# GSTR-3B vs GSTR-1 Mismatch Notices: Why They're Issued, How to Reconcile, and the Penalty Exposure The GST department has one of the most automated tax audit systems in the world. GSTR-1 and GSTR-3B data are compared electronically for every taxpayer, every month. When the numbers don't match, the system flags it — and you receive a scrutiny notice (ASMT-10). If you've received one, or if you want to understand how to prevent it, this step-by-step guide covers the mechanics, the sources of mismatch, the legal exposure, and the exact reconciliation process. --- ## Understanding the Two Returns ### GSTR-1: Invoice-Level Outward Supply Statement GSTR-1 is a **statement of all outward supplies (sales) you made** during the tax period. It is filed at the invoice level for B2B supplies and at a consolidated level for B2C supplies. - For monthly filers: due by the 11th of the following month - For quarterly QRMP filers: due by the 13th of the month after the quarter GSTR-1 is a **disclosure return** — it does not involve any tax payment. When you file GSTR-1, the invoice data flows into your buyers' **GSTR-2B**, allowing them to see and claim ITC on your supplies. ### GSTR-3B: Summary Return with Tax Payment GSTR-3B is a **summary return** that covers: - Total outward taxable supplies (aggregate, not invoice-level) - Total ITC available and claimed - Net tax liability - Actual tax payment (CGST, SGST, IGST) GSTR-3B is where tax is actually paid. It is filed by the 20th of the following month (for most taxpayers) or the 22nd/24th for QRMP taxpayers. --- ## What a Mismatch Looks Like The system compares specific fields between GSTR-1 and GSTR-3B: | Comparison point | GSTR-1 source | GSTR-3B source | |---|---|---| | Taxable value (B2B) | Table 4A | Table 3.1(a) | | Taxable value (exports) | Table 6A/6B | Table 3.1(b)/(c) | | Zero-rated + exempt supplies | Table 8 | Table 3.1(d)/(e) | | Tax amounts (CGST/SGST/IGST) | Tax columns | Tax columns in 3.1 | **Example mismatch**: In June 2025, your GSTR-1 shows taxable supplies of ₹30 lakh. Your GSTR-3B for June 2025 shows taxable supplies of ₹26 lakh. The ₹4 lakh gap triggers an automated flag. --- ## Why Mismatches Occur: Five Common Reasons ### Reason 1: Advance Receipts Reported in GSTR-3B but Not in GSTR-1 When you receive an advance for a supply of goods, GST is payable on the advance at the time of receipt (Section 12(2) of CGST Act). Many businesses report this in GSTR-3B (paying tax on the advance) but forget to report the advance in GSTR-1 (Table 11 — Advances and adjustment of advances). ### Reason 2: Credit Notes After GSTR-1 Filed Without Adjusting 3B You issue a credit note in April. You amend GSTR-1 (Table 9B credit notes) in the April return. But you forget to reduce the taxable value in GSTR-3B for April. Now GSTR-1 shows lower taxable value than GSTR-3B — still a mismatch. ### Reason 3: Exempt and Nil-Rated Supplies Included Incorrectly Exempt supplies are reported in GSTR-1 (Table 8) but carry zero tax. In GSTR-3B, they appear in Table 3.1(d) as "exempt supply" with zero tax. The mismatch happens when the taxpayer includes them in the taxable supply columns of either return by mistake. ### Reason 4: Inter-State vs Intra-State Classification Error You sold goods to a customer in another state but treated it as intra-state in GSTR-3B (paying CGST + SGST instead of IGST). When you correctly declared it as inter-state in GSTR-1 (IGST column), the tax component creates a mismatch by component even if total tax is the same. ### Reason 5: Clerical Errors and Rounding Mistyping ₹10 lakh as ₹1 lakh in GSTR-3B, or vice versa. Using invoice-level data with rounding that accumulates into a difference. Entering net-of-discount value in one return and gross in the other. --- ## The Notice Sequence and Legal Exposure ### ASMT-10: Scrutiny Notice The department issues **ASMT-10** under Section 61 of the CGST Act. You have **30 days** to respond. **How to respond**: File **ASMT-11** — a reply to the scrutiny notice — via the GST portal. Your reply must: 1. Accept the discrepancy and pay the differential tax (using DRC-03, voluntary payment challan) if it's a genuine error 2. Explain why there is no discrepancy with supporting evidence ### If Not Resolved: DRC-01 (Show Cause Notice / Demand) If your ASMT-11 reply is unsatisfactory, the department issues a **DRC-01** — a show cause notice under Section 73 or 74. **Section 73 (non-fraud cases)**: - Tax + interest under Section 50 (18% per annum from due date) - Penalty: 10% of tax (minimum ₹10,000) — but if you pay the full demand before the notice or within 30 days of DRC-01, the penalty is **waived entirely** **Section 74 (fraud / wilful misstatement / suppression of facts)**: - Tax + interest - Mandatory penalty: **100% of tax**. Cannot be waived. **Interest under Section 50**: 18% per annum on unpaid tax from the due date of filing 3B to the date of actual payment. On ₹10 lakh of differential tax for 12 months, that's ₹1.8 lakh in interest alone. --- ## What the law says Section 39(8) of the CGST Act, 2017 reads: > Every registered person who is required to furnish a return under sub-section (1) or sub-section (2) shall furnish a return for every tax period whether or not any