LET’S UNDERSTAND THE GSTR-1 AND GSTR-3B

GSTR-1: GSTR-1 is a monthly/quarterly return that summaries all outward supplies of a taxpayer. Here, invoice-wise details are to be uploaded so that the Government can keep a check on every transaction. This forms the basis for the recipient of supplies to accept the same and take the eligible input tax credit.

GSTR-3B: GSTR-3B is a simple return containing summary of outward supplies, inward supplies liable to reverse charge, eligible ITC, payment of tax etc. Thus, GSTR-3B does not require invoice-wise data of outward supplies.

WHY RECONCILIATION FOR GSTR-1 AND GSTR-3B IS REQUIRED?

• From 1st January 2021 taxpayer must ensure that supplies declared in GSTR-1 must match the summary total of supplies declared in GSTR-3B. Otherwise GSTIN may be suspended.
• Reconciliation would help the government to allocate the right share of tax revenue to the concerned states. The reconciliation is specifically useful to identify any errors that have been made when entering the details of integrated taxes while filling GSTR-3B.
• Reconciliation of outward supplies is must to ensure that the details disclosed in GSTR-1 & GSTR-3B matches for every month/quarter.

REASONS FOR MISMATCHES IN GSTR-1 AND GSTR-3B

• Time Differences: There may be time difference in reporting of invoices in GSTR-1 and GSTR-3B.
• Debit note or Credit note: Issue of an invoice in a particular month and issue debit or credit note at a later date.
• Reporting of supplies under wrong table: Reporting of supplies under the wrong table in GSTR-3B but correctly reporting the same in GSTR-1.
• Unregistered person supplies: Inter-state supplies made to unregistered persons omitted in GSTR-3B but declares in GSTR-1.
• Prior Period Transactions: A supply is not been shown in GSTR-1 of the former tax duration even when the tax was furnished effectively in GSTR-3B. The information of these supplies might be reported via enrolled individuals in GSTR-1 of the current tax period.
• Omission, misleading or shortness: While furnishing return in form GSTR-1 and GSTR-3B there may have omission, misleading, shortness etc.

ACTION THAT MIGHT BE TAKEN BY THE DEPARTMENT IF THERE IS MISMATCH IN GSTR-1 AND GSTR-3B
“Every taxpayer must carry out reconciliation between GSTR-1 and GSTR-3B so as to know if there is any discrepancies. Because a small
mismatch between GSTR-1 and GSTR-3B can lead to huge amount of penalty along with interest.”

• The proper officer could send a communication to a registered person for short or unpaid tax along with explaining reasons for non payment or short payment of self-assessed tax.
• Reasonable time will be given for the payment of such tax.
• If the taxpayer explain valid reasons for non payment or short payment of tax or pays the unpaid tax then need not to initiate any recovery proceedings under section 79.
• If the taxpayer failed to provide valid reasons or the recovery department isn’t satisfied with reason then recovery proceedings under section 79 could be initiated.
• If the taxpayer fails to reply to such communication or fails to make payment within prescribed time limit then recovery proceedings under section 79 could be initiated.

RECTIFICATION OF MISMATCH BETWEEN GSTR-1 AND GSTR-3B
In case of any mismatch between GSTR-1 and GSTR-3B, the same can be rectify in subsequent month or till the furnishing of final return in form GSTR-9.
An explanation was inserted in section 75(12) of the CGST Act, 2017 vide Finance Act 2021
“ Not with standing anything contained in section 73 or section 74, where any amount of self-assessed tax in accordance with a return furnished under section 39 remains unpaid, either wholly or partly, or any amount of interest payable on such tax remains unpaid, the same shall be recovered under the provisions of section 79.
[Explanation.-For the purposes of this sub-section, the expression “self-assessed tax” shall include the tax payable in respect of details of outward supplies furnished under section 37, but not included in the return furnished under section 39.] ”

Written by
Priyanka & Sadhna Kumari
Articled Clerk