A STANDARD ACCOUNTING PROTOCOL FOR RECONCILIATION OF GST RETURNS WITH BOOKS OF ACCOUNTS

With The advent of GST in INDIA, one of Fastest Growing yet among LARGEST Economies of the globe, the destiny of Accounting Framework was set to be changed to bring in more transparency and thereby adoption of more detailed accounting practices.

The Accounting Fraternity, being (generally) guided and supervised by the dynamic professionals- THE CHARTERED ACCOUNTANTS- have evolved to make necessary changes in the structure of accounting records being prepared and recorded.

Nevertheless, the accounting softwares have also been pivot to bring these tremendous changes in book-keeping practices in INDIA.

But with the completion of FY 2018-19 and the advent of the countdown of GST Annual Return, not only the organizations but even the professionals had start feeling the heat of frequent mismatches of data reported in monthly GST Returns and data extracted from books. This pose roadblocks for every stakeholders including management, tax authorities, auditors etc.

The absence of the option to revise the returns, as was under VAT/Service Tax/ Excise Regime, has added to the apathy of the industry. (though this drastic change have the potential to prove a boon in long run)

The reconciliations can be broadly bifurcated into 2 categories:

– Books of Accounts vs GSTR-3B vs GSTR-1

– GSTR 3B vs GSTR-2A

The first reconciliation includes all the static data as the same needs to be prepared and recorded by the organization itself and (legally) can never be amended retrospectively.

The second reconciliation requires more dynamic data as the data appearing in GSTR-2A is never filed by the organization but by its numerous vendors. So, every time any single vendor files its GSTR-1 or file any amendment in its GSTR-1 relating to the reporting organization, the data varies and thereby the reconciliation needs to be prepared again and again.

This Article aims to publish an innovative Accounting Framework, being labelled by the author as “AKAC Accounting Framework” which is developed to track various mismatches between “books of accounts vis-à-vis GSTR-3B and GSTR-1”.

Precisely, this article emphasis on the GST Input Adjustment and Output Adjustment figures of the reconciliation between Books of accounts and GSTR-3B.

Framework Outline

(A) Required Set of GLs (Accounts)

– GST Output Adjustment Ledgers (Minimum – CGST OUTPUT ADJUSTMENT A/c

– SGST OUTPUT ADJUSTMENT A/c

– IGST OUTPUT ADJUSTMENT A/c and

– Cess OUTPUT ADJUSTMENT A/c.

– GST Input Adjustment Ledgers (Minimum – CGST INPUT ADJUSTMENT A/c

– SGST INPUT ADJUSTMENT A/c

– IGST INPUT ADJUSTMENT A/c and

– Cess INPUT ADJUSTMENT A/c.

– GST Payable Ledgers (Minimum – CGST Payable A/c

– SGST Payable A/c

– IGST Payable A/c and

– Cess Payable A/c.

GST Output Adjustment Ledgers (Minimum – CGST OUTPUT ADJUSTMENT A/c

– SGST OUTPUT ADJUSTMENT A/c

– IGST OUTPUT ADJUSTMENT A/c and

– Cess OUTPUT ADJUSTMENT A/c.

– GST Input Adjustment Ledgers (Minimum – CGST INPUT ADJUSTMENT A/c

– SGST INPUT ADJUSTMENT A/c

– IGST INPUT ADJUSTMENT A/c and

– Cess INPUT ADJUSTMENT A/c.

(B) Required Details for reconciliation Entries

– Trial Balance with verified and accurate entries of GST Input and Output in respective Ledger Maintained by the organization.

– Downloaded (pdf) files of Final GSTR-3B from the GSTIN Portal.

– Downloaded copies of Electronic Cash Ledgers and Electronic Credit Ledgers from GSTIN Portal

– Copies of Challan (if entries has not been already posted properly in books of accounts)

(C) Reconciliation Process

The framework presumes that the mismatch between GST Output Liability and GST Input Credit reported in GSTR-3B vis-a -vis the books of accounts can be due to various reasons ranging from typing errors to malfunctioning of data records maintained by the organization.

Further, this reconciliation process aims to match GST figures appearing in the books with those reported in GSTIN Portal with a presumption that the details in books are correct and accurate as figures reported/ finalized with the management consciously. This framework let the financial controller to monitor the errors in the figures reported to GST Authorities at one click.

The process includes the following Steps :

1) All the GST Challans paid by the organization should be booked in respective Payable Ledgers, say CGST Payable A/c, SGST Payable A/c etc.

2) Match GST input claimed in GSTR-3B with the Input recorded in books of accounts for that month. In case of any mismatch, pass an adjustment entry as shown in Appendix -I.

