GSTR-1 reports outward supplies. GSTR-3B declares tax liability and payment. The two are not independent returns. The GST Network runs automated matching algorithms that cross-verify both returns every filing period. Where material differences arise, scrutiny follows.
This is not necessarily an allegation of evasion. It is often a system-identified variance.
How Mismatch Commonly Arises
- Tax liability reported in GSTR-1 exceeds liability discharged in GSTR-3B for the same period, typically from filing GSTR-3B on estimates without reconciling first.
- ITC claimed in GSTR-3B exceeds supplier-reported credit in GSTR-2B.
- Export or zero-rated supplies reported in GSTR-1 are not fully reflected in GSTR-3B.
- Credit notes and amendments reported in GSTR-1 are not reconciled in GSTR-3B.
What Happens Next
- The department issues Form ASMT-10 under Section 61 of the CGST Act, a scrutiny notice requiring explanation within 30 days.
- If unresolved, proceedings under Section 73 may follow for genuine errors, carrying interest at 18 percent per annum and a penalty of 10 percent of tax due. Where suppression is alleged under Section 74, the penalty rises to 100 percent.
- Under Rule 88C, where the differential remains unexplained within prescribed timelines, subsequent GSTR-1 filing may be restricted.
Why This Matters
GSTR-1 and GSTR-3B are two parts of a single compliance picture. Finance teams that file both without a month-wise reconciliation between them are increasing scrutiny exposure with every return cycle. Reconciling GSTR-1, GSTR-3B, and GSTR-2B before each filing is the single most effective control against avoidable GST disputes and interest cost.