GST Audit & Reconciliation

By Nexgenca — Accurate reconciliations. Audit-ready work papers. Clear sign-off.

1) Short answer — what this is, and why it matters

GST reconciliation is the process of reconciling GST returns (GSTR-1, GSTR-3B, 2B/2A, e-invoices etc.) with your books of accounts and audited financial statements.
GST audit/reconciliation (GSTR-9 / GSTR-9C) is the annual summary and, where applicable, a CA/Cost-Accountant certified reconciliation between your annual GST return and audited financials. It ensures no mismatch in outward supplies, ITC claimed, and tax paid.

2) Legal basis & who must file what (quick facts)

• GSTR-9 (Annual Return) — annual summary of outward/inward supplies, ITC, tax paid. It is required for taxpayers above certain thresholds (see official guidance). 
• GSTR-9C (Reconciliation Statement + Certificate) — reconciliation between annual GST return (GSTR-9) and the audited annual financial statements; certification by a CA/Cost Accountant is mandatory where the aggregate turnover exceeds the specified threshold (commonly ₹5 crore). The form (Part A reconciliation; Part B certification) is prescribed on the GST portal.
• Due date (typical) — historically the GSTR-9/GSTR-9C submission deadline has been on or before 31 December following the financial year, unless extended by CBIC. Always check current year notifications.

Note: tax authorities update thresholds and due-dates from time to time (and may grant one-time relaxations). Always confirm the current year notification before filing. 

3) Penalties & interest (what you’ll get hit with if things are late)

• Late fee for GSTR-9 / 9C: daily late fee applies (CGST + SGST components). The per-day amount and caps depend on turnover slabs but can go from ~₹50 per day (lower slabs) to ₹200 per day (higher slabs) and may be capped as a % of turnover — consult the current CBIC notification for exact slab rates. 
• Interest on late payment of GST: interest is charged on delayed tax payments (computed under Section 50 of CGST) — typically up to 18% p.a. (higher rates can apply where ITC is wrongly availed/used). 
• Other consequences: audit notices, reassessments, ITC reversals plus interest, and potential penal action for intentional mis-reporting. 

4) When a GST audit / GSTR-9C becomes mandatory (summary)

• If your aggregate turnover in the financial year crosses the notified limit (commonly ₹5 crore for GSTR-9C certification), you must: (a) prepare GSTR-9 annual return and (b) get the reconciliation certified by a CA/Cost Accountant in Form GSTR-9C. Check the latest CBIC/GST portal notification for current thresholds and exemptions. 

5) The reconciliation & audit workflow — step by step (practical & detailed)

Phase A — Data collection (start here)

Gather:

• Books of accounts / audited Financial Statements (P&L, Balance Sheet).
• GSTR-1 (outward invoices / e-way data), GSTR-3B filings, GSTR-2B (ITC auto-populated), e-invoice / IRP data, EWB / e-way bills.
• Bank statements, export documentation, debit & credit notes, advances, vouchers, and ledger reports.
• Details of exempt/zero rated supplies, SEZ supplies, composition supplies, export invoices.
  (These are the primary inputs for every reconciliation schedule.) 

Phase B — Monthly / Quarterly reconciliations (best practice)

Do these routinely — not just year-end:

1. GSTR-1 → Books (Sales ledger): ensure all outward invoices reported in GSTR-1 are present in books; reconcile totals by tax rate, place of supply (state), GSTIN of recipient (B2B), and invoice numbers.
2. GSTR-3B Outward tax → GSTR-1 → Books: confirm tax declared in GSTR-3B matches tax computed on invoices (GSTR-1) and books (allowing for timing differences).
3. Input Tax Credit (ITC) Reconciliation: reconcile GSTR-2B (auto-populated ITC) with purchase ledger. Identify invoices where supplier hasn’t uploaded or mismatch in GSTIN/amount/tax rate.
4. E-Invoice / EWB Reconcile: match e-invoice numbers and e-way bills with invoices and GSTR-1.
5. Other checks: Reverse charge (RCM) liability posted in books vs declared on return; ISD credits, TDS/TCS adjustments; advances & advances adjusted vs tax paid.

Do monthly reconciliations and escalate unresolved items to vendor follow-up.

Phase C — Year-end (Annual) reconciliation for GSTR-9 / preparing GSTR-9C

1. Prepare reconciliation schedules that map:
   • Annual outward supplies as per books ↔ GSTR-9 figures (and GSTR-1 cumulative).
   • Annual ITC claimed as per books ↔ GSTR-9 ↔ GSTR-3B / GSTR-2B.
   • Reconcile export turnover, zero-rated supplies, non-GST supplies, and composition scheme supplies.
2. Prepare Part A of GSTR-9C — tabulate line-by-line reconciliations (turnover, tax paid, ITC) with reasons for differences (timing, omissions, credit notes, supplier non-upload).
3. Audit trails & supporting documents — build folders: invoices, GRNs, bank statements, debit/credit notes, vendor confirmations, e-invoices, and reconciliation working papers.
4. Part B — Auditor’s certificate — CA/Cost Accountant performs independent audit tests, verifies reconciliation and signs off the GSTR-9C certificate. 