3) Match GST output claimed in GSTR-3B with the GST Output recorded in books of accounts for that month. In case of any mismatch, pass an adjustment entry as shown in Appendix -I

4) Record GST Input- output Set off entries in accordance with Table no. 6 of GSTR-3B for each month as shown in Appendix-II.

5) Now match the Electronic Credit Ledger with the Trial Balance (after posting such Journal Entries at respective month end).

6) The closing balances appearing in the Adjustment Accounts represents the adjustments to be made in next month GSTR-3B for the errors reported till last month.

APPENDIX-I

CASE A: CGST Input in Books exceed CGST Input reported in GSTR-3B

CGST Input as per Books: Rs. 50,00,000 ( Rs. Fifty Lacs)

CGST Input as per GSTR-3B: Rs. 10,00,000 ( Rs. Ten Lacs)

Adjustment Entry:

CGST Input Adjustment A/c Dr. 40,00,000 (forty Lacs)

To CGST Input A/c 40,00,000

CASE B: IGST Input in Books is less than the IGST Input reported in GSTR-3B

IGST Input as per Books: Rs. 50,00,000 ( Rs. Fifty Lacs)

IGST Input as per GSTR-3B: Rs. 80,00,000 ( Rs. Eighty Lacs)

Adjustment Entry:

IGST Input A/c Dr. 30,00,000 (thirty Lacs)

To IGST Input Adjustment A/c 30,00,000

CASE C: CGST output in Books exceed CGST Output reported in GSTR-3B

CGST Output as per Books: Rs. 50,00,000 ( Rs. Fifty Lacs)

CGST Output as per GSTR-3B: Rs. 10,00,000 ( Rs. Ten Lacs)

Adjustment Entry:

CGST Output A/c Dr. 40,00,000 (forty Lacs)

To CGST Output Adjustment A/c 40,00,000

CASE B: IGST output in Books is less than the IGST Output reported in GSTR-3B

IGST Output as per Books: Rs. 50,00,000 ( Rs. Fifty Lacs)

IGST Output as per GSTR-3B: Rs. 80,00,000 ( Rs. Eighty Lacs)

Adjustment Entry:

IGST Output Adjustment A/c Dr. 30,00,000 (thirty Lacs)

To IGST output A/c 30,00,000

APPENDIX-II

CASE A: CGST Input – Rs. 5,00,000 (Rs. Five Lacs)

SGST Input – Rs. 5,00,000 (Rs. Five Lacs)

IGST Input – Rs. 8,00,000 (Rs. Eight Lacs)

CGST Output – Rs. 2,00,000 (Rs. Two Lacs)

SGST Output – Rs. 2,00,000 (Rs. Two Lacs)

IGST Output – Rs. 25,00,000 (Rs. Twenty Five Lacs)

Set off Entry:

CGST Output A/c Dr. 2,00,000 (Two Lacs)

SGST Output A/c Dr. 2,00,000 (Two Lacs)

IGST Output A/c Dr. 25,00,000 (Twenty Five Lacs)

To CGST Input A/c 2,00,000 ( as visible from Table 6 -CGST-CGST Column)

To SGST Input A/c 2,00,000 ( as visible from Table 6 -SGST-SGST Column)

To IGST Input A/c 8,00,000 ( as visible from Table 6 -IGST-IGST Column)

To CGST Input A/c 3,00,000 ( as visible from Table 6 -IGST-CGST Column)

To SGST Input A/c 3,00,000 ( as visible from Table 6 -IGST-SGST Column)

To IGST Payable A/c 11,00,000 ( as from Table 6 -Payable through Cash)

Disclaimer:The information contained in this document is intended solely for dissemination of information and doesn’t aim at soliciting work in any manner. Though meticulous care has been taken but the author assumes no liability in respect of any loss/damage incurred while acting on the basis of information provided. The above framework has been developed by the author after researching since long time and a proprietary intellectual property of the author. The author can be reached at [email protected] and can be called at +91-7011503210.

Author Bio

Qualification: CA in Practice
Company: akshay aggarwal & Co
Location: Central Delhi, New Delhi, IN
Member Since: 13 Apr 2019 | Total Posts: 4
I, CA AKSHAY AGGARWAL, am a Qualified and Practicing Chartered Account and having key interest and expertise in Direct and Indirect taxes. Apart from Chartered Accountancy, my interest in financial markets have persuaded me to persue and clear all the three levels of CFA (USA). I believe my expertis View Full Profile

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2 Comments

  1. Manjunath G says:

    In GSTR-1 while uploading tax invoice, there is a click botton called is tax at differencial tax rate, when we click it will show 65%, please do explain me what is this option and why it is provided, please guide me.

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