GST returns are built from invoices, but the books are built from entries. When the two are not matched before a return is filed, the difference shows up later as a notice. A short reconciliation each month removes most of that risk.
How the returns connect
- GSTR-1 reports outward supplies invoice by invoice. The figures flow into the tax liability in GSTR-3B.
- GSTR-2B is a statement drafted by the portal from what suppliers have reported. It shows the input tax credit available to you for the month.
- GSTR-3B is the summary return through which tax is paid. Per the portal’s guide, the outward-supply table is populated from GSTR-1 and the input credit tables from GSTR-2B.
Step 1. Outward supplies
- Agree total sales in the books for the month to GSTR-1, by tax rate. List invoices booked but not reported and invoices reported but not booked.
- Check that credit notes, debit notes, and amendments appear in the same period in the books and the return.
- Compare GSTR-1 with the tax payable shown in GSTR-3B, and investigate any gap before payment.
- Compare e-invoice and e-way bill reports with GSTR-1 for the same invoices.
Step 2. Inward supplies and credit
- Match the purchase register to GSTR-2B by supplier GSTIN, invoice number, date, taxable value, and tax.
- Sort the differences into: invoice in books but not in GSTR-2B; invoice in GSTR-2B but not in books; and amounts that differ.
- For the first group, ask the supplier whether the invoice has been reported. Credit is taken only for an invoice that appears in GSTR-2B; do not claim it on the strength of the books alone.
- For the second group, check whether the goods or services were received and the invoice belongs to you. Book it, or reject it using the portal’s facility for accepting or rejecting supplier records.
- Identify credit the Act blocks or requires to be reversed, such as inputs used for exempt supplies or non-business use, and reverse it.
- Check that invoices have been paid to the supplier within the period the rules allow, or that the reversal has been made.
Step 3. Time limit for credit
Section 16(4) of the CGST Act sets an outer limit for first-time credit on an invoice: the earlier of 30 November following the end of the financial year, or the date the annual return for that year is filed. Credit that was reversed earlier and is being reclaimed after payment is treated differently under the rules. A list of invoices still outstanding should be reviewed well before the limit.
Step 4. After the return
- File GSTR-3B only when the working above agrees to the figures entered. Keep the working with the return.
- Keep a note of every mismatch that is carried forward, with the action taken.
- At year end, reconcile the annual return to the audited accounts and to the monthly returns, and explain every difference in writing.
The rules for these returns have been amended several times in recent years, and the portal’s treatment of edits and intimations changes with notifications. Check the current text on the portal or the CBIC site before relying on a step.
Records to keep ready
- Sales and purchase registers and ledgers for the period
- Copies of GSTR-1, GSTR-2B, and GSTR-3B as filed, with the reconciliation worksheets
- Credit and debit notes, with the correspondence behind them
- Payment proof for supplier invoices, and the reversal workings