ITR Filing 2025 Why GST-Income Reconciliation Matters More Than Ever
With the ITR filing 2025 season underway, one area where taxpayers—especially business owners and professionals—must be extra cautious is reconciliation of GST data with income reported in the return.
Discrepancies between ITR and GST filings are now a red flag for the Income Tax Department and may trigger automated notices or deeper scrutiny.
This blog breaks down what to check, common mismatches, how to avoid errors, and what the law says.
What is GST-Income Reconciliation?
Reconciliation means ensuring that the income reported in your Income Tax Return matches the turnover or receipts declared in your GST returns (primarily GSTR-1 and GSTR-3B).
Why it matters:
- Tax departments share data: As per the MoU between CBDT and CBIC, both departments now share return and invoice-level data.
- Mismatch triggers scrutiny: A high variance between ITR and GST filings can lead to e-notices, reassessment, or even penalties.
Common Mismatches Noticed During Assessments
| Area | GST Filing (GSTR-1/3B) | ITR (Schedule BP or P&L) | Issue |
|---|---|---|---|
| Turnover | Higher sales in GSTR-1 | Lower receipts in ITR | Underreported income |
| Exempt supplies | Not disclosed in GST return | Fully included in ITR | Data misalignment |
| Export income | Declared in GSTR-1 with LUT | Missing in ITR | Income omission |
| Commission or service income | Declared under GST | Clubbed in other income in ITR | Head of income mismatch |
| Advances | Taxed in GST | Not accounted in ITR | Timing difference |
Step-by-Step Guide to Reconcile GST and ITR
- Download Annual GST Return (GSTR-9) for FY 2024–25
- Compare with books of accounts and P&L statement
- Match the following items:
- Gross turnover
- Exempt and non-GST income
- Export and SEZ supplies
- Reverse charge entries
- Adjust for timing differences, if any
- Mention proper disclosures in tax audit report (if applicable under Section 44AB)
📌 Expert Tip:
Always reconcile GSTR-3B turnover, not just GSTR-1, as GSTR-3B is considered more final for tax computation purposes.
What CBDT and CBIC Say
- Section 143(1)(a) allows adjustment for “mismatch in income” between tax returns and other reported sources.
- Circular No. 3/2022 (CBDT) clarifies mismatches with external data (like GST returns) can lead to e-verification.
- GST Circular No. 183/15/2022-GST reiterates the need for consistency in outward supplies between GSTR and books.
Legal Insight:
Recent Delhi High Court rulings (e.g., Wazir Chand v. ITO) upheld additions under Section 69C when GST turnover exceeded reported income, and the taxpayer couldn’t explain the gap.
How to Fix Discrepancies
- Voluntary corrections: Use revised ITR (if within deadline) or updated return under Section 139(8A).
- Maintain audit trails: For any differences, retain explanations, working papers, and reconciliations.
- Seek professional help: If you’re unsure, involve a tax consultant early.
Impact on Refunds and Notices
- Refund delays: Mismatched figures can hold up refunds until clarifications are provided.
- More e-notices: CPC uses AI to match GST, TDS, and ITR data.
- IT Scrutiny risk: Persistent gaps may flag the assessee for detailed scrutiny under CASS (Computer Aided Scrutiny Selection).
FAQ: GST and ITR Reconciliation
Q1: Is reconciliation mandatory for small businesses under presumptive income (Section 44AD)?
No, but if they’re registered under GST, it’s advisable to reconcile to avoid mismatch risks.
Q2: What if GST turnover includes advances not yet earned?
Mention it under “Advance received” in books and explain timing in notes.
Q3: Can I revise my ITR if mismatch is found later?
Yes, you can file a revised return before 31-Dec-2025 or an updated return with additional tax.
Summary
For ITR filing 2025, taxpayers must reconcile GST turnover and income to avoid mismatch notices and refund delays. With data-sharing between CBDT and CBIC, discrepancies can trigger scrutiny. Use GSTR-3B, books, and P&L to ensure figures align and file accurate returns.
Final Thoughts & CTA
As GST and Income Tax data become more integrated, reconciliation is not optional—it’s essential.