supplies of goods or services or both have been made during such tax period Last verified against CGST Act s.39 on 5 November 2026. ## Step-by-Step Reconciliation Process ### Step 1: Download Your GSTR-1 Data From the GST portal (gst.gov.in → Returns → GSTR-1 → View Filed Returns), download the filed GSTR-1 for the period(s) under scrutiny. Export to Excel. ### Step 2: Download Your GSTR-3B Data Download GSTR-3B for the same period(s). Note the figures in Table 3.1: - 3.1(a): Outward taxable supplies (other than zero-rated, nil, and exempt) - 3.1(b): Outward taxable supplies (zero-rated) - 3.1(c): Other outward supplies (nil, exempt) ### Step 3: Column-by-Column Match Build a reconciliation table comparing GSTR-1 value, GSTR-3B value, difference, and reason for each supply type and tax component. ### Step 4: Identify the Source of Each Difference For each difference, determine: - **Timing difference**: An invoice filed in GSTR-1 for Month 1 was accidentally included in GSTR-3B for Month 2. The overall FY numbers match but the monthly comparison shows differences. - **Genuine error**: A figure was mis-entered in one of the returns. - **Classification error**: Interstate/intrastate mix-up, taxable/exempt mix-up. Timing differences resolve themselves when you look at the full year (cumulative GSTR-1 vs cumulative GSTR-3B). If the FY total matches but monthly figures don't, that's the explanation for ASMT-11. ### Step 5: Correct the Error or File Explanation **If genuine under-reporting in GSTR-3B**: Pay the differential tax via **Form DRC-03** (voluntary payment) on the GST portal. Interest is still payable but the penalty is lower (and can be waived if paid before or within 30 days of a notice). **If GSTR-1 error**: You can amend GSTR-1 in a subsequent return period using Table 9A (amendment of B2B invoices) or Table 9B (credit notes/debit notes). Note: GSTR-1 amendments can only go up to the return for October of the following financial year. --- ## The GSTR-2B vs GSTR-3B ITC Mismatch: A Separate but Equally Common Notice Under Rule 36(4) of the CGST Rules, the ITC you can claim in GSTR-3B cannot exceed the ITC shown in your GSTR-2B (which is auto-populated from your suppliers' GSTR-1 filings). If you claimed ₹5L ITC in GSTR-3B but your 2B shows only ₹4L (because a supplier hasn't filed their GSTR-1), the excess ₹1L is not available. The only remedy: get your supplier to file their GSTR-1. Until they do, you cannot claim ITC on their invoice. --- ## FAQ **Q: I received ASMT-10 for a FY 2023-24 mismatch. The period is more than 3 years ago. Is the notice time-barred?** Section 73 demands can be issued within **3 years from the due date of the annual return** (GSTR-9) for the relevant FY. For FY 2023-24, the GSTR-9 due date was 31 December 2024, so the Section 73 limitation runs until 31 December 2027. An ASMT-10 in 2026 for FY 2023-24 is well within time. **Q: My GSTR-1 shows higher turnover than GSTR-3B because I included export invoices in GSTR-1 but didn't pay tax on them (exported under LUT). Is this a mismatch problem?** Not a liability mismatch, but it will show as a difference. In GSTR-3B, exports under LUT/bond appear in Table 3.1(b) with zero tax. In your ASMT-11, explain that the difference is zero-rated exports under LUT and provide the LUT reference number. **Q: I voluntarily paid the mismatch amount via DRC-03 before receiving ASMT-10. Does the department still issue a notice?** A DRC-03 voluntary payment ideally stops a notice from being issued. If ASMT-10 still arrives after your DRC-03, reference the DRC-03 challan in your ASMT-11 reply. The payment extinguishes the demand and, under Section 73, the penalty is waived. **Q: My accountant filed GSTR-3B but made errors in five months. The total for the year is correct. How do I explain this?** In your ASMT-11, present a month-by-month reconciliation showing that the FY cumulative GSTR-1 and GSTR-3B values are identical. The monthly mismatches are timing differences, not suppression of income. This is a strong defence under Section 73. --- ## Fix It Before the Notice Arrives The GSTR-1 vs GSTR-3B reconciliation should be done every quarter — not only when you receive a notice. A self-initiated DRC-03 payment for a discovered gap costs only the tax and interest. A department-initiated demand after ASMT-10 adds a penalty. A Section 74 fraud determination multiplies the penalty by 10. For assistance with GST reconciliation, ASMT-10 responses, or proactive mismatch resolution, contact us at **harunraaj.com/contact**. *Harun Raaj & Associates | NRI Tax Specialists* --- ## See Also - [Input Tax Credit Blocked Under Section 17(5): The Complete List With the Cases That Catch Businesses Off Guard](https://www.harunraaj.com/blog/itc-blocked-gst-section-17-5-complete-list) - [GST Registration Threshold in 2026: ₹20L vs ₹40L vs ₹10L — Which Limit Applies to Your Business](https://www.harunraaj.com/blog/gst-registration-threshold-2026-which-limit-applies) - [RoDTEP Rate Chart 2025-26 for Indian Exporters — Scheme Guide, Eligible Categories & How to Claim](https://www.harunraaj.com/blog/rodtep-rate-chart-exporters-india-2025-26) Canonical: https://www.harunraaj.com/blog/gstr-3b-gstr-1-mismatch-reconciliation-notices