It is very necessary to understand the difference between GSTR-3B and GSTR-1 for every tax payer to avoid any demand notice from the tax authorities or any other unwanted issue that may hamper the accurate filling of the annual returns.
1. GSTR-3B vs GSTR-1
At every 20th of next month a taxpayer is expected to file GSTR-3B which is a monthly summary return filed by a taxpayer. It includes supplies made during the month along with GST to be paid, input tax credit claimed, purchases on which reverse charge is applicable, etc. It also makes a provision for the payment of taxes.
On the other hand, GSTR – 1 is a monthly or quarterly return filed by taxpayers to disclose details of their outward supplies for a certain time period along with liability of their tax. It is uploaded with reference to invoice details so that the Government can access the details of any transaction when it's needed. This forms the basis for the recipient of supplies to accept the same and take the eligible input tax credit.
2. Importance for GSTR-3B vs GSTR-1
The reasons that highlight the importance of reconciliation of GSTR-3B and GSTR-1 are listed below.
• In 2017-18, The total GST collections disclosed at the end of the year, had a difference of several thousand crores. On that pretext, GST authorities have issued a show cause notices to many taxpayers and asked them to reconcile the total of sales disclosed in the GSTR-3B summary return and the detailed GSTR-1 return.
• Reconciliation helps in asking sure that no invoice is counted out or gets recorded more than once in either of the returns.
• A late declaration of GST liability can also lead to interest.
• Reconciliation helps the Government to allocate the right share of tax revenue to the any states. This reconciliation comes handy in identifying any errors that haven been made while entering the details of integrated taxes while filing GSTR-3B.
• GSTR-1 helps in creating the base for the recipients of supplies to claim input tax credit while filing their returns. Therefore, it is always suggested that GSTR-3B and GSTR-1 should be declared, timely and accurately, to avoid hassles with recipients in future. It also ensures that only genuine input tax credit can be claimed.
Reconciliation while filing of the Annual return:
A reconciliation of outward supplies is a must while filling the annual return to ensure that the details shared match the details disclosed in GSTR-1 and GSTR-3B, throughout all the months. It is necessary to include the details of all the tax paid during the year. Those details should tally in with the total taxes. Details of tax paid during the year need to be mentioned as well and this must tally with the total taxes disclosed and paid in GSTR-3B. Since the return-filling system is integrated, a dissimilarity between the same could improper disclosure in the annual return.
3. Reasons for mismatches in GSTR-3B vs GSTR-1
The reconciliation of the shared details in Form GSTR – 3B and GSTR – 1 may not take place under following circumstances.
• If the supplies are reported under the wrong table in GSTR-3B, but reported correctly while declaring it as invoice-wise in GSTR-1. For example: Reporting zero-rated sales correctly in Table 6A of GSTR-1, but incorrectly reporting it under Table 3.1(a) in GSTR-3B.
• If an issue of invoice and issue of debit or credit clash on the basis of their dates, i.e. If they belong to different months then a situation of mismatch will occur.
• Inter-state supplies made to unregistered persons omitted in GSTR-3B but declared in GSTR-1.
• If the tax is paid under the wrong head in the details disclosed then it can lead to mismatch. For example, IGST instead of CGST & SGST or vice- versa.
• Any change of tax liability between the time of filing GSTR-1 and GSTR-3B can cause a mismatch.
• Similarly, the time difference in reporting of invoices in GSTR-1 and GSTR-3B can cause mismatch.
Due to the reasons discussed above, the government experienced a difference of tens and thousands of crore in the year 2017-18. Consequently, the government sent notices to taxpayers asking an explanation for this difference.
4. Action to be taken on Reconciliation of GSTR-3B vs GSTR-1
If form GSTR-3B and GSTR-1 carry any inconsistency throughout months, leading to any shortage of tax paid by the supplier, the same must be paid along with interest. Conducting reconciliations every filling period, hence, becomes necessary to make sure that all details match so that it doesn't lead to rise any interest that may become payable later on.
5. Advantages of GSTR-3B vs GSTR-1 Tax Comparison Report
- GSTR-1 and GSTR-3B can be downloaded throughout the month to start comparing data. Verify GST login once using OTP, and continue to easily update data.
- Check the difference for every field such as outward tax, outward taxable value, supplies under RCM in both returns, etc.
- Data comparison at a PAN and GSTIN level is available.
- Know the differences instantly at a monthly, quarterly, or annual level, to take further action.
6. How to download GSTR-3B and GSTR-1 forms.
- Go to GST -> GSTR 3B.
- Click on the 'Populate Report' button for the month you wish to generate GSTR 3B for.
- You'll see the data for the selected month. Use this information to file your GSTR-3B on GSTN portal.
- Login on to the GST Portal.
- Then, go to 'Services' > 'Returns' > 'Returns Dashboard'
- Select the Month and Year from the drop-down.
- Click on 'PREPARE OFFLINE' under GSTR 1.
- Go to 'Download' and click on 'GENERATE FILE'.