Library / Goods and Services Tax: The Professional's Master Guide
43. Reconciliations and Year-End Closing
Almost every GST notice starts with a mismatch between two data sets that the department can see. A business that reconciles the same data sets every month finds the gap first and fixes it cheaply. The reconciliations below should be part of the monthly close.
43.1 Monthly and Annual Reconciliations
Reconciliation | Purpose | Frequency |
|---|---|---|
Books vs GSTR-1 | All invoices, credit notes and advances reported | Monthly |
GSTR-1 vs GSTR-3B | Liability declared equals liability paid (now largely locked) | Monthly |
GSTR-2B vs purchase register | ITC claimed only on invoices in GSTR-2B; follow-up list for suppliers | Monthly |
E-way bills vs GSTR-1 | Every movement for supply matched to an invoice | Monthly |
E-invoices (IRP) vs GSTR-1 | Cancelled and amended e-invoices reflected | Monthly |
GST turnover vs income-tax turnover, AIS and Form 168 | Differences explained (non-GST income, stock transfers) | Annual |
Payroll and expenses vs RCM | RCM on director fees, legal, GTA, import of services | Monthly |
TDS (section 51) and TCS (section 52) credits | Credits accepted in the cash ledger match receivables | Monthly |
Illustration 202: GSTR-2B vs purchase register for one month Purchase register ITC Rs. 18,40,000; GSTR-2B ITC Rs. 17,65,000. Difference Rs. 75,000. Step 1: Three invoices not uploaded by suppliers: Rs. 52,000. Do not claim; follow up. Step 2: One supplier reported an invoice under another GSTIN of the group: Rs. 15,000. Ask the supplier to amend through GSTR-1A or a later GSTR-1. Step 3: A supplier credit note in GSTR-2B not yet booked: Rs. 8,000. Book it and reduce ITC. Check: Rs. 52,000 + Rs. 15,000 + Rs. 8,000 = Rs. 75,000. ITC claimable: Rs. 17,65,000. |
Judicial view: No rectification of GSTR-3B outside the scheme Union of India v. Bharti Airtel Ltd. (Supreme Court, 2021): The taxpayer cannot unilaterally rectify a filed GSTR-3B outside the scheme of the Act. Self-assessment is the taxpayer's duty, based on its own books, and errors must be corrected through the mechanism the law provides. This is why monthly reconciliation before filing matters: the chance to correct later is limited. |
43.2 Year-End Items
Item | Deadline | Reference |
|---|---|---|
Last date to take ITC of the year | 30 November of next year or annual return date, earlier | Section 16(4) |
Credit notes and GSTR-1 corrections for the year | 30 November of next year or annual return date, earlier | Sections 34(2), 37(3) |
Annual true-up of common credit reversal | Return for September of next year | Rule 42(2), rule 43 |
Reversal where supplier did not file GSTR-3B by 30 September | By 30 November of next year | Rule 37A |
GSTR-9 and GSTR-9C | 31 December of next year | Section 44, rule 80 |
Illustration 203: Rule 42 annual true-up for FY 2025-26 Common credit for the year Rs. 24,00,000. Exempt turnover Rs. 3,60,00,000; total turnover Rs. 24,00,00,000. Step 1: Credit attributable to exempt supplies = Rs. 24,00,000 x 3,60,00,000 / 24,00,00,000 = Rs. 3,60,000. Step 2: Monthly reversals during the year totalled Rs. 3,15,000. Shortfall Rs. 45,000, reversed in the September 2026 return filed on 20 October 2026. Step 3: Interest from 1 April 2026 to 20 October 2026, both days included (203 days): Rs. 45,000 x 18% x 203 / 365 = Rs. 4,505. |
43.3 A Worked GSTR-9 Reconciliation
Illustration 204: Books to GSTR-9 for Patel Components Pvt. Ltd., FY 2025-26 Revenue from operations as per audited books: Rs. 24,60,00,000. GSTR-1 turnover for the year: Rs. 25,85,00,000. |
Revenue from operations as per books | Rs. 24,60,00,000 |
Less: unbilled revenue at 31 March 2026 (time of supply in April 2026) | (Rs. 35,00,000) |
Add: unbilled revenue of FY 2024-25 invoiced this year | Rs. 28,00,000 |
Add: sale of scrap booked in other income | Rs. 6,40,000 |
Add: supplies to own branch in another State (distinct person) | Rs. 1,20,00,000 |
Add: post-sale discounts deducted in books without GST credit notes | Rs. 12,00,000 |
Turnover as per books for GST | Rs. 25,91,40,000 |
Turnover as per GSTR-1 and GSTR-3B | Rs. 25,85,00,000 |
Unreconciled difference | Rs. 6,40,000 |
The difference is the scrap sale, which was never invoiced through the GST billing system. Tax at 18% is Rs. 1,15,200 (CGST Rs. 57,600 and SGST Rs. 57,600). It is shown in GSTR-9 Table 4 and paid through DRC-03 with interest, since GSTR-9 cannot itself be used to pay. On the ITC side, Table 8A (GSTR-2B) showed Rs. 3,16,80,000 against Rs. 3,11,50,000 availed in Table 8B. The difference of Rs. 5,30,000 was explained by blocked credits not availed (Rs. 2,10,000), FY 2025-26 invoices availed in FY 2026-27 before 30 November 2026 (Rs. 2,40,000, shown in Table 8C and Table 13) and invoices for goods rejected and returned, on which credit was not availed pending the suppliers' credit notes (Rs. 80,000). Rs. 2,10,000 + Rs. 2,40,000 + Rs. 80,000 = Rs. 5,30,000.
Practice note Prepare the GSTR-9 working from the books, not from the returns. Starting from GSTR-1 hides exactly the items the department will later find. GSTR-9C (for aggregate turnover above Rs. 5 crore) is self-certified; the same reconciliation feeds it and the audit file. |
Chapter summary • Reconcile books with GSTR-1, GSTR-2B with the purchase register, and e-way bills and e-invoices with GSTR-1 every month. • Annual reconciliations cover income-tax turnover, AIS and Form 168, RCM and TDS and TCS credits. • ITC, credit notes and GSTR-1 corrections for a year close on 30 November of the next year; rule 42 true-up by September's return with interest. • GSTR-9 should be prepared from the books; differences are paid through DRC-03, not through GSTR-9. • Returns cannot be rectified outside the statutory scheme (Bharti Airtel), so reconcile before filing. |
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