Under Goods and Services Tax (GST), reconciliation means recording every transaction that took place during a period while also ensuring that the data filed by the supplier matches with those of the recipients. This enables one to make sure that no sales or purchases are missing or wrongly reported in the GST returns.
In order to claim the input tax credit (ITC), the taxpayers have to reconcile their data with that of the vendors on a regular basis. Although the reconciliation process is simple, the necessity for the taxpayers to continuously keep track of any discrepancy or mismatches could be time-consuming.
The procedure of reconciliation and matching of GST returns is not new for taxpayers as it was prevalent in the previous VAT and excise regime. Before, the matching of data was done between the books of accounts and tax returns which was an easy task. In case of any discrepancy, the authorities would communicate the same to the taxpayer and accordingly further audits and scrutiny would be carried out.
However, under GST, reconciliation has gained much significance as it is associated with ITC claimed by businesses, which is again regularly monitored by the tax authorities. Furthermore, the taxpayer must reconcile their data on a regular basis with the data declared by their supplier.
You must start the reconciliation process within the GSTIN and then take it to the PAN level. For the entire FY 2017-18, the reconciliation of GST returns should be done across months. In addition, the amendments made in the current period of 2018-19 to GST returns of FY 2017-18 must be taken into consideration.
One of the most important components of the GST return is tax credit which holds greater relevance compared to any other component of GST returns. Unlike in the previous tax regime, now the accuracy of claims can be confirmed by taxpayers while filing GST returns (GSTR-2A) and take necessary action. Earlier, this function was carried out by tax authorities, usually during the processing of returns.
One of the major challenges during GST reconciliation is that the parties involved have a different method for their invoice numbers. This can make it harder for the implementation mechanism to find an exact match around invoice number. A powerful reconciliation tool could solve these problems while also easing the process of matching and reconciling GST returns data. Some of the major issues with the reconciliation between GST returns are listed below.
Although there can be many reasons for the afore-mentioned discrepancies, some of the popular ones are as follows.
Therefore, the reconciliation of GST returns must be done appropriately on a regular basis. This can help you identify and declare necessary changes within the stipulated time. Additionally, you might also stay safe from the scrutiny notices issued by tax authorities.