GST Registration

GSTR1 and GSTR3B: Comparison and Reconciliation; A Guide

calendar20 Dec, 2023
timeReading Time: 7 Minutes
GSTR1 and GSTR3B

A GST return is a form that outlines taxes paid on sales and purchases by a company. GSTR-3B, filed monthly by the 20th, discloses monthly supplies, GST paid, input tax credit details, and reverse charge applicability. GSTR-1, which is filed quarterly or monthly, lists outward supplies and tax liability details for each invoice, enabling accurate tracking of transactions and eligibility for input tax credit claims by recipients.

Comparing and reconciling GSTR-3B and GSTR-1 is vital for accurate tax reporting. GSTR-3B, a monthly summary return, outlines tax liability and input tax credit, while GSTR-1 details monthly outward supplies. Reconciliation ensures consistency, identifying discrepancies and preventing potential tax issues. Filing these GST forms is crucial for legal compliance, providing essential information for the Income Tax Department, and facilitating smooth business operations. These returns play a significant role in fulfilling legal obligations under the GST regime, emphasizing the importance of timely and accurate filing.

GSTR-3B is a monthly summary return submitted by taxpayers by the 20th of the following month or the 22nd/24th of the quarter. It outlines supplies made, GST to be paid, input tax credit claimed, and purchases under reverse charge for the respective month. It also facilitates tax payment provision.

On the other hand, GSTR-1 is a monthly or quarterly return where taxpayers report details of their outward supplies for the month, specifying tax liability. It requires invoice-wise information to be uploaded, allowing the government to monitor transactions. This serves as the basis for recipients to accept supplies and claim eligible input tax credits.

What is the difference between GSTR-1 and GSTR-3B Across Various Aspects?

BasisGSTR-1GSTR-3B
Definition and PurposeThis return discloses outward supplies or turnover by registered taxpayers. It provides detailed information on all supplies made during a specific period, with filing frequencies based on the business turnover—monthly for turnover exceeding ₹1.50 crore and quarterly for turnovers below this threshold.A self-assessment return filed monthly by registered dealers, designed to simplify the return filing process. It summarizes tax liabilities, covering purchases, input tax credits, sales, output tax liability, and tax payments made.
Filing DatesFiling deadlines vary based on turnover. Monthly filers (turnover > ₹1.50 crore) must file by the 11th of the subsequent month, while quarterly filers (turnover < ₹1.50 crore) submit by the 30th/31st of the following quarter.Filed monthly by all registered businesses, due on the 20th day of each month.
Tax PaymentNo immediate tax payment is required upon filing.Tax liability settlement is essential before filing.
Penalties for Late FilingLate filing incurs a penalty of ₹200 per day (₹100 each for SGST & CGST) until the return is filed.Penalties vary—₹20 per day for nil returns and ₹50 per day for returns with added transaction details.

What does the term “Reconciliation” mean?

Reconciliation is an accounting procedure that involves comparing two sets of records to verify accuracy and consistency. This process ensures the precision, consistency, and completeness of general ledger accounts. While commonly used in business, reconciliation can also be applied for personal purposes.

The purpose of account reconciliation is to explain any disparities in account balances or financial data. Variances arising from the timing of payments and deposits may be acceptable, but unexplained inconsistencies could signal accounting fraud. Record reconciliation can be performed on a daily, monthly, or annual basis.

What is the Importance of GSTR-1 and GSTR-3B Reconciliation?

Reconciling GSTR-1 and GSTR-3B data is essential for various reasons:

  1. No Revisions:

GSTR-3B does not allow revisions, making reconciliation crucial for ensuring accuracy in reporting.

  • Minimizes Omissions and Duplication:

Regular reconciliation reduces the risk of omitting or duplicating invoices in either GSTR-1 or GSTR-3B, promoting accurate financial reporting.

  • Reduces GST Litigation:

Reconciliation helps avoid potential show-cause notices from GST authorities by ensuring alignment between the total sales reported in GSTR-1 and GSTR-3B, thereby minimizing the risk of future litigation.

  • Avoids GSTIN Suspension:

Matching outward supplies in GSTR-1 with the summary total in GSTR-3B is critical to prevent GSTIN suspension in case of discrepancies.

