ITC Mismatch in GSTR-9: Causes, Adjustment Methods, Solutions

GSTR-9 is the annual return to be filed on 31^st December of the year following the financial year. The return contains the details of all the sales, purchases and ITC (Input Tax Credit) claimed during the financial year. However, there may be instances where a number of mismatches can occur such as: ITC mismatch in GSTR 2A and GSTR 3B, Non-availability of ITC, mismatch in HSN/SAC codes, etc. 

This article sheds the light on such mismatches, its causes and to make appropriate adjustments thereof. 

Key Takeaways:

• Identifying the common errors that occur while reporting of ITC, discrepancies between outward supplies as per GSTR 1 and tax paid as per GSTR 3B, mismatch in HSN/SAC codes, etc.
• The discrepancies and mismatches can be rectified by maintaining proper monthly records, following with suppliers, and seeking professional help wherever required. By doing so, businesses can claim their eligible ITC, avoid penalties, and interest charges and enhance GST compliance.
• Use of different tools and software aids in reconciliations which helps to automate the process. 
• Reconciling mismatches in ITC claimed is the fundamental aspect and the main purpose for filing GSTR 9. Hence,  identifying and rectifying such mismatches and discrepancies ensures appropriate compliance.

What is ITC Mismatch in GSTR 9?

ITC mismatch in GSTR 9 refers to discrepancies between ITC details reported by the taxpayer throughout the financial year and data available in GST records. GSTR 9 consolidates all the monthly/quarterly returns (GSTR 1 and GSTR 3B) filed during the year, as a key part of this, Table 8 is where the system auto populates available ITC from GSTR 2B from the financial year which is then compared to the actual ITC claimed by the taxpayer in their GSTR 3B. 

Common Reasons for GSTR 9 ITC Mismatch

Following are the common scenarios where there can arise a mismatch in ITC:

1. One of the most common issues that the businesses face while claiming ITC is the mismatch between GSTR 2B and GSTR 3B. GSTR 2B is an auto populated statement that contains the details of all the purchases made by the business, as uploaded by suppliers.  On the other hand, GSTR 3B is a monthly return that contains the details of all the sales and purchases made by the business, along with ITC claimed. Due to technical glitches or errors in the data entry, there can be a mismatch between the two returns which can lead to denial of ITC.
2. Sometimes, businesses may face a situation where their suppliers do not upload the details in their GSTR 1, or they may not have the necessary documents to claim ITC, this can result in non-availability in ITC, even if businesses have paid tax on purchases. 
3. Another common issue that businesses face while claiming ITC is non-compliance with GST rules, such as claiming ITC on exempted goods, or goods used for personal purposes, etc which can lead to further mismatches in ITC.
4. Ensuring timely filing of returns is also important for claiming ITC, late filing or non-filing can lead to interest and penalties, and denial of ITC.
5. Amendments made in subsequent returns are often overlooked while filing GSTR 9, which may lead to mismatches in the ITC.

GSTR 9 ITC Mismatch Scenarios with Examples:

1. Mismatch Between Table 8A (Auto Populated ITC) and Actual Books – 

Table 8A of GSTR-9 is auto-populated based on the GSTR-1s filed by suppliers. Mismatches arise between this auto-populated data and the ITC recorded in the recipient's books. 

Ex: An invoice dated March 15, 2024 (FY 2023-24) is filed by the supplier in their April 2024 GSTR-1 (FY 2024-25). The recipient claimed ITC in their March 2024 GSTR-3B. But the ITC will appear in the recipient's GSTR-2B for April 2024, and hence it will not be in Table 8A of the GSTR-9 for FY 2023-24. 

Solution: Therefore, this ITC should be reported in Table 8C (ITC of the previous FY availed in the current FY) and Table 13 of the GSTR-9 for FY 2023-24.

2. Ineligible ITC due to Place of Supply (POS) rules – 

Ex: A taxpayer registered in Madhya Pradesh stays in a hotel located in Mumbai, Maharashtra.
The hotel provides accommodation services, which are services related to immovable property. As per Section 12(3) of the IGST Act, the place of supply is the location of the hotel, i.e., Maharashtra.

Since both the supplier and the place of supply are in Maharashtra, the supply is an intra-State supply, and the hotel correctly charges CGST and Maharashtra SGST. The hotel reports the invoice in its GSTR-1, due to which the invoice appears in the recipient’s GSTR-2A / GSTR-2B.

