As the Income Tax Return (ITR) filing season for Assessment Year (AY) 2025–26 kicks off, tax experts are urging taxpayers—especially businesses and professionals—to pay close attention to the reconciliation of their Goods and Services Tax (GST) returns with income tax filings. The Central Board of Direct Taxes (CBDT) has notified all ITR forms, and filing is expected to begin soon. Mismatches between GST and income tax data may invite scrutiny, compliance notices, and increased costs.
🔍 Why GST-Income Tax Reconciliation Matters
With digital integration between various government departments, especially after the revised Memorandum of Understanding (MoU) signed between the CBDT and the Central Board of Indirect Taxes and Customs (CBIC) on July 21, 2020, data sharing has become seamless and automated. Information from GST returns and income tax forms like Form 26AS and the Annual Information Statement (AIS) are now cross-verified using data analytics.
This enhanced scrutiny makes it vital for taxpayers to ensure that business turnover, invoices, and TDS/TCS deductions match across platforms.
📊 GST Compliance Structure: A Quick Recap
A registered GST taxpayer is expected to file:
- Monthly Returns: GSTR-1 (Outward Supplies), GSTR-2B (Input Tax Credit), GSTR-3B (Summary Return)
- Annual Returns: GSTR-9 and GSTR-9C (Reconciliation Statement)
These returns should reflect the actual business transactions recorded in the books. Any mismatch between these GST returns and your ITR could lead to red flags during processing.
⚠️ Common Reasons for Mismatches
Some genuine reasons for mismatches include:
- Timing differences in revenue recognition
- High-sea sales or exempted income
- Different accounting treatments
- Technical glitches in return filings
Despite being legitimate, such discrepancies can still trigger automated alerts, resulting in notices or even scrutiny assessments.
🧾 The Role of Form 26AS and AIS in Cross-Verification
Form 26AS consolidates all TDS and TCS entries related to your PAN. If a business has had 2% TDS deducted on sales but hasn’t shown the corresponding invoice in GSTR-1, this inconsistency becomes visible to the tax department. The AIS further strengthens this by integrating more GST-related data.
Ensuring that your ITR reflects the same receipts as reported under GST and in Form 26AS is no longer optional—it’s necessary for smooth return processing.
💼 Impact on Small Businesses
Small and medium businesses may face a higher compliance burden as they deal with technical mismatches or minor clerical errors. These might not indicate tax evasion but still attract attention due to algorithmic monitoring by the tax departments.
Experts recommend that guidelines be issued to define acceptable variances and include examples of legitimate differences. This would help both taxpayers and assessing officers avoid unnecessary disputes.
✅ Tips for Taxpayers: How to Avoid GST-ITR Mismatches
- Reconcile GSTR-1, 3B, and 9 with your books before filing the ITR.
- Match turnover and receipt details reported in ITR with those in Form 26AS and AIS.
- Check for TDS/TCS credits that may not be supported by GST invoices and rectify them.
- Keep records of justifications for variances, especially if caused by accounting policies or exemptions.
- Use automated reconciliation tools or consult with a tax expert for detailed matching.
📅 AY 2025–26: File With Caution
With the ITR forms for AY 2025–26 already notified and filing about to commence, this is the right time to begin reconciling your data across platforms. Ignoring discrepancies can result in time-consuming compliance queries or even selection for scrutiny.
In a world of increasing data transparency and inter-departmental collaboration, accurate and consistent reporting is not just good practice—it’s a compliance necessity.