Last updated: March 27th, 2023 6:31 PM

Mandatory Reconciliation of Form GSTR-3B and Form GSTR-2B

Under GST, the introduction of both auto-generated statements in Form GSTR-2A and thereafter Form GSTR-2B created huge havoc with regard to which form to be considered as a base for availment of the input tax credit. However, with god’s grace, the said confusion got cleared by amending and inserting various provisions made effective from 1^st January 2022 and concluded that availing of the input tax credit is possible only if the same is reflected in Form GSTR-2B. In the present article, we will try and understand the provisions which summarize that reconciliation of Form GSTR-3B and Form GSTR-2B is mandatory under GST.

Understanding the basics of Form GSTR-3B and Form GSTR-2B –

As per provisions of section 39 read with provisions of rule 61 of the Central Goods and Services Tax Rules, 2017, every normal registered person is required to furnish a return in Form GSTR-3B either on monthly basis or on a quarterly basis. Form GSTR-3B is a self-declaration statement that contains details of inward and outward supplies; input tax credit availed; output tax payable; output tax paid and such other particulars. On the other hand, as per rule 60(7) of the Central Goods and Services Tax Rules, 2017, Form GSTR-2B is an auto-generated static statement. Form GSTR-2B is generated on the basis of details/ information as furnished by the supplier in Form GSTR-1, GSTR-5, and GSTR-6. Notably, Form GSTR-2B covers details of both input tax credit available as well as input tax credit not available.

Co-relating Form GSTR-3B and Form GSTR-2B –

Going through all the below highlighted provisions, we can easily figure out the direct linkage between Form GSTR-3B and Form GSTR-2B –

1. Section 16(2) clause (aa) of the Central Goods and Services Tax Act, 2017 [effective from 1^st January 2022] –

Vide clause (aa) to section 16(2), the fifth condition was inserted for availment of the input tax credit. According to the fifth condition, the input tax credit is available to the recipient only if-

• Details of tax invoice/ debit note are reflected by the supplier in Form GSTR-1; and
• The details of the input tax credit are communicated to the recipient in Form GSTR-2B.

2. Rule 36(4) of the Central Goods and Services Tax Rules, 2017 [effective from 1^st January 2022] –

As per the provisions of sub-rule (4), the recipient of goods or services is not eligible to avail of the input tax credit unless –

• The same is furnished by the supplier via Form GSTR-1 or Invoice Furnishing Facility (IFF); and
• The details of the input tax credit are communicated to the recipient in Form GSTR-2B.

Both the above provisions summarize that availment of input tax credit (i.e., taking input tax credit in Form GSTR-3B) depends completely on input tax credit as reflected in Form GSTR-2B.

Relevant new provisions inserted vide the Finance Act, 2022 –

The Finance Act, 2022 has come up with two new provisions which have stringent the input tax credit availment in Form GSTR-3B vis-à-vis Form GSTR-2B. Both the provisions are summarized hereunder –

1. Section 16(2) clause (ba) of the Central Goods and Services Tax Act, 2017 [effective date is yet to be notified] –

Vide clause (ba) to section 16(2), the sixth condition is newly inserted for availment of an input tax credit. According to the sixth condition, the input tax credit as reflected in Form GSTR-2B shouldn’t be restricted under section 38.

2. Section 38 of the Central Goods and Services Tax Act, 2017 [effective date is yet to be notified] –

According to the newly substituted provisions of section 38, the input tax credit will be restricted if any of the following conditions are satisfied –

• The supplier of goods or services has obtained GST registration within a prescribed period;
• The supplier has defaulted in payment of tax for a continuous period as prescribed;
• The supplier has availed excess input tax credit as against available input tax credit for the prescribed period;
• The supplier has excess output tax payable as against output tax paid for a prescribed period;
• The supplier has defaulted in discharging the tax liability;
• The supplier is covered with the prescribed class of persons.

Mandatory reconciliation of Form GSTR-3B and Form GSTR-2B –

From all the above provisions, it is pretty clear that input tax credit as per Form GSTR-3B and Form GSTR-2B are completely entangled. The recipient is not at all allowed to avail of the input tax credit which is not reflected or restricted in Form GSTR-2B. Hence, it is important to reconcile the input tax credit availed in Form GSTR-3B with the input tax credit reflected in Form GSTR-2B. Notably, Form GSTR-2B is auto-generated from the details furnished by the supplier in Form GSTR-1 or Form GSTR-5, or Form GSTR-6. There are chances of various errors like –

• The supplier has wrongly furnished the figures (clerical error);
• The supplier has wrongly reflected the transactions i.e., instead of B2B the transaction is reflected as B2C;
• The supplier has wrongly furnished inter-state transactions as intra-state or vice versa; etc.

Hence, it is important to reconcile the input tax credit as per Form GSTR-3B and Form GSTR-2B. Steps to reconcile the same are narrated hereunder –

1. Finalize the input tax credit as per Form GSTR-3B;
2. Download Form GSTR-2B from the GST portal;
3. Compare the input tax credit as per Form GSTR-3B and as downloaded in Form GSTR-2B;
4. Carry out all the necessary adjustments to match the input tax credit in Form GSTR-3B with Form GSTR-2B.