However, the recipient is registered in Madhya Pradesh and cannot avail credit of Maharashtra SGST, as State tax credit is restricted to the State in which the recipient is registered. Consequently, the ITC is ineligible in law and cannot be claimed in GSTR-3B. Since the credit is ineligible, it is not included in Table 8A of GSTR-9, even though it appears in GSTR-2A / 2B.

3. Timing differences in filing the return by Supplier:

Example: You purchase goods from a supplier on 20^th March 2024 (FY 2023-24) and you claim your ITC in March GSTR 3B. However, the supplier has filed GSTR 1 on 13^th April, 2024. Thus, the ITC amount will not appear in Table 8A for FY 2023-24, causing a mismatch with your GSTR 3B claim. 

How to Adjust ITC Mismatch in GSTR 9 Filing?

ITC mismatch in GSTR 9 can be adjusted using specific tables within the return to declare differences, as GSTR 9 once filed cannot be revised. Hence it is to be filed with utmost care and precautions.

Reporting ITC Mismatches in GSTR-9

• Table 6: Total Amount of ITC Availed
  • This table is used to consolidate the total ITC claimed in all your monthly or quarterly GSTR-3B returns during the financial year.
  • Any unclaimed but eligible ITC for the financial year (that was claimed in the subsequent year's GSTR-3B before the deadline) should be reported in Table 8C.
• Table 7: Total Amount of ITC Reversed and Ineligible ITC
  • This table is used to report all ITC reversals made during the financial year, for reasons such as non-payment to vendors within 180 days, or inputs used for exempt supplies or personal use.
  • If any reversal was missed in monthly GSTR-3B filings, it can be done in a subsequent GSTR-3B and then correctly reported in Table 7 of GSTR-9.
• Table 8: Other ITC Related Information
  • This critical table auto-populates data from GSTR-2A/2B (depending on the financial year) and compares it with the ITC claimed in GSTR-3B (reported in Table 6).
  • Table 8C is specifically used to report ITC for the relevant financial year that was only claimed in the GSTR-3B returns of the subsequent financial year (before the specified deadline).
  • Table 8D shows the difference between the available ITC (8A) and the claimed ITC (8B + 8C). A positive difference (ITC available but not claimed) should be explained through reconciliation, and if the time period for claiming such ITC has passed, then such ITC will be lapsed and cannot be claimed.

What if the supplier has not filed GSTR 1?

A supplier must mandatorily file GSTR 1 and GSTR 3B to claim ITC and appropriately set off the available inputs against output tax liability.

Consequences for the Supplier

• Cannot File GSTR 9: if all the relevant GSTR 1 and GSTR 3B returns relating to a financial year are not filed, then the GST portal will not enable the option to file the annual return as well.
• Late Fees and Penalties: Failing to file GSTR-1/ 3B within or on the due date will lead to levy of late fees and penalties. 
• Scrutiny and Notices: Frequent delays in return filing may lead to scrutiny and notices by GST authority.
• Cancellation/Suspension of Registration:  If the suppliers continue to delay the filing of returns, it may result in cancellation or suspension of the supplier’s GST registration.

How to File GSTR 9 with ITC Mismatch?

The primary solution is to reconcile the ITC as per your purchase register and as per GSTR 2B reflected, and subsequently make adjustments in the relevant tables provided in GSTR 9, and if there are any mismatches arising due to your suppliers’ not reporting such purchases, following up with such suppliers to ensure they file their returns accordingly.

Steps to Address ITC Mismatch in GSTR-9

Before filing, you must identify the exact nature of the mismatch. 

1. Reconcile Data:

• Compare your purchase register/books of accounts with the auto-populated ITC data in Table 8A of GSTR-9 (which is based on GSTR-2B).
• Identify missing invoices, invoices with incorrect details, or differences in the timing of claims (e.g., ITC claimed in the subsequent financial year).

2. Adjust in Relevant GSTR-9 Tables:

• If ITC was claimed in GSTR-3B of the relevant financial year but it is missing in GSTR-2B/8A: you can report such details in the relevant tables and ensure proper documentation thereof. 
• If ITC belongs to the financial year but was claimed in the subsequent financial year (up to the specified deadline): Report this in Table 8C and Table 13 of GSTR-9.
• If ITC was wrongly claimed (ineligible credit): The amount must be shown as reversed in Table 7 of GSTR-9.

3. Pay Additional Liability (if required):

• If the reconciliation reveals that you claimed excess ITC in your GSTR-3B returns throughout the year, you need to pay the differential tax amount.

This payment is made voluntarily using Form DRC-03 before or at the time of filing GSTR-9. DRC-03 cannot be used for the actual reversal of ITC in Table 7, but for paying any tax liability or excess ITC claimed.