GSTR-3B vs. GL Reconciliation: How to Reconcile GSTR-3B with GL

GSTR-3B is a summary of output tax liability and Input Tax Credit (ITC) utilised to set off such liability in a tax period and General Ledger (GL) are the internal records containing purchase and sales registers which are the records of transactions maintained by the business.

Key Takeaways

• Reconciliation of GSTR-3B with GL becomes a crucial aspect for any business to make sure they are declaring accurate tax liability, claiming accurate inputs and remaining compliant with the GST regulations.
• Some of the significant areas to be reconciled are GSTR-3B with the sales register, GSTR-2B with the purchase register (as part of validating the ITC component), verifying RCM liabilities and paying the output tax liability.
• The process of reconciliation includes steps like preparing the data for the relevant tax period, verifying ITC claims, cross-checking tax liabilities & payments, documenting the reasons for mismatches and steps taken to resolve the same.
• ClearTax AI-powered platform is a beneficial tool helping in seamless tax reconciliations. The embedded AI algorithms and tools which facilitates faster and accurate outcomes to determine accurate ITC claims and ensure correct tax liability.

GSTR-3B vs. GL: Key Differences

GSTR-3B is a monthly return summary for the purpose of declaring liabilities, claiming ITC and paying taxes; whereas GL (General Ledger/ Books of Accounts) is a detailed real-time record of business transactions. 

The key differences between GSTR-3B and GL are as follows:

Why Reconcile GSTR-3B with GL?

GL reconciliation is performed by comparing the balances of the general ledgers to the external third-party documents such as bank statements, statement of confirmation provided by vendors and customers, etc.,

Reconciling GSTR-3B with the GL ensures accurate GST compliance and financial reporting. The process of reconciliation verifies the details reported in GSTR-3B matches with the transactions recorded in the General Ledger.

Reconciliation helps you identify underpaid, unpaid or overpaid taxes and fix any unintentional mistakes or omissions.

Some of the reasons why reconciliation of GSTR-3B with GL is important:

• The process helps in ascertaining accurate tax liability for the period by summarising all the inward and outward supplies with the transactions recorded in the GL.
• Reconciliation is useful in claiming accurate ITC by verifying whether the input in GSTR-2B is matching with that recorded in the GL; this ensures no non-genuine or ineligible ITC is claimed which prevents further notices and penalties.
• It streamlines the audit process through organised, accurate and well-documented financial records.

Key Areas to Reconcile in GSTR-3B vs GL

The following are the key areas to be reconciled in GSTR-3B vs. GL:

1. GSTR-3B with the Sales Register: Compare the sales reported in GSTR-1 and 3B with the output liability reflected in books for the tax periods. Adjust for any credit/debit notes, amendments, or other wrong reporting.

2. GSTR-2B with the Purchase Register: Compare the ITC claimed in GSTR-3B (Table 4A) with the ITC recorded in the GL/Input Tax ledger for the same tax period. Since ITC in GSTR-3B is itself drawn from GSTR-2B, a prior GSTR-2B vs. Purchase Register check (for credit/debit notes, amendments, prior-period entries, and ineligible credits) is a necessary input. However, the reconciliation point that matters for this exercise is whether the GSTR-3B figure ties back to the books. 

3. RCM Liabilities: Match the RCM liabilities paid in cash to the expenses or liabilities booked under RCM in the GL.

4. Tax Paid and Tax Payable: Ensure that the final tax paid in the GSTR-3B i.e., Cash + ITC matches with the output liability and Inputs available in each head of tax – CGST Input, SGST Input and IGST Input. Pass the corresponding set off entries to indicate the utilisation of input credit to pay off output liability.

Step-by-Step Process to Reconcile GSTR-3B with GL

Given is the step-by-step process to reconcile GSTR-3B with GL:

1. Prepare your data: Organise all the data belonging to the same tax period such as GSTR-1, GSTR-2B and GSTR-3B along with GL reports such as Sales Registers, Purchase Registers, Tax ledgers etc., from your accounting ERP systems.

2. Verify ITC claims: Cross-check the ITC claimed in GSTR-3B with the purchases recorded in books, look for any missed transaction or excess claimed inputs and segregate eligible and ineligible ITC.

3. Tax Liability and Payments: Ensure the tax liability determined is accurate after the correct utilisation of credit and balance recorded as payable in cash including RCM liability. Also check whether such payment has reflected in the bank statements recorded in the GL.

4. Documentation: Document how the mismatches identified are resolved along with post adjusting journal entries in the GL; also record the reasons for such mismatches and steps to be taken to avoid the same.

Common Reasons for GSTR-3B and GL Mismatch

A mismatch can arise between GSTR-3B and GL due to various reasons such as timing differences, manual errors, differences in tax treatments, etc.,

How ClearTax AI-Powered Platform help with GSTR-3B vs GL reconciliation?

ClearTax AI-powered platform facilitates seamless GSTR-3B vs. GL reconciliation by automating data extractions from ERPs and GST portal with its intelligent algorithms to identify mismatches and discrepancies in real time and provide actionable reports.

Let us understand how ClearTax’s AI-powered platform helps in such reconciliation:

1. Automation of Data Extraction and Reconciliation

• ClearTax directly integrates with ERPs like SAP, MS Dynamics, Tally, Oracle, Zoho, etc., to extract sales and purchase data in bulk eliminating the need for manual interruption.
• With its AI-powered matching using an intelligent algorithm of fuzzy matching; it can match invoices from GSTR-3B to GL even when there are minor differences in the invoice.
• The platform helps you to classify invoices and entries into 4 categories – matches, mismatches, not in GL and not in GSTR-2B; which helps the user to take quick actions to resolve issues.

2. Reconciliation Features

ClearTax provides with the following reconciliation features:

• ITC GL vs. GSTR-3B reconciliation
• Output GL vs. GSTR-3B reconciliation
• Invoice Management System (IMS) vs. Purchase registers

3. Actionable Reports

• The AI analyses supplier filing behaviours to identify high-risk suppliers who consistently file their returns late or fail to upload invoices.
• The AI identifies mismatches and automates the communication with the respective vendors to enable faster corrections and accurate ITC claims.
• The AI also indicates potential risks associated such as excess claims, ineligible credits claims, etc., which may result in notices and penalties.

4. Benefits

• ClearTax AI learns from previous corrections to improve accuracy, it often ensures 100% accuracy while reconciliation and classification of invoices.
• The AI platform reduces substantial manual efforts and facilitates the required reconciliations in real time saving time and manual efforts.
• The platform helps in maximising ITC claims with accurate ITC matching and claims.