Tax Query: Why do differences exist between your GSTR-1 and GSTR-3B?

GSTR-1 is filed on the basis of invoices recorded in the books of accounts of a business. GSTR-3B contains summary data, which is also taken from the books of accounts. Yet, why are there differences between the GSTR-1 and GSTR-3B that could potentially lead to the taxpayer receiving notices from the government?

The GSTR-1 and GSTR-3B are both prepared based on the books of accounts of a taxpayer. However, these returns may not reconcile due to the following reasons:

• The reporting of supplies is done in the right table of the GSTR-1, but under the wrong table in the GSTR-3B. For example, if zero-rated sales are reported correctly in Table 6A of the GSTR-1 return, but incorrectly reported under Table 3.1(a) in the GSTR-3B return.
• A supply invoice has been issued in a particular month, but the debit or credit note pertaining to that invoice is issued at a later date in a succeeding return period.
• Inter-state supplies made to unregistered persons are declared in the GSTR-1 and omitted in the GSTR-3B.
• The value of supplies are reported correctly, but the tax paid is reported under the wrong head. For example, IGST is reported instead of CGST & SGST or vice-versa.
• Supplies have been amended after the GSTR-1 has been filed but before filing the GSTR-3B. This could lead to differences in both the outward supplies and tax liability.
• There could be timing differences in the reporting of invoices between the GSTR-1 and GSTR-3B.

Due to these reasons, several taxpayers have received notices from the government in the past. Hence, it is very important to reconcile the GSTR-1 and GSTR-3B returns in each tax period, to avoid being liable to interest and penalties.

Also Read: Tax Query: What is the new criteria to file ITR if annual income is below taxable limit?

GSTR-2B is a newly launched auto-drafted statement by the GSTN (Goods and Services Tax Network). Why is it important to reconcile your purchase books with the GSTR-2B every month?

GSTR-2B is a static monthly auto-drafted statement that has been introduced for regular taxpayers. It displays the eligible and ineligible input tax credit (ITC) for a month, like the GSTR-2A statement, however, it will remain constant for a tax period. The data in the GSTR-2B will help taxpayers to reconcile their ITC with their purchase books and will help claim accurate ITC while filing the monthly GSTR-3B return.

It is vital for taxpayers to reconcile their purchase books every month with the GSTR-2B, and not wait until the end of the financial year to do so. The benefits of frequent reconciliation with the GSTR-2B statement are:

1. Being a static statement, the GSTR-2B gives the taxpayer an accurate picture of the ITC available for a particular tax period. This will help the taxpayer claim the correct ITC in his GSTR-3B and avoid the risk of receiving notices from the tax department.
2. In case of any missing invoices or any amendments required to be made, the taxpayer can communicate the requirements to his vendors well in time and rectifications can be made immediately, instead of waiting until the end of the financial year.
3. The GSTR-2B provides an advisory to the taxpayers on the actions that they are required to take. Besides, data is available document-wise for invoices, debit notes, credit notes, etc., as well as section-wise and summary-level details for easy comparison.
4. Reconciliation of the purchase books with the GSTR-2B before filing the GSTR-3B return will help the taxpayer in

• Not availing ITC twice against a particular document.
• Reversing ITC as per the law, wherever necessary.
• Paying GST on reverse-charge, wherever applicable.

For any clarifications/feedback on the topic, please contact the writer at

athena.rebello@cleartax.in