GST notices and audit queries often start with one issue: input tax credit claimed in GSTR 3B that is not supported by GSTR 2B or is not backed by clean documentation.
A disciplined ITC reconciliation process helps businesses:
- Claim eligible ITC on time
- Identify ineligible credits early
- Follow up with vendors for missing invoices
- Avoid interest and penalties from reversals during scrutiny
Why GSTR 2B Reconciliation Matters
GSTR 2B is a static statement of eligible and ineligible ITC for a period, based on supplier filings. Many departments treat it as the baseline for ITC verification.
A strong process reconciles:
- Purchase register and expense ledgers
- GSTR 2B statement
- GSTR 3B ITC claimed
- Electronic credit ledger movement
Step 1 Prepare the Data Sets
Purchase register
Ensure the purchase register contains:
- Supplier GSTIN
- Invoice number and date
- Taxable value and tax amounts
- Place of supply and RCM flag
- Expense or inventory mapping
- Capital goods identification
GSTR 2B download
Download GSTR 2B for the period and keep a version controlled copy.
GSTR 3B ITC working
Maintain a working paper that maps ITC claimed in Table 4 to the underlying invoices and categories.
Step 2 Perform the Matching
Match purchase register to GSTR 2B using keys such as:
- GSTIN
- Invoice number
- Invoice date
- Tax amounts
Classify results into buckets:
- Matched and eligible
- In purchase register but not in 2B
- In 2B but not in purchase register
- Matched but value or tax mismatch
- Ineligible as per Section 17 5 or other rules
Step 3 Resolve Common Mismatch Reasons
In purchase register but not in 2B
Common reasons:
- Supplier has not filed GSTR 1
- Supplier filed with wrong GSTIN
- Invoice uploaded in a later period
- Invoice number format mismatch
Actions:
- Follow up with supplier with invoice details
- Track in an ageing report until it appears
- Consider ITC claim timing based on internal policy and risk appetite
In 2B but not in purchase register
Common reasons:
- Vendor uploaded invoice not received
- Duplicate or incorrect invoice uploaded
- Wrong entity GSTIN used by vendor
Actions:
- Validate with procurement and stores
- Raise dispute with vendor and obtain credit note if required n
Value or tax mismatch
Common reasons:
- Partial booking of invoice
- Credit note not accounted
- Wrong tax rate or HSN
Actions:
- Correct booking and ensure credit note linkage
- Reconcile tax rate and classification positions
Step 4 Identify Ineligible and Reversal Items
Key areas to track:
- Blocked credits under Section 17 5
- Rule 42 reversal for exempt supplies
- Rule 43 reversal for capital goods
- Non business or personal use credits
- RCM credits where tax payment is pending
Maintain a reversal register with reasons and supporting working.
Step 5 Vendor Compliance and Follow Up Process
A practical vendor compliance process includes:
- Vendor wise mismatch ageing report
- Monthly follow up cadence
- Hold payment or retention policy for non compliant vendors
- Vendor onboarding checks including GSTIN validation
Monthly ITC Reconciliation Checklist
1 Close purchase register for the month 2 Download GSTR 2B and lock the version 3 Match purchase register to GSTR 2B and classify mismatches 4 Identify ineligible credits and reversal requirements 5 Prepare vendor follow up list and send communications 6 Finalise GSTR 3B ITC working and approvals 7 Maintain reconciliation file and supporting documents 8 Track pending mismatches in an ageing dashboard
ITC Reconciliation for Audit and Annual Return
For GSTR 9 and GSTR 9C readiness:
- Maintain month wise reconciliation summaries
- Reconcile ITC as per books vs ITC as per returns
- Maintain reasons for differences and supporting evidence
How Perfect Accounting Can Help
Perfect Accounting and Shared Services supports GST ITC controls:
- Monthly ITC reconciliation and mismatch resolution support
- Vendor compliance tracking and communication templates
- GSTR 3B working paper preparation and maker checker controls
- GST audit and annual return reconciliation support
- Notice response support for ITC mismatch queries