Know All About GST, GST Returns, Reconciliation, and Matching

published on 01 February 2022
Know all about GST, GST Returns, Reconciliation, and Matching
Know all about GST, GST Returns, Reconciliation, and Matching

India has a complex tax system, and it is quite famous for it. New ventures and startups can't comprehend its indirect tax systems. The problem further rises if consistent changes are made to the taxes every year. However, things have changed with the Goods and Services Tax (GST) release.

GST has been a major game-changer for businesses. Hence, knowing about all the types of returns, the importance of reconciliation and matching is essential. If there are any mismatches, you immediately should reconcile them using software such as TallyPrime. It is your one-stop solution to meet all your GST needs and reconciliations and matching issues.

What is GST?

GST is a tax based on consumption levied on the production, sale, and consumption of goods and services at the city, state, and national levels. Every property leaving money and security is marked as goods. It includes fruits, crops, cars, eatables, and more.

A registered business should file monthly, quarterly, or yearly GST returns depending on their business type. The GST filings are done via the GST Portal.

Items Excluded in the GST

GST is charged on almost all goods and services, except for the things mentioned below. Petroleum items and alcohol products are not included in the GST.

Some services are exempted from GST, such as selling buildings and other properties, benefits received from court cases, etc. All the services offered under funeral are not to be taxed. The responsibilities and job duties done by the municipalities, government bodies, MPs, and MLAs are also exempted from GST.

GST Structure in India

The co-existing model GST was adopted by the State and Central Governments in India. This act implies to the complete nation. GST is segregated into four sections.

Integrated Goods and Service Tax: IGST is charged outside the state during the supply of products and services and export-import out of the nation. The tax is collected by the Central Government and is distributed to states.

Central Goods and Service Tax: CGST is charged for outside state products and services supply. The Central Government charges it, and the amount collected is added to the Central government funds.

State Goods and Service Tax: SGST is also charged for the intrastate selling of products and services. The state government collects the tax and uses it for the development of the State.

Union Territory Goods and Service Tax: UTGST is also charged for the intrastate transfer of products and services. It resembles SGST very much, and the amount collected is used by the Union Territory government.

How can you calculate your GST?

GST is the amount of the supplied products at a specific percentage, divided by 100.

The GST Rates for Different Products in India

The GST was implemented uniformly in the entire nation, with one tax and one rate policy. However, there are different rates charged for different categories. Take a look at it:

  • 1% tax is levied on the producers and traders.
  • Food and beverage suppliers are charged with 5% tax. The GST rates of products differ from 0.25% to 28% according to different products.
  • A tax of 5% is charged on essential items such as medicines, household products, and hearing aids.
  • A 12% tax is imposed on stationery products, computers, and processed eatables.
  • An 18% tax is imposed on products like CCTV, cosmetics, aluminum foil, and other industrial items.
  • A 28% tax is charged upon expensive vehicles, cigars, aerated drinks, etc.

What is GST Return?

A GST return filing has all the sales and purchases details that a taxpayer needs to file with the tax department. It is used by the tax authorities to assess tax liability.

A taxpayer should file returns including purchases, sales, GST on Sales, and GST on Purchases with GST.

Who Are Liable to File GST Returns?

During the GST tenure, any business with over INR 5 crore as yearly turnover should be file two returns in a month and one yearly. This totals to 26 in one year.

The GST return fillings differ for quarter GSTR-1 taxpayers. The number of GST Returns filings is 9 in one year, including an annual return and a GSTR-3B.

Composition Dealers have separate returns filings in special cases. They have to file 5 GSTR in one year.

Different Types of GST Returns

Here is some basic information related to different types of GST Returns:

1. GSTR 1

It is a GST return filing to report the sales you have made. What have you sold and to whom? What are the locations and the prices? These are a few things to be covered under GSTR 1. The return covers all transactions that have occurred in the sales part.

You need to know here that no tax is paid by filing GSTR 1. It is just a process to acknowledge your sales and transactions to the government.

2. GSTR-2 and GSTR-3

They are just simple read-only tax returns applicable for GST registration. They were released by the government but didn’t work.

3. GSTR-3B

The sales and liabilities reported by you to the government using GSTR-1 have to be paid via GSTR-3B. What's important here is that you have to consider that you are not giving governments their revenue by not filing or postponing the return filing.

