How to Fix Mismatch Between GSTR-1 & GSTR-3B?

To operate any business under the Goods and Services Tax (GST), GST compliance is an important aspect. One most common challenge taxpayers face is the mismatch between GSTR-1 and GSTR-3B. These mistakes can result in extra taxes, fines, interest charges, and even GST notices. In this blog we understanding the reasons behind these mismatches and the steps to Solve them can help businesses maintain GST filing and avoid compliance issues.

GSTR-1 vs GSTR-3B: Understanding the Difference

Before understanding GST return mismatches, it is essential to understand the differences between these two forms:

• GSTR-1: GSTR-1 is the monthly or quarterly return that details all sales (outward supplies) made by a business.

• GSTR-3B: It’s self-declared summary GST return filed every month (quarterly for the QRMP scheme). Taxpayers need to report the summary figures of sales, ITC claimed, and net tax payable in GSTR-3B.

These types of mismatches between the two returns occur due to errors in tax reporting, wrong ITC claims, or mismatched in sales reported.

How to Fix Mismatch Between GSTR-1 & GSTR-3B?

Common Reasons for GSTR-1 and GSTR-3B Mismatch

Incorrect Taxable Value or Tax Amount

GSTR-1 and GSTR-3B mismatch occurs when tax calculations or manual entries contain variances or errors.

Omissions or Delays in Data Entry

The omission or missed transactions in both GSTR-1 and GSTR-3B results in reporting inconsistencies.

ITC Claims Not Matching Purchases

The GSTR-3B ITC claims submitted by ITC do not align with the details automatically extracted from suppliers’ GSTR-1 submissions when the claimed ITC in GSTR-3B exceeds the ITC available as per GSTR-2B.

GSTR-1 Amendment Not Considered in GSTR-3B

Discrepancies develop when GSTR-1 amendments do not get properly mirrored into GSTR-3B.

Wrong GSTIN or HSN Code Entries

Entering the GSTIN incorrectly or using incorrect HSN/SAC codes can lead to unaligned data

Inconsistent Tax Period Reporting

Errors occur when the sales a business reports for a particular return period are registered under a different reporting period.

GST Tax Liability Difference

The improper reporting of tax payments through GSTR-3B system creates inconsistent data within the system.

GST Notices for GSTR-1 and GSTR-3B Mismatch

Multiple errors might lead tax authorities to start investigating businesses through formal tax notices.

Steps to Reconcile GSTR-1 and GSTR-3B Differences

Download and Compare Returns

• Retrieve GSTR-1 and GSTR-3B from the GST portal and compare details.

Identify Mismatch Areas

• Use reconciliation tools or manually check sales, ITC, and tax amounts.

Cross-Check with Books of Accounts

• Match the return data with invoices, ledgers, and accounting records.

Check for GSTR-1 Amendment Needs

• If discrepancies are found in GSTR-1, use the amendment option to correct data.

Make Necessary Adjustments in GSTR-3B

• If errors in GSTR-3B are identified, adjust them in subsequent filings.

Respond to GST Notices Promptly

• If a notice is received, provide explanations along with rectified figures.

Avoid Future Errors

Implement best practices for GST return reconciliation to prevent mismatches.

How to Rectify Errors in GSTR-1 and GSTR-3B?

• For GSTR-1 Errors: Use the amendment option in the following month’s GSTR-1.
• For GSTR-3B Errors: Make adjustments in the next month’s GSTR-3Band pay any additional tax liability if needed.
• If ITC Issues Arise: Check GSTR-2B and ensure ITC claimed matches with supplier reports.

ITC Issues Due to GSTR-1 and GSTR-3B Mismatch

• When the ITC claimed in GSTR-3B exceeds the information displayed in GSTR-2B the tax department might initiate further investigations.
• The practice of regular reconciliation helps businesses prevent incorrect ITC claims and stops them from receiving associated penalties.

GST Penalties for Incorrect GSTR-3B Filing

• Interest on Tax Shortfall: 18% per annum on unpaid tax liability.
• Penalty for Wrong ITC Claim: 100% of the wrongly availed ITC.
• Late Filing Fee: ₹50 per day for nil returns and ₹100 per day for tax liability cases.

How to Amend GSTR-1 After Filing GSTR-3B?

• Users can update GSTR-1 invoice information in successive returns to make amendments.
• Users cannot make direct corrections in GSTR-3B since all adjustments need to be carried forward to future returns.

Best Practices for GST Return Reconciliation

Use Automated GST Reconciliation Tools

The system diminishes human mistakes while enhancing accuracy levels within the process.

Maintain Accurate Records

All invoices and tax credits together with outward supplies need proper documentation.

Verify Data Before Submission

Businesses should double-check their data records before submittal to prevent making mistakes during GST filing.

Regularly Reconcile GST Returns

Monthly reconciliation procedures should be performed to find inconsistencies at an earlier stage.

Keep Up with GST Compliance Updates

You must maintain continuous knowledge of GST rules alongside their amendments to stop mistakes.

Legal Consequences of GSTR-1 and GSTR-3B Mismatch

• Repeated GST mismatch outcomes may trigger business audits and investigations by the authorities.
• The GST registration will be automatically canceled in cases where severe discrepancies are found.
• Businesses could become subject to legal prosecution when they use tax invoices fraudulently or conduct tax evasion activities.

Conclusion

Accurate GST filings and prevention of legal hazards depend heavily on proper GSTR-1 reconciliation with GSTR-3B corrections being performed correctly. Businesses should adhere to best practices while detecting errors early to respond promptly with required changes for maintaining effective GST compliance. Check all data entries thoroughly before filing and answer GST notices quickly to avoid both fines and interest fees.

Businesses that use a structured, proactive methodology can easily resolve GSTR-1 and GSTR-3B mismatches, enabling them to maintain tax compliance efficiently.