GST Compliance challenges
CA Poonam Gandhi

Updated on February 13th, 2024

Goods and Services Tax, the biggest tax reform in India, is escorted by the concept of ‘reconciliation’. Consequently, reconciliation can be termed as one of many GST compliance challenges, as it is unavoidable, time-consuming, and oftentimes tedious. Furthermore, GST reconciliation is not at all a single-time obligation, but a continuous process. That is why it is recognized as one of the common GST challenges in India.

What is GST Reconciliation?

What is GST Reconciliation Featured

GST reconciliation means the comparison of two sets of data i.e. details submitted/to be submitted via GST returns with actual purchase, sale, and credit. It figures out any type of error, mismatches, wrong entries, etc.

In this article, you will learn about the basics of reconciliation vis-à-vis GST law, different types of reconciliations under GST, and various challenges of GST faced by the manufacturing units in Input Tax Credit reconciliation.

Types of reconciliations under GST

Sales Reconciliation

To find discrepancies in sales registers, a reconciliation between Form GSTR-1 and Form GSTR-3B needs to be carried out.

Input Tax Credit (ITC) Reconciliation

Input Tax Credit reconciliation can be carried out in the following two ways –

  1. Reconciliation between provisional Input Tax Credit claimable as per books of accounts and actual Input Tax Credit claimable as per auto-populated statement in Form GSTR-2B.
  2. Reconciliation between Input Tax Credit reflected in Form GSTR-2A/ GSTR-2B and Input Tax Credit reflected in Form GSTR-3B.

2 Common Challenges Faced by Manufacturing Units in Input Tax Credit Reconciliation

Input Tax Credit discrepancies are the prevailing errors in reconciliation, causing multiple challenges for the manufacturing supply chain, some of which are highlighted hereunder:

2 Common Challenges Faced by Manufacturing Units in Input Tax Credit (ITC) Reconciliation

Different Comparisons of Input Tax Credit

Input Tax Credit reflected in books of accounts should be compared with credit reflected in Form GSTR-3B. Further, the Input Tax Credit reflected in Form GSTR-3B should be compared with credit auto-populated under Form GSTR-2A/ GSTR-2B.

Firstly, total reflected figures should be compared and in case of any difference, individual reflection needs to be compared. This individual comparison of each invoice makes the entire Input Tax Credit reconciliation task challenging and time-consuming.

Input Tax Credit Vis-à-Vis Non-Compliance On the Part of the Supplier

Input Tax Credit is largely dependent on the fulfillment of various compliances on the part of the supplier. In case of supplier non-compliance risks/non-compliance from the supplier’s end, Input Tax Credit tends to be denied/blocked.

Importantly, manufacturing units have to deal with various suppliers. Accordingly, figuring out due compliance/ non-compliance on the part of every supplier and for each invoice is truly pains-giving.

Related articles:

Positive And Negative Impact of GST on the Manufacturing Sector

6 Steps for Easy Input Tax Credit (ITC) Reconciliation

Here’s a step-by-step and simplified GST guide for manufacturers to conduct hassle-free Input Tax Credit reconciliation:

 Input Tax Credit Reconciliation

STEP 1 – Fix the particular period for which Input Tax Credit reconciliation is to be done.

STEP 2 – Collect all the relevant data for that particular period like purchase details, invoice, number and date, taxable value, input tax credit involved, etc.

STEP 3 – Figure out the available Input Tax Credit for the particular period.

STEP 4 – Verify entry-wise Input Tax Credit availed as per Form GSTR- 3B and books of accounts.

STEP 5 – Also, verify entry-wise Input Tax Credit availed as per Form GSTR- 3B with Input Tax Credit available as per Form GSTR- 2A/ GSTR- 2B.

STEP 6 – Make a summary of differences and reconcile/ rectify the errors.

After going through the above steps, one may find that carrying out the Input Tax Credit reconciliation is quite simple, however, note that the same is not. Depending upon the quantum, it is always advisable to go for efficient accounting software that effectively provides Input Tax Credit reconciliation.


GST reconciliation is an unavoidable task for any manufacturing unit. It is a must for maximization of Input Tax Credit availed and for avoiding unwanted levies of interest and penalties, which are likely to be suffered for availing excess Input Tax Credit. However, to avoid time-consuming GST compliance challenges, it is sensible to adopt suitable accounting software.

Why Choose Us as Your GST Return Filing Partner?

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Here’s what you can expect from us:

  1. 100% GST Compliance
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  3. 99.98% ITC Reconciliation (error-free) 
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Our Key Solutions:

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CA Poonam Gandhi

About the author

Poonam Gandhi is a Chartered Accountant and a Lawyer, with practical experience of 9+ years in the field of Indirect Taxation.

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