Importance of Reconciliation and Matching Under GST
Reconciliation under Goods & Service Tax (GST) implies matching the data filled by the supplier to that of the recipients. It is made for collecting or recording all the transactions done during a particular period. The GST reconciliation process is formulated and strengthened to its unevolved, non-effective self; it has been before VAT and excise came into action. With the reconciliation process, you can ensure that no sales or purchase is omitted or wrongly reported in the GST returns. So, in this blog, we will look into the importance of GST reconciliation and matching.
Importance of GST Reconciliation and Matching under GST
As a taxpayer, it is mandatory for you to reconcile your sales data on a regular basis with that of the vendors to get the eligible Input Tax Credit, i.e., ITC. The process of reconciliation is very simple; you can boil it down into 5 easy steps and enjoy its benefits. It can be time-consuming and requires you to be constantly on the look for discrepancies or mismatches that may affect the ITC claim that you made. But trust us, it is a very simple process. Here are the 5 easy steps:
1. The reconciliation process of GST for the financial year (FY) requires you to file the GST mandatorily. returns regularly. Periodic GST returns are very necessary for a taxpayer to file, and even if you have missed the due date for filing the GST returns, you must file it even when you have to pay the late fees that are applicable. It is also necessary because it is the first step to process GST Reconciliation and matching. You must regularly update the account books and align the tax returns accordingly. Notably, you will not be able to claim adequate ITC until you have filed GST returns.
2. Once you have filed the GST return, the actual process of reconciliation and matching starts. You should identify any mismatches, missed entries in the accounts. Amend the wrong entries, recheck the details, furthermore also make amendments if any mistakes you have found for the next GST return filing period. You can also make the revisions in the current and upcoming tax returns filed; you will not be allowed to make the changes in the previous periods. But you can file an amendment return form under GSTR 1 and GSTR 3B accordingly in the next periodic return.
3. Once you are done with that, match the purchase register with GSTR 3B. It is uploaded month-wise, and you can easily track it down. Match it with GSTR 2A details that are uploaded by suppliers. Make sure your account book is well maintained. To avoid paying extra taxes and loss in ITC claims, you must show relevant purchases and sales as any mistake in the same. To get benefitted from GSTR-3B and GSTR-2B, streamline your accounts.
4. Make sure you have congruity between the books of accounts and GST returns, as it is very important when you are claiming ITC. Keep a check on the taxes paid under the reverse charge mechanism while you are claiming ITC on purchase. It is essential that you understand, the reverse charge mechanism is the only way for an individual to avail credit of tax paid if the goods or services are used, or there is a near-future possibility available to be used for the purpose of the business.
You can achieve it very easily when you a healthy communication among the vendors and customers. Coordination is key, and it helps in uniform reporting of details in the GST returns. Chances of mismatches, incorrect entry, omission get reduced by a significant percentage when the suppliers and the recipients match their details and then file GST returns. This also becomes very helpful in identifying any non-compliant vendor, talk to them, and resolve any queries; it will only benefit you as doing it can even maximize the ITC for the recipients.
You can also go for any advanced reconciliation software, which reduces the communication gap between the suppliers and the recipients. The advanced software allows you to send a reconciliation report to your vendor or supplier and resolve any issue causing because the communication gap. It is an advanced way by which you can bypass all the efforts you have to make for spotting any mismatch in accounts and amend it.
5. You must report all the corrected sales or purchase transactions done between a financial year, for the September returns. Even if you have missed the last date, do it with the late fees applicable, as we have told you it is very important to get ITC. September, however, is the last chance you have to file any report or correct the differences in the tax returns for any given financial year.
If you have not claimed ITC in the previous months, there is a possible way to get GST to return. You can avail the same in some months, but not after the filing of the annual returns, i.e., GSTR-9 or filing of GST returns for the September month of the financial year. Also, any changes or amendments to the previously filed returns of that of the financial year can be done within the same time being.
Final Note
In each step of filling a GST return, we have made things clear that reconciliation and matching of the account books is one of the most important aspects of it. without streamlining your account books, you are not even able to file for a return; it is the very first step to claim. Also, ignoring it will only cause you more loss, you will have to pay more taxes, and it will minimize your claim. It might also become a lengthy process if you are not regularly updating it, tracking the records back can be hectic, and you might have to pay the late fee and also face other problems. It is advisable that you implement effective technology to automate the whole process of reconciliation and matching and also keep healthy communication with your vendors to make sure that you make little effort and get more benefits from it all.