4. GSTR-4

Under the Composition Scheme, the government has offered an alternate tax payment method to the taxpayers. If you have applied for Composition Scheme, your GSTR falls in this category.

The return must be done annually, but the tax payment amenability is quarterly. Composition taxpayers should pay their returns at the suggested tax rate in three months. The money is deposited via a challan known as CMP-08.

5. GSTR-5

It is suggested when a non-resident taxpayer applies for a business temporarily.

6. GSTR-6

It is applicable if you have several GST registrations against one PAN Number. You don’t pay any tax against GSTR-6. You have to report your sales and liabilities to the government under this return.

7. GSTR-7

It is not a global return. It is just for the government bodies, agencies, organizations, and public sector undertakings.

8. GSTR-8

Sales done through online mode are filled against GSTR-8. The online store owners opt for TCS (Tax collected at Source) method, which is paid to the government.

9. GSTR-9

A registered taxpayer with a turnover below INR 2crore doesn’t have to file this return. If the turnover surpasses INR 2 crore, the yearly return becomes obligatory. GSTR-9 has the gist of all the transactions done in the year.

10. GSTR-10

The return is filed after you have given up or canceled your GST registration. GSTR-10 should be filed to move out of the GST realm.

11. GSTR-11

It is applied if you are a UIN holder, Unique Identification Number Holder. Some government agencies get a UIN number rather than a GST number. They have to file GSTR-11.

Every registered business should file a GST return. In case of no transaction, you should file a NIL return. The penalties for not filing GST returns differ according to the due payment.

What is GST Reconciliation and Matching?

Basically, reconciliation compares two data entry set to know any variations or differences. It is done to rectify the mistakes committed or any omissions.

Reconciliation has importance in taxation as it gives rise to tax paid less or not paid at all or excessively paid. Here are some mismatches that are found during the reconciliation and matching processes.

  • Discrepancies between the amounts filed in the GSTR-3B and amounts entered in GSTR 2A and GSTR-2B.
  • Differences in the sales data between GSTR-1 and GSTR-3B.
  • Till the last date of the year, discrepancies in the provisional credit as mentioned in the CGST Rule 36(4) and the claimable credit according to GSTR-2B.
  • If there are discrepancies between the ITC amount as mentioned in the GSTR 2B and ITC books. It may be noticeable after 1st Jan 2022 as the provisional ITC from Section 16(2) (aa) has been removed.
  • The difference in the sales books and GSTR-1 when auto-checked from e-invoices.
  • The difference in the tax amount when comparing the GSTR 3B with accounting books.

All the differences will lead to issuing scrutiny notices to the taxpayers or, worse, GST Registration suspension.

There are many causes for these mismatches. Some are given below:

  • The vendor may file liability, but credit hasn’t been availed in the GST returns. These should be availed before the September due date returns or annual returns.
  • The vendor failed to declare supply liabilities made, but companies have benefitted from the credit on such purchases in the GST returns. Businesses should speak to the vendor to determine if the liability is declared or not to eliminate such mismatches.
  • Difference between the liability declared and credit received. It can be acknowledged and reconciled suitably by issuing debit or credit notes, before September or at the end of the financial year.
  • Mistakes in the details mentioned: Sometimes, there can be mismatches in other details, such as the GSTIN of the supplier or receiver, invoice data, or debit note date. Such changes should be made in the following month when mistakes are made.

GST Reconciliation is a simple procedure, but automation may take some time and resources. For instance, if a taxpayer must constantly be in touch with vendors and make changes in their returns or track the ITC claim.

Monitoring a few transactions will not be difficult for business. However, if there are thousands of invoices in a month, it can lead to a bulk volume. Thus, reconciliation of GST returns data should be done periodically to avoid chaos and confusion.

Why is GST Reconciliation Needed?

You have many reasons to reconcile GST return data under GST.

  • A registered business should claim ITC if they have a GSTR-2B invoice. Because of this, taxpayers should reconcile whenever the ITC according to their purchase register and GSTR-2B fails to match.
  • GSTR is filed monthly or three-monthly. However, after the financial year is finished, an annual return must be filed before 31st December of the year. This requires data consolidation reported over the financial year. To ensure the correction is done and there is no duplication, taxpayers should reconcile it and make the declaration.
  • According to the GST regulations, some deadlines are specific to making amendments to GSTR data or filing for ITC. According to the CGST law, the action should be taken under section 39 before filing the month of September or the end of the financial year.

