Reconciling Your GST Ledgers to the Returns You Filed
- What to reconcile
- A worked example: sales
- Output tax
- Input tax credit
- Tax payments
- Common causes of differences
- Making it routine
- Where this fits
The figures in your GST returns should be traceable to the figures in your accounts. A short monthly reconciliation, comparing the sales, output tax, input tax credit and tax payment ledgers with the amounts reported in the returns you filed for the same period, catches most errors while they are still easy to correct. Differences are normal; unexplained differences are the problem. Each one should be listed, explained and, where needed, corrected in the books or dealt with in a later return with your tax adviser’s guidance.
This guide covers the accounting side of that tie-out. It does not set out filing deadlines, correction procedures or the conditions for claiming credit, which should be confirmed from current official guidance or with your adviser.
What to reconcile
| In your books | Compare with |
|---|---|
| Taxable sales ledger, by rate and by type of supply | Outward supplies reported for the period |
| Output tax ledgers, by tax type | Output tax declared in the return |
| Input tax credit ledgers | Credit claimed in the return, and the supplier-reported credit available to you |
| Tax payment and cash ledgers | Tax paid in cash and through credit, per the return and the bank |
A worked example: sales
For one month, the sales ledger shows taxable sales of ₹42,50,000. The return filed for that month reports ₹41,80,000. The difference is ₹70,000.
| Amount | |
|---|---|
| Taxable sales per books | ₹42,50,000 |
| Less: invoice dated the last day of the month, entered in books after the return was prepared | (₹1,20,000) |
| Add: credit note recorded in books, not reflected in the return | ₹50,000 |
| Taxable sales per return | ₹41,80,000 |
| Unexplained difference | nil |
Illustrative figures.
Both items are timing or reporting differences with a clear cause. Each needs a follow-up: the missed invoice and the credit note must be dealt with correctly, and the process that let them slip needs fixing, typically a cut-off rule that no invoice for the month is raised after the return data is extracted without it being flagged.
Output tax
Repeat the same comparison for each output tax ledger. Output tax per books should broadly equal taxable sales at each rate multiplied by that rate. A difference between the calculated tax and the ledger balance points to invoices with the wrong rate, tax posted to the wrong ledger, or manual journals affecting tax accounts. Manual journals to tax ledgers should be rare and always documented.
Input tax credit
The credit side needs two comparisons:
- Books to return. Does the credit claimed in the return agree with the input tax ledgers, after excluding credit you have decided not to claim?
- Books to supplier-reported data. Does each purchase invoice in your books appear in the statement of supplier-reported invoices available to you on the GST portal? Invoices missing from supplier data, and invoices in supplier data that are not in your books, both need follow-up with the supplier or internally.
Keep a running list of unmatched purchase invoices with the supplier’s name, invoice number, amount and the action taken, and clear it every month. An unmatched invoice left for six months is much harder to resolve.
Tax payments
The tax payable ledgers should be close to zero after the month’s liability is settled, apart from interest or late fee entries you can explain. Compare cash paid per the bank statement with the payment record on the portal, and credit utilised per the return with the reduction in your input tax ledgers.
Common causes of differences
- Invoices raised after the return data was extracted.
- Credit notes and debit notes recorded in one period in books and another in the return.
- Sales posted with the wrong rate, place of supply or customer registration number.
- Advances, exempt supplies or non-taxable income posted to the taxable sales ledger.
- Purchase bills entered late, or entered twice.
- Manual journals in tax ledgers without supporting documents.
Making it routine
- Build a reconciliation template with one tab each for sales, output tax, input credit and payments.
- Complete it every month, as soon as the return is filed, not at the year-end.
- Record every difference with its cause, amount and the action to be taken.
- Carry forward open items and clear them.
- Have a second person review the template each month.
At the year-end, a set of twelve completed monthly reconciliations makes the annual review far quicker, because most of the questions have already been answered.
Keep the completed templates with the returns and the working papers behind them, such as sales registers and supplier follow-up emails. If a question about a period is raised later, the explanation for every difference is then available immediately, prepared at the time by someone who knew the facts, rather than reconstructed from memory months afterwards.
Where this fits
- The filing process itself: how to file a GST return for a small business
- Credit that cannot be claimed: blocked input tax credit
- Ledger structure that makes this easier: chart of accounts setup
- Where it sits in the monthly routine: month-end close checklist