Reconciliation under Goods & Services Tax (GST) is about matching
the data filed by the supplier with those of the recipients and
recording all the transactions that have taken place during that period.
The reconciliation process ensures that no sales or purchases are
omitted or wrongly reported in the
GST returns.
The taxpayers must reconcile their data on a regular basis with that of
the vendors to claim eligible Input Tax Credit (ITC). The process of
reconciliation is simple, but can be time-consuming, as the taxpayers
are required to continuously keep an eye on any discrepancy or
mismatches that may affect
the
ITC claim.
This article will bring about clarity to an otherwise tedious process in less than 5 easy steps.
1. Under the reconciliation process of
GST
for the financial year (FY) 2017-18, the taxpayers are required to
mandatorily file all the periodic GST returns. Even if the due date for a
particular GST return is missed, it should be filed along with the
interest or the late fees as applicable. As long as the GST returns are
not filed, matching and reconciliation process will not take off. The
taxpayers need to update their books of accounts and align the tax
returns accordingly. Unless and until all the GST returns are filed, the
taxpayers won't be able to claim adequate ITC.
2. Furthermore, the taxpayers should identify the mismatches and correct
the relevant entries in the books of accounts. They should also amend
these details in the coming GST return filing period. GST laws do not
allow for revision of tax returns filed in the previous periods.
However, it does allow for filing of the corrected entries via an
amendment return in the next periodic return. These amendment entries
should be filed in GSTR 1 &
GSTR 3B, accordingly.
Make sure you carefully match the purchase register with GSTR 3B (uploaded month wise) and with
GSTR 2A
details (uploaded by the supplier). It is important to streamline the
books of accounts, the GSTR-3B return, and GSTR-2A form to fully avail
the ITC on the relevant purchases; otherwise, the taxpayer will lose ITC
claim and will end up paying extra taxes.
3. The congruity between the books of accounts and the GST returns is
crucial for claiming ITC. Additionally, taxpayers while claiming ITC on
purchases should keep a check on taxes paid under the reverse charge
mechanism. However, a taxpayer can only avail credit of taxes paid under
reverse charge mechanism only if the goods and/or services are used or
will be used for purpose of business.
4. Communication is the key, especially amongst the vendors and
customers. This coordination results in uniform reporting of the details
in the GST returns. Chances of mismatches, omission or incorrect
entries are reduced when the suppliers' and the recipients' synchronize
their details and then file GST returns. It is also very important to
identify the non-compliant vendors, interact with them, and resolve the
queries; this will help the recipients maximise ITC. Now, advanced
reconciliation software can help reduce this communication gap between
the suppliers and the recipients. These software enable the users to
send a reconciliation mismatch report to the vendors or suppliers to
resolve any issue arising out of it.
5. Lastly, the taxpayers should report all the rectified sale or
purchase transactions of the FY 2017 -18, for the September returns.
This September 2018, the returns are to be filed by 20 October 2018.
This is the last chance for the taxpayers to report and correct all
differences filed in tax returns of FY 2017-18.
Any taxpayer who has not claimed ITC in the preceding months can avail
the same in the subsequent months, but not later than the filing of
annual return i.e GSTR -9 or filing of GST returns for September month
of the subsequent financial year, whichever is earlier. Any amendments
or changes to the previously filed returns can be done within the same
timeline.
GST reconciliation is a recurring event, it must be performed
periodically to claim maximum credit and to avoid mismatches on a larger
scale. The taxpayers shall communicate the queries with his recipients
or vendors at the earliest and file error-free returns.