As we bid farewell to the FY 2023-24 and wrap up our financial records for the period, it’s imperative to shift our focus towards ensuring accuracy in GST return filings and reconciliations. Year-end reconciliations are pivotal for businesses operating under the GST regime, guaranteeing the precision of GST return filings, and mitigating any potential discrepancies that could result in penalties or complications.

This article aims to throw light on the significance of filing GSTR-1 and GSTR-3B.

What is GST Reconciliation?

GST reconciliation involves comparing the GST collected and paid by a business on sales and purchases with the amounts reported in the GST returns filed with the tax authorities.

Purpose of GST Recon

The main objective of GST reconciliation is to ensure that the business’s financial records align with the GST returns filed, identifying, and rectifying any discrepancies to mitigate the risk of penalties or audits.

Key Components of GST Reconciliations

• Comparing the GST reflected in sales and purchases invoices.
• Verifying the GST reported in the business’s accounting records.
• Cross-checking the GST figures in the GST return filed with the tax authorities.

Things to Lookout For

GSTR-1/ IFF: Outward Supplies

• Ensure all outward supplies for the financial year are accurately reported in GSTR-1/ IFF.
• Cross-check invoices, payment receipts, and relevant documents to avoid discrepancies.
• Verify that all details such as invoice numbers, dates, and amounts match in the GSTR-1/ IFF.
• Reconcile data with sales registers and accounting records to ensure consistency.
• Address any variances promptly to maintain accurate reporting in GSTR-1/IFF.

GSTR-3B: Summary Return

• GSTR-3B is a simplified summary return that must be filed monthly by registered taxpayers.
• It includes details of outward and inward supplies, input tax credit availed, and tax liability.
• This return must be filed even if there are no transactions during the tax period.
• GSTR-3B serves as an interim return until the final return is filed for the month.
• Ensure accurate and timely filing of GSTR-3B to avoid penalties and compliance issues.
• Reconcile GSTR-3B with books of accounts to ensure consistency and accuracy in GST reporting.

Step-by-Step Guide to Year-End GST Reconciliations

• Step 1: Review GST reports from the accounting system.
• Step 2: Compare GST collected and paid with the General Ledger.
• Step 3: Investigate and rectify any discrepancies found.
• Step 4: Reconcile GST amounts with BAS lodgements.
• Step 5: Verify input tax credits and non-deductible expenses.
• Step 6: Document all the reconciliations for future reference.

Things to Reconcile under GST During Year-End

• Compare monthly sales data in GSTR-1 with sales recorded in books of accounts to ensure no sale invoice goes unreported in GSTR-1.
• Ensure monthly sales reflected in GSTR-1 match with sales declared in GSTR-3B to maintain consistency in tax payments.
• Match data in GSTR-1 and GSTR-3B, especially for zero-rated supplies, to prevent delays or non-processing of IGST refunds by ICEGATE.
• Verify that claimed Input Tax Credit (ITC) aligns with information available in GSTR-2B.
• Reconcile sales data in GSTR-1 with e-invoices and e-way bills to confirm the presence of an e-invoice for every sale transaction reported in GSTR-1.
• Match purchase data with supplier invoices (GSTR-2B) to ensure accuracy.
• Compare ITC claimed in GSTR-3B with ITC available in GSTR-2B and books to avoid discrepancies.
• Keep track of ITC reversal and Reclaim amounts.
• Ensure HSN/SAC codes and GST rates applied on transactions are accurate.
• Update and file shipping bills in GSTR-1 for all export invoices.

Best Practices for Year-End GST Reconciliations

• Begin Early: Begin the reconciliation process well in advance to allow ample time for thorough review and corrections.
• Maintain Accurate Records: Keep detailed records of all GST transactions throughout the year to facilitate a smooth reconciliation process.
• Reconcile Regularly: Conduct periodic reconciliations to identify and address discrepancies promptly, minimizing errors at year-end.
• Utilize Automation: Consider using software or tools to automate the reconciliation process for efficiency and accuracy.
• Seek Professional Assistance: When in doubt or dealing with complex transactions, do not hesitate to consult with a tax professional for guidance.

Navigating Changes in GST Regulations for Year-End Reconciliations

• Stay updated on any recent changes to GST regulations that may impact year-end reconciliations.
• Consult with a tax professional or advisor to ensure compliance with the latest GST guidelines.
• Keep detailed records of all GST transactions throughout the year to facilitate the reconciliation process.
• Review input tax credits to identify any discrepancies or errors that need to be rectified.
• Utilize accounting software or tools to streamline the GST reconciliation process and minimize errors.

Importance of GST Reconciliation

• Ensures accuracy in financial records by matching input and output tax credits correctly.
• Helps identify discrepancies and rectify errors promptly to avoid penalties or fines.
• Claiming accurate ITC and avoiding blocking of working capital
• Facilitates smooth filing of GST returns by ensuring all data is accurate and up to date.
• Provides insights into overall business operations and helps in making informed decisions.
• Streamlines the audit process by maintaining organized and reconciled GST records.

Utilizing Automation for Year-End GST Reconciliations

• Automation tools can streamline the reconciliation process by handling large volumes of data efficiently.
• Implementing automated software can help reduce errors and ensure accuracy in GST reconciliations.
• Utilizing automation allows for quicker identification of discrepancies and discrepancies in GST data.
• Automation can generate detailed reports and analysis, aiding in decision-making and compliance efforts.

Check Out Our IRIS GST Reconciliation Software

IRIS GST Software offers efficient, easy, and timesaving GST reconciliation. Its Smart Reconciliation feature compares invoices uploaded by the user with auto-drafted details of GSTR 2A/GSTR 2B, categorizing results according to necessary actions. It covers various reconciliation scenarios, including GSTIN match, invoice number match, and financial period match, providing insightful and intuitive categorization of differences.

Here are some features:

• Smart Reconciliation
  Automated Smart Reconciliation identifies comparable invoices and categorizes the results into match, mismatch, and missing invoices. Users can mark reconciled and reviewed invoices and generate summary reports to track reconciliation status. Vendor-level reconciliation results with month-wise breakdowns are also available.
• Advance Reconciliation
  Advance reconciliation is possible through various rules, allowing matching of invoices from different financial years and utilizing fuzzy logic to match invoice numbers with random character patterns. It also reconciles beyond invoice numbers, considering parameters like taxable value, invoice value, and tax rate under user-defined tolerance levels.
• Ensuring Accurate ITC Claims
  Accurate GST reconciliation ensures precise ITC claims, avoiding penalties and compliance issues. IRIS Sapphire facilitates streamlined reconciliation processes, maximizing invoice matches and optimizing ITC claims.