Reconciliation & Comparison between GSTR 3B and GSTR 1

For any business, the filing of GST forms is the key requirement that needs to be fulfilled to maintain its business. These forms are important for any business to continue its operations legally and are important for gathering necessary information from enterprises and passing all of them to the Income Tax Department. There are various types of GST returns filed throughout the year by taxpayers.

What is a GST Return?

The GST return is a form that states the various taxes paid on the sale/income and purchases/expenses by the company. One must pay the consecutive tax liability post the filing of GST returns (money that the business owes to the government). There are 13 types of GST returns that businesses need to file throughout the year to keep their business running.

The focus shifts towards 2 kinds of forms, GSTR-3B and GSTR-1

GSTR 3B

It is a monthly return form filed on the 20th of every month or on the 22nd or 24th month preceding the quarter. GSTR-3B is the form where the monthly supplies are made and GST paid on them are disclosed. It is also the form which gives out details about the input tax credit claimed and those purchases on which reverse charge is applicable etc.

GSTR 1

The GSTR 1 return filing is a quarterly or monthly return filed by the taxpayers in order to list out the details of the outward supplies for the month as well as their tax liability. The details that need to be updated are for each invoice individually so that the Government can track each and every transaction. This very factor creates the basis for the recipient of supplies to be eligible to claim the input tax credit.

Importance of Reconciliation of GSTR 3B and GSTR 1 Forms

• The GST authorities have raised their objection to taxpayers by sending out show cause notices to them and asked them to coordinate the total sales reported in the GSTR 3b summary return and GSTR 1 return filing respectively.
• Reconciliation guarantees that while making returns of GSTR 3B and GSTR 1, each invoice is only recorded or omitted only one time. Thereby, ensuring that the taxpayer arrives at a precise amount of output tax to be paid for a duration.
• Any GST declarations that are made late or are made beyond a stipulated period would attract interest.
• Since January 2021 the supplies mentioned in GSTR 1 form should match the total supplies summary mentioned in GSTR 3B form. Failing to do this would mean suspension of GSTIN.
• Filing the returns in the GSTR-1 form would make the recipients of the supplies eligible to claim input tax credits. Therefore, filing the GSTR 1 and GSTR 3B forms on time is important for recipients to claim input tax credits to ensure that the input tax credit claimed is real.

The significance of filing returns in GSTR 3B and GSTR 1 is that any mismatch in their filling can lead to incorrect disclosures made in the annual return form GSTR-9.

GSTR 3b vs GSTR 1 – Reasons for Mismatch

• – Incorrect reporting of supplies under the wrong table in GSTR 3B but correctly reporting the same detail when declaring it under form GSTR 1. For example- Providing correct zero-rated supplies under Table 6A of GSTR 1 whereas providing wrong zero-rated supplies details under Table 3.1(a) in GSTR 3B.
• – Inter-State supplies made by an unregistered person, that is declared in GSTR 1 but omitted in GSTR 3B
• – The correct value of supply is shown but the tax is paid under the wrong head as in the case of showing IGST instead of CGST and SGST.
• – Amendments to supplies made after filing GSTR 1 which means the changes in tax liabilities that take place between the filing of GSTR 1 and GSTR 3B.
• – The difference in the time of reporting invoices in GSTR 1 and GSTR 3B.

Reconciliation between GSTR 3B and GSTR 1

The above circumstances ensure that if any sort of mismatch is found between forms GSTR 3b and GSTR 1 throughout the months then the taxpayer is liable to pay any interest or penalty for late filing of gstr 3b to cover all the outstanding tax liabilities.

Therefore taxpayers must ensure to carry out reconciliations between GSTR 3B and GSTR 1 at the time of every filing period so that the details reported by them reconcile. Further, this will help the taxpayer in properly filing annual returns under GST because under GST all sorts of return filing systems are consolidated and any sort of mismatch might lead to fines, penalties, or even cancellation of GSTR registration.

Conclusion – Comparison between GSTR 3B and GSTR 1

All in all, GSTR 3B and GSTR 1 are two very important forms for taxpayers as the details mentioned in them often correspond with one another. A mismatch between them can lead to many complications for the taxpayer which include paying additional penalties or fines and a constant mismatch between form GSTR 3B and GSTR 1 can also lead to the cancellation of GSTR registration.

FAQs about the difference between GSTR 3B and GSTR 1

1. What will be the effective date of registration?
Where the application for registration has been submitted within thirty days from the date on which the person becomes liable for registration, the effective date of registration shall be the date of his liability for registration. Where an application for registration has been submitted by the applicant after 30 days from the date of his becoming liable for registration, the effective date of registration shall be the date of grant of registration. In the case of Suo moto registration, i.e. taking registration voluntarily while being within the threshold exemption limit for paying tax, the effective date of registration shall be the date of the order of registration.

2. Is possession of a Permanent Account Number (PAN) mandatory for obtaining a Registration?
Yes. As per Section 25(6) of the CGST/SGST Act, every person shall have a Permanent Account Number (PAN) issued under the Income Tax Act, 1961(43 of 1961) in order to be eligible for a grant of registration.

3. 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.

4. 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 DSCi.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.

5. Whether Cancellation of the Registration Certificate is permissible?
Yes. Any Registration granted under this Act may be cancelled by the Proper Officer, in 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.