System based reconciliation of information furnished in FORM GSTR-1 and FORM GSTR-2 with FORM GSTR-3B – regarding.

Circular No.: 7/7/2017-GST
Date of Circular: 1st September 2017
Relevant Sections and Rules:

• Central GST Act, 2017:
  • Sections 37, 38, 39 (Returns), 41, 42, 43 (Matching of input tax credit), 47 (Late fee), 49 (Payment of tax)
• CGST Rules, 2017:
  • Rules 59 (GSTR-1), 60 (GSTR-2), 61 (GSTR-3/3B), 69–76 (Matching), Rules 37, 39, 42, 43 (ITC reversals)
• Relevant Notification:
  • Notification No. 28/2017-Central Tax dated 1st September 2017

Summary of Circular:

The circular provides guidelines for system-based reconciliation between FORM GSTR-3B and the detailed returns in FORM GSTR-1 (outward supplies) and FORM GSTR-2 (inward supplies) for July and August 2017, since FORM GSTR-3B was allowed to be filed early due to initial implementation challenges.

1. Reconciliation Framework:
   After filing GSTR-3B, taxpayers must submit GSTR-1 and GSTR-2. Based on this data, GSTR-2A (auto-drafted) and GSTR-3 are generated to ensure system-based reconciliation. Amendments/corrections in GSTR-3B can be reflected through GSTR-1 or GSTR-2.
2. Additional Tax Liability:
   If reconciliation shows higher tax payable in GSTR-3 than in GSTR-3B, the difference must be paid with interest (from 26th August 2017 till date of payment). Mismatches in transitional credit or excess ITC utilization in GSTR-3B are also to be adjusted with interest.
3. Additional Eligible ITC:
   If more ITC is claimable in GSTR-2 than what was claimed in GSTR-3B, the additional credit will be added to the electronic credit ledger when GSTR-3 is submitted.
4. Reduction in Output Tax Liability:
   Any reduction in liability found post reconciliation will be carried forward to the next month’s return unless offset by a reduction in eligible ITC.
5. Delayed Payment of Tax:
   If GSTR-3B was submitted without payment, interest applies but no late fee is charged (if filed on time). If GSTR-3B wasn’t submitted, tax and interest are payable but late fee is waived as per Notification No. 28/2017.
6. Matching Process:
   After GSTR-1 and GSTR-2 are submitted, matching of returns under sections 41 to 43 is undertaken. Returns are deemed valid only after full tax payment per GSTR-3.

Source: Circular No.: 7/7/2017-GST