Builders and Developers – Understanding Reconciliation of GST and Accounting Records

This article aims at understanding the need and areas for reconciliation between accounting and GST records in the case of real estate sector. In accountancy the objective of reconciliation is to explain differences between two sets of financial records. Unexplained differences in the process of reconciliation signifies a possible red flag. Hence, reconciliation becomes relevant whenever transactions are differently recorded in two sets of financial records.

In simple transactions involving outward supply of goods, the revenue recognised in the books of accounts and the financial statements prepared based on the books of accounts as at the end of the year and the value of outward supplies recognised in the GST returns during that particular year would usually be in agreement. However, it may not be the same case when we come to supply of services. For instance, advances in case of services are liable for payment of GST but the income in respect of services provided is recorded only when the services are actually rendered. The situation in case of real estate sector gets even more complex due to the fact that the process of receipt of progressive payments and the ultimate transfer of possession of the unit sold to a buyer may happen over several accounting periods.

Tax payers declare their gross receipts / gross turnover to the Income Tax authorities by furnishing their an