  • Accurate Tax Liability Calculation:

Reconciliation ensures precise calculation of tax liability on outward supplies during a specific period, minimizing errors and miscalculations.

  • Timely Tax Error Rectification:

Identification of errors in integrated taxes is facilitated through reconciliation, allowing for timely rectification and compliance.

  • Better ITC Calculation:

GSTR-1 serves as the foundation for recipients to claim input tax credits, emphasizing the importance of timely and accurate declarations in both GSTR-1 and GSTR-3B.

  • Avoids Penal Action:

Timely reconciliation helps businesses avoid late fees and interests associated with short or non-payment of taxes, preventing penal action and ensuring regulatory compliance.

Ensuring Accuracy in Annual Return Filing: Reconciliation of GSTR-1 and GSTR-3B

When filing the Annual Return in Form GSTR-9, a meticulous reconciliation of outward supplies becomes imperative. This process is crucial for aligning the details disclosed in GSTR-1 and GSTR-3B consistently across all months. It goes beyond just matching figures; the details of tax payments made throughout the year must be accurately reflected. This total should precisely correspond with the taxes disclosed and paid in GSTR-3B.

The integration of the return-filing system underscores the significance of maintaining harmony between GSTR-1 and GSTR-3B. Any disparity between these filings could result in improper disclosure within the annual return, emphasizing the critical role of reconciliation in ensuring accurate and compliant reporting.

What are the Reasons for mismatches in GSTR-3B vs GSTR-1?

Mismatches between GSTR-3B and GSTR-1 often occur due to various reasons:

  1. Misreporting in GSTR-3B Tables:

Reporting supplies under the wrong table in GSTR-3B, even if correctly declared invoice-wise in GSTR-1. For instance, accurately reporting zero-rated sales in Table 6A of GSTR-1 but incorrectly placing it under Table 3.1(a) in GSTR-3B.

  • Timing Discrepancies with Debit/Credit Notes:

Issuing an invoice in one month and subsequently giving a debit or credit note can lead to discrepancies between GSTR-3B and GSTR-1.

  • Omission of Inter-State Supplies to Unregistered Persons:

Inter-state supplies made to unregistered individuals may be omitted in GSTR-3B but correctly declared in GSTR-1.

  • Incorrect Tax Head Allocation:

Correctly indicating the value of supplies but paying tax under the wrong tax head, such as using IGST instead of CGST and SGST or vice versa.

  • Amendments Post GSTR-1 Filing:

Supplies that are amended after filing GSTR-1 cause changes in tax liability between the time of GSTR-1 and GSTR-3B filing.

  • Time Lag in Invoice Reporting:

Differences in the timing of reporting invoices in GSTR-1 and GSTR-3B lead to variations in the declared data.

  • Typographical Errors:

Errors in reporting due to typographical mistakes or inaccuracies.

Addressing and rectifying these issues is crucial to ensuring accurate and consistent reporting between GSTR-3B and GSTR-1 filings. Regular reconciliation can help identify and resolve such discrepancies.

What are the Actions for Discrepancy Resolution in GSTR-3B vs GSTR-1 Reconciliation?

Upon identifying discrepancies between Form GSTR-1 and GSTR-3B, especially in instances where there is a shortage in tax payment by the supplier, prompt actions are imperative. In such cases, the shortfall in tax must be rectified by making the necessary payment, accompanied by the applicable interest.

Conducting this reconciliation for each filing period is crucial to align both returns seamlessly. By ensuring a match between GSTR-1 and GSTR-3B, businesses can avoid situations where interest payments may become due at a later date. This proactive approach to reconciliation helps maintain compliance and financial accuracy, preventing potential issues and penalties in the future.

What are the Advantages of GSTR-3B Over GSTR-1 in Tax Comparison Reporting?

Explore the benefits of utilizing the GSTR-3B vs GSTR-1 Tax Comparison Report:

  1. Flexible Data Comparison:

Download GSTR-1 and GSTR-3B at any time during the month, allowing for flexible data comparison. Upload sales ledgers effortlessly after confirming your GST login with OTP.

  • Field-Level Differences:

Easily verify variances in every field, covering outgoing tax, outgoing taxable amounts, and supplies reported under RCM in both reports, enhancing accuracy in financial analysis.

  • Comprehensive Comparison:

Conduct data comparisons at both PAN and GSTIN levels, ensuring a comprehensive examination of tax-related data for thorough insights.