Steps To Do GST Reconciliation

It would help if you did reconciliation for all GSTIN, and it should be handled at a PAN standard. Reconciliation should be done across months. It shouldn’t be just done for the previous financial year, but the current financial year should also be considered.

ITC is a major part of your GST returns, and it holds great importance compared to the other GST return components. The phase where the claims sanctity were checked previously is not the same as the present GST regime. A taxpayer can check the authenticity while filing GST returns through GSTR-2B and GSTR-2A and acting. Previously, it was done during the processing of the returns.

The vendor reconciliation should be done regularly. If it is not done, taxpayers should consider doing it before the September returns of the financial year following the related financial year. It will help you check and declare all unclaimed ITC during the period.

Concerns About Not Reconciling Data for GSTR

If a business doesn’t reconcile GST return information, it may lead to scrutiny notices from the GST establishments. However, there have been cases where the GST officer has suspended the GST registration of the taxpayer. Some events when the GST officer can suspend a taxpayer’s GST registration are:

  • The difference in sale data is shown in GSTR-1 and GSTR 3B.
  • The difference in the purchase data is shown in GSTR 2B and GSTR 3B.

Reconciling a small amount of data is convenient, but the problem arises if the data is large. And, reconciling a big chunk of data manually isn’t feasible. It is time-taking and tedious. It can also lead to suspension of the GST registration because of data differences. Hence, it is highly suggested that a taxpayer use an automated remedy to avoid such notices from the GST office. There are several tools and software to perform GST data reconciliation without worrying about data quantum.

Things to Consider when Selecting the Software for GST Reconciliation

  • It should offer seamless data sharing between a company, its chartered accountants, and workers.
  • It should acknowledge input errors like the wrong date, improper GSTIN and invoice numbers, and other details.
  • It should send reminders to lower stress on the brain.
  • It should be adaptable to the changing GST regulations. Changes keep coming frequently. And the tool shouldn’t get obsolete. It should be made for updates and plugins.
  • It should help to make the procedure efficient.
  • It should offer insights into business owners’ sales data periodically.

Tools to Reconcile GST Data Quicker with Compliance

One should find a powerful reconciliation tool or system to match and reconcile GST return data. Some of the things that an efficient reconciliation tool should have are:

  • It should have the capacity to handle any amount of data.
  • It should simplify the business owners to get data in the system and take it out to the ERP system. The process should be seamless and get the data from any source.
  • It should offer deep reporting to meet all the reconciliation points.
  • It should do the process monthly so that the owner doesn’t feel too burdened.
  • It should permit efficient data sharing and collaboration between the owner and his team.
  • It should be smart enough to recognize all the wrong information and render the best reconciliation under such a circumstance.
  • The tool should act in real-time and proactively. Seamless integration will make the reconciliation a real-time automatic approach.
  • It should be automatic to lower human intervention.

Tally Prime is a completely well-decked business management system to handle all business operations right from finances, account inventory, and payroll. Its major highlight is that it can reconcile GST five times quicker than the conventional approaches. It also comes with auto-identification technology to accurately match the data and ensure error-free, easy ITC claims.

It optimizes the reconciliation procedure and reconciles quickly and effortlessly. It wipes out any duplication and eliminates all human errors linked with GST reconciliation.

Steps to Reconcile with TallyPrime

  • Open your GST reports in tally, and check the statutory reports in the reports section. It will have all the details of the supplies, invoices, and suspicious transactions.
  • Open the vouchers section on the GST website and check invoices for returns and invoices with mismatched data.

Check out the mismatches in both sections and perform accordingly. It eliminates all the differences between the invoices on the website and your accounting book. There are several reasons to use TallyPrime, one of them being it allows immediate and effortless reconciliation of GSTR without spending hours on a complicated spreadsheet. You have to get the software and automate all your GSTR calculations and reconciliation to get the most effective results for your month, quarter, and annual GST returns.

Wrapping Up

Filing GST returns can be an overwhelming experience for a business owner. Having a tool at hand eases your work and wipes out chances of human errors and enhances better results. It also helps with other business operations such as finances, payroll, and accounting inventory. So, use it to get all its benefits and enjoy a peaceful work environment.

Contact us to learn more!

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