more traceable and transparent transaction trail, addressing the need for unnecessary explanations.
- Conduct Regular Reconciliation: Before filing, perform a thorough reconciliation of your GSTR-1 with the government-prepared GSTR-1. This practice is essential to identify any missing or superfluous entries, allowing for timely rectifications. Addressing differences flagged at the invoice level during this reconciliation process can streamline the filing of the GSTR 1 form, minimizing any potential discrepancies.
- Leverage Automated Computations: For enhanced accuracy, compute GSTR-3B based on the data present in GSTR-1. IRIS offers auto-drafting functionalities, which ensure the precise computation of outward liability and Input Tax Credit (ITC) and other relevant data. Employing these automated systems not only simplifies the filing process but also reduces the likelihood of inconsistencies in the returns.
- Generate Comparative Reports: After filing the GST returns, it is crucial to generate 1-3B comparative reports at the organization level on a monthly basis. These reports provide a comprehensive overview of how each GSTIN within the organization has filed their returns. By comparing the GSTR-1 and GSTR-3B data, organizations can identify any discrepancies or variations in the filings, enabling them to take appropriate actions.
- Identify and Monitor Discrepancies: The generated comparative reports highlight the GSTINs that exhibit discrepancies in their filings. It is important to closely monitor these GSTINs to understand the reasons behind the discrepancies. By analyzing the causes, such as data entry errors or systemic issues, organizations can implement corrective measures and provide necessary guidance to the respective GSTINs. This proactive approach ensures that subsequent returns are prepared accurately, minimizing the chances of recurring discrepancies.
- Maintain Notices and Litigations: Organizations should maintain a centralized repository at the organizational level to track notices and GST litigation related to GSTR-1 and GSTR-3B filings. This repository serves as a reference for other GSTINs within the organization, providing insights into potential issues and legal matters. By tracking notices and litigations, organizations can adopt a proactive approach in resolving similar issues, minimizing the impact on compliance and facilitating smoother GST operations across the organization.
IRIS GST Software is India’s leading GST software to reconcile data faster and ensure 100% compliance!
The GST MIS report is IRIS GST Software’s smart feature that enables top management or decision-makers to quickly assess the compliance level. MIS reports will offer a thorough analysis of mismatches, total GST turnover, maximum ITC utilization, and other decision-making criteria. We have different types of reconciliations like GSTR 1 vs E-invoice, GSTR 1 vs E-way bill data, and GSTR 2A/2 B-based reconciliation with the facility of tracking invoices for ITC in GSTR 3B.
Bulk Data upload facility – It helps to upload data for multiple GSTINs in one go
2P Summary – Provides a summary of uploaded data. Check your uploaded data with the count of invoices getting considered for reconciliation
Bulk download of GSTR 2A and GSTR 2B– For multiple periods, send ’Get GSTR 2A/ 2B data’ request in one go
Smart reconciliation – It runs on your data and provides the recon results with summary\
Advanced reconciliation – It helps to extend the scope of comparison between data that is in the supplier-only and purchaser-only category. Some rules that help in better reconciliation are:
- Checking invoices across the financial years
- Fuzzy invoice no. Logic
- Checking exact values ignoring invoice number
- Checking invoices within the tolerance provided by you
Monthly reconciliation results with monthly GSTR 2A and 2B report – Helps to decide monthly ITC and how much you can claim
Net vendor summary – Gives a glance reconciliation status for each vendor
PAN level reports and GSTIN level reports – It helps to analyze in detail of your purchaser-only and supplier-only invoices
Send Mail – By using this feature you can easily communicate discrepancies to your vendor
Vendor Cockpit – Includes recommendations for vendor payment release report and know your supplier report