  • Timely Discrepancy Awareness:

Quickly identify discrepancies on a monthly, quarterly, or annual basis, enabling swift awareness and facilitating prompt corrective actions.

How do you ensure compliance through GSTR-3B and GSTR-1 Reconciliation?

In the event of discrepancies between GSTR-3B and GSTR-1 across months, rectifying actions is crucial. Any unpaid tax obligations should be promptly settled, inclusive of applicable interest or penalties.

Consistent reconciliation between GSTR-3B and GSTR-1 during each reporting period is vital to align the provided information accurately. This proactive reconciliation not only aids in annual GST return preparation but also safeguards against fines, penalties, or potential termination of GST registration. The interconnected nature of the GST return system emphasizes the significance of maintaining precision and compliance throughout the reconciliation process.

Conclusion

GSTR-1 and GSTR-3B are integral returns in the GST framework, demanding accurate and timely filing for regulatory compliance. GSTR-1 specifically addresses outward supplies, while GSTR-3B offers a comprehensive summary of both inward and outward supplies, tax liabilities, and claimed Input Tax Credit (ITC). The generated reports serve as vital tools for decision-making and analysis by businesses and government authorities.

Understanding the distinctions between these returns is crucial, emphasizing the significance of precise filing to evade penalties and interest charges. Overall, adherence to GST regulations is pivotal for businesses, ensuring credibility and a positive reputation in the market.

Frequently Asked Questions (FAQs)

1. What is GSTR-1?

GSTR-1 is a return filed by registered taxpayers to report details of their outward supplies or turnover. It encompasses comprehensive information about supplies made during a specific period.

2. What does GSTR-3B cover?

GSTR-3B is a self-assessment return filed monthly by registered dealers. It provides a summarized overview of tax liabilities, including purchases, input tax credits, sales, output tax liability, and tax payments made.

3. How often should GSTR-1 be filed?

The filing frequency of GSTR-1 depends on the business turnover. Businesses with an annual turnover above ₹1.50 crore must file GSTR-1 every month, while those below this threshold can file it quarterly.

4. Is there a specific due date for filing GSTR-3B?

Yes, GSTR-3B is filed monthly, and the due date for submission is consistently set as the 20th day of each month.

5. What information does GSTR-1 capture?

GSTR-1 captures various details, including invoice-wise and consolidated values of supplies made to registered and unregistered persons, exports, supplies liable for the reverse charge, exempted supplies, debit/credit notes, advances received, and adjustments made.

6. Is there an immediate tax payment requirement for GSTR-1?

No, GSTR-1 does not require an immediate tax payment upon filing. It is a detailed return focused on recording outward supplies.

7. Is the filing of the annual return form affected by GSTR 3B and GSTR 1?

Yes, while filing annual returns in form GSTR-9, the reconciliation of outward supplies is essential because the details reported in GSTR 3b and GSTR 1 should match with each other. Hence, the details given in GSTR 3b and GSTR 1 should be accurate so that the taxpayer doesn’t face any issues while disclosing annual returns.

8. Is there any facility for digital signature in the GSTN registration?

Taxpayers would have the option to sign the submitted application using valid digital signatures. There will be two options for electronically signing the application or other submissions – by e-signing through an Aadhar number or through DSC, i.e., by registering the taxpayer’s digital signature certificate (DSC) with the GST portal. However, companies or limited liability partnership entities will have to sign mandatorily through DSC only.

9. Whether Cancellation of the Registration Certificate is permissible?

Yes, any Registration granted under this Act may be cancelled by the Proper Officer in the circumstances mentioned in Section 29 of the CGST/SGST Act, 2017. The proper officer may, either on his own motion or on an application filed, in the prescribed manner, by the registered taxable person or by his legal heirs, in case of death of such person, cancel the registration, in such manner and within such period as may be prescribed.

10. What are the penalties for late filing of GSTR-1 and GSTR-3B returns?

For GSTR-1, if filed after the due date, a penalty of ₹200 per day (₹100 each for SGST and CGST) must be paid. For GSTR-3B, a penalty of ₹20 per day is charged for a nil return, and a penalty of ₹50 per day is assessed for any added transaction details.

Read Our Article: Impact Of GST Rate On Flat Purchase In 2024

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