What is GSTR-1 Reconciliation?

Tally Solutions |Updated on: June 13, 2023

• Why do we need GSTR-1 reconciliation?
• Process of GSTR-1 reconciliation
• GSTR-1 reconciliation examples

GSTR-1 is a return form that is filed monthly or quarterly, depending on the business’s turnover. It must be mandatorily filed by all normal and casual GST-registered taxpayers who are involved in outward goods and services supplies or both. GSTR 1 reconciliation is the process of matching two sets of data; data available in the GSTR-1 form and data available in your books of accounts. In an ideal situation, the two sets of data must match exactly; however, in the real world, for plenty of reasons, differences can occur. GSTR-1 reconciliation is a regular process that ensures your returns are in synch with your books.

Why do we need GSTR-1 reconciliation?

GSTR 1 reconciliation is important as it ensures the books of accounts and returns are in sync with each other. GST returns are filed monthly or quarterly, while annual GST returns are filed before the end of the year. Before filing the annual return, every taxpayer must ensure the correctness and validity of their data. Regular reconciliation of GSTR-1 with the books of accounts makes it an easy task. In addition, all GST-registered businesses are mandated to preserve books of accounts, including invoices and other documents, for a period of 6 years. This implies that books are the primary source of data for return filing. As a result, the returns should be the reflection of your books, and any difference would lead to non-compliance.

GSTR-1 reconciliation is a good practice because, in the real world, the source of errors can be anywhere. For example, businesses have multiple stakeholders involved, and it is highly unlikely that only one individual is responsible for doing all the accounting activities and filing GST returns. If another individual is filing the returns and making changes directly in the portal due to errors found in the data shared by the taxpayer, then there are bound to be mismatches between the GST return filed and the books of accounts. With the help of GSTR 1 reconciliation, this problem is averted as the difference can be identified and rectified.

If the taxpayer does not reconcile the GSTR-1 form with the books of accounts, many errors may be present, and he will have no idea about them. This will create problems during the consolidation process when the annual returns are being filed, and also, books not matching with returns may lead to non-compliance consequences. This will be a bigger problem to solve when compared to regularly reconciling and rectifying the errors depending on the type and where they have occurred. All types of errors, such as typos, missing data from the books, duplication of data, etc., will be prevented by reconciling data regularly. It is a highly recommended process. This applies to every type of business, whether it is a micro-business or an enterprise.

Process of GSTR-1 reconciliation

GSTR 1 reconciliation can be done using two methods: manually and automatically.

Manually

The manual process involves downloading the GSTR-1 return from the GST portal and then verifying the details with the books of accounts. You will need your sales details handy in advance to make it easier. You will be responsible for figuring out the gaps and the errors that occur and then rectifying those as required. The manual process is time-consuming as you will need to go through every transaction, calculate, and then rectify when mismatches occur between the two data sets.

Automatically

The automatic way of performing GSTR 1 reconciliation involves the use of a software tool. The software does the bulk of the work as you are only required to download the GSTR-1 return form from the GST portal and then command the system to compare it to your books of accounts. The software highlights the mismatches in a short span, thereby saving hours of time and effort. It is a convenient way of reconciling GSTR-1 as you are only required to provide the data sets to be compared to execute the task. As GSTR-1 reconciliation is a regular process, using software to perform this task is a smart way of ensuring zero errors while filing returns.

GSTR-1 reconciliation examples

The following are a few examples that help you understand the importance of GSTR-1 reconciliation and how it occurs.

Example 1

A company ABC Ltd. provided its tax consultant with the data required to file the GSTR-1 form. While filing, the tax consultant noticed that there were calculation errors in some of the invoices provided. He rectifies the details when filing the GSTR-1 form and then submits the data to the GST portal. When reconciliation takes place, they find out the mismatches that occurred and rectify the data in the books of accounts where the errors stem from. Through reconciliation, data in the GSTR-1 form matches with the details of outward supplies in the books of accounts, thereby rectifying all errors. This will make it easier when you are filing your annual returns and keeping your books of account in sync with returns.

Example 2

Let us say XYZ Ltd. compiled the data required to file the GSTR-1 return. When the tax consultant was filing the g the GSTR-1 form, he typed a value incorrectly into the system. This caused a mismatch to occur between the books of accounts and the GST portal due to the typo. Such mistakes can lead to differences between books and filed returns. Such differences can be identified and corrected with regular GSTR-1 reconciliation.

One of the simplest ways to avoid errors is using software like TallyPrime, which comes equipped with the prevention, detection, and correction capability. This prevents all common types of errors, such as typos, that can occur when typing in the values. This saves you considerable time and ensures you only submit data to the GST portal that is completely accurate. You generate a valid GSTR-1 return every single time, which has no errors and matches your books of accounts. TallyPrime comes with several other useful features that can help your business soar and go in the right direction. 

Additional capabilities of the new version of TallyPrime

The latest version of TallyPrime is filled with numerous features to cater to your GST as well as other business function needs. GSTR-1 reconciliation is the regular comparison of the data in your GSTR-1 return form and your book of accounts to verify that your returns are in sync with your books. With the new version of TallyPrime you can:

1. Automatically map GSTR-1 reconciliation to GSTR-1 form table accurately
2. Easily utilize the user-friendly and intuitive design of the software
3. Access reconciliation report instantly
4. Manage multiple GSTIN registrations
5. View the reports and customize them as per your choice

Read More: 

• What is GSTR-2A Reconciliation
• Why is GSTR-2A Reconciliation Important for Businesses

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