6) Typical reconciliation schedules & templates (what to produce)

Create the following schedules (each with supporting source files):

• Sales Reconciliation (Books ↔ GSTR-1) — by tax rate & GSTIN.
• GSTR-3B vs GSTR-1 Reconciliation — monthly / quarterly totals & adjustments.
• ITC Reconciliation (Books ↔ GSTR-3B ↔ GSTR-2B) — matched / unmatched invoice lists.
• Output Tax Reconciliation (Books ↔ GSTR-3B) — tax liability, penalties, interest.
• Exports & Zero-rated Reconciliation — export invoices, shipping bills, LUT/Bond, refund claims.
• Reverse Charge & ISD Reconciliation — amounts in books vs returns.
• Debit/Credit Notes Reconciliation — year-end impact on turnover and tax.
• Adjustments & Journal Entries — list of proposed corrections & their accounting entries.

(Each schedule should have drill-down to invoice level for audit evidence.)

7) Common mismatches — causes & fixes (practical)

• Supplier didn’t upload invoice → ITC blocked: follow up with supplier; get supplier to revise/issue invoice or file GSTR-1 amendment; if necessary, reverse ITC and claim later when supplier compliance is corrected.
• Wrong GSTIN or invoice number → ITC mismatch: correct books or request supplier amendment.
• Timing differences — invoice received in next month: document cut-off and show in reconciliation as a timing difference.
• Credit notes not accounted → adjust both turnover and tax; issue/accept credit notes and update returns.
• E-invoice / EWB mismatch → check invoice numbers and transport documents; correct mis-classification or reissue docs.

8) How auditors test & sample (what your CA will do)

• Substantive testing: invoice vouching, bank payments vouching, and verification of exports.
• Analytical procedures: trend analysis, ratio checks, and Benford/outlier checks for odd patterns.
• Sample selection: risk-based sampling of high value / high-risk invoices and unmatched items.
• Cut-off tests: verify transactions around year-end for correct period recognition.

9) Deliverables Nexgenca will produce (example service pack)

When Nexgenca performs GST Reconciliation & Audit support we deliver:

1. Monthly/Quarterly reconciliation dashboards (mismatch lists + aging).
2. Year-end reconciliation workbook: Sales schedule, ITC schedule, RCM, exports, credit notes.
3. GSTR-9 draft & working papers.
4. GSTR-9C ready-to-certify pack (Part A reconciliations + Part B supporting working papers) for CA sign-off. 
5. List of proposed journal entries to correct books.
6. Vendor follow-up tracker and risk heatmap.
7. Board/Management summary: key variances, exposures, and remediation roadmap.

10) Realistic timeline (recommended)

• Monthly: Sales vs GSTR-1; GSTR-3B vs books; ITC reconciliation with GSTR-2B.
• Quarterly: Deep ITC clean-up; e-invoice & EWB matching.
• Year-end (start 60–90 days before annual due date): build GSTR-9 / GSTR-9C pack, auditor coordination, corrective journals, and submission.

11) Penalties — practical examples & mitigation

• Late GSTR-9/GSTR-9C → daily late fee + possible cap based on turnover. (Exact slabs change; verify current CBIC notification.)
• Tax short-payment found via reconciliation → interest @ Sec 50 (up to ~18% p.a.) + penalty if deliberate.
  Mitigation: routine reconciliations, corrective journals, and filing amended returns (where allowable) before assessment reduces exposure.

12) Special situations (exports, SEZ, composition, NIL & non-resident)

• Exporters: reconcile shipping bills, LUT/Bond, and foreign remittances to substantiate zero-rated supplies.
• Composition scheme: different return treatment — composition dealers generally do not file GSTR-9; check applicability.
• Non-resident / casual taxpayers: special rules — often excluded from 9C certification obligations.

13) Useful official & technical references

• GST Portal — GSTR-9 FAQs & user guide.
• GSTR-9C Offline Utility & instructions (GST tutorial / portal). 
• Technical Guide on GSTR-9C (detailed filing instructions). 
• Advisory & CBIC updates on late fee waivers / timelines (watch CBIC / PIB for extensions). 

14) Nexgenca — how we help (end-to-end)

We deliver a turnkey GST reconciliation + audit pack:

• Automated extraction (ERP / Tally / Xero / QuickBooks / Excel) → normalization → reconciliation.
• Gap analysis and vendor follow-up (we chase supplier GSTR-1 corrections).
• Draft and finalize GSTR-9. Prepare GSTR-9C ready for CA certification (or coordinate with your auditor).
• Fixes: propose journal entries & support MCA / GST portal filings.
• Ongoing: monthly dashboards + continuous monitoring rule packs to prevent future mismatches.

  15) Quick GST Reconciliation Checklist (printable)

• Monthly GSTR-3B → Books cross-check
• Monthly GSTR-1 → Sales ledger reconciliation
• Monthly GSTR-2B → Purchase ledger & ITC matching
• E-invoice & EWB matching (high-value shipments)
• Reverse Charge & ISD reconciliations
• Credit/Debit notes adjusted & documented
• Export documentation validated (LUT/Bond, shipping bills, remittance)
• Prepare Year-end schedules 60–90 days before GSTR-9 due date
• Draft GSTR-9; prepare GSTR-9C Part A (reconciliations) & assemble CA workpapers (Part B)

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  16) Ready-to-use deliverables from Nexgenca

• Reconciliation workbook (invoice-level drilldown)
• Proposed correcting journal entries + ledgers updated copy
• GSTR-9 draft & GSTR-9C Part A reconciliation schedules
• CA handover pack (evidence & working papers) for certification
• Management summary & remediation roadmap

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