Vendor Reconciliation Services
Vendor reconciliation matches what your books say you owe each supplier with what the supplier says, and with what the GST portal shows. We clear the differences, protect your input tax credit and flag MSME dues before they cost you a tax deduction.
What it is
Vendor reconciliation compares each supplier’s account in your books with the supplier’s own statement of account until the closing balances agree or every difference is explained. The usual culprits: invoices one side has not booked, payments in transit, unadjusted notes, TDS and typing errors.
Under GST it goes one step further. Input tax credit is available only when the supplier’s invoice appears in your GSTR-2B, under Section 16(2)(aa) of the CGST Act. So a proper vendor reconciliation also matches your purchase register with GSTR-2B and the Invoice Management System (IMS) on the GST portal. If you want us to keep your books end to end, see our compliance and accounting management service; this page covers the focused reconciliation job on its own.
Who it applies to
Businesses with many suppliers
Think of a Faridabad sheet-metal unit buying steel, packing and job work from a few dozen vendors. Small differences in each ledger add up to a big one by March.
Anyone claiming input tax credit
Every GST-registered buyer whose ITC depends on suppliers filing GSTR-1 correctly and on time.
Buyers from micro and small enterprises
Businesses that buy from Udyam-registered micro and small suppliers and must track payment dates for Section 43B(h) and, for companies, Form MSME-1.
Why it matters
Keep the ITC you are owed
Invoices missing from GSTR-2B mean credit you cannot claim yet. Finding them early gives the supplier time to file or amend.
Stop paying twice
Duplicate invoices, unadjusted advances and forgotten credit notes get caught before you pay them again.
Get clean balance confirmations
Auditors ask for balance confirmations from major suppliers. Reconciled ledgers mean confirmations come back clean.
What we reconcile
| Check | Compared with | Why |
|---|---|---|
| Vendor ledger | Supplier’s statement of account | Agree the balance you owe |
| Purchase register | GSTR-2B and IMS | ITC only on invoices the supplier has reported |
| Invoice dates and payments | The 180-day payment rule | Reverse ITC on invoices unpaid after 180 days |
| Dues to micro and small suppliers | MSMED Act payment limit (15 days, or up to 45 days if agreed) | Section 43B(h) deduction and MSME-1 reporting |
| TDS deducted | Supplier’s ledger and your TDS returns | Avoid disputes over short payment |
In practice, we start with the largest balances and the vendors whose GST filings are patchy, then work down the list.
Documents required
From your books
- Vendor ledgers for the period
- Purchase register with GSTINs and invoice numbers
- Payment and bank records
- Debit and credit notes
From your suppliers
- Statements of account for the same period
- Copies of disputed or missing invoices
- Udyam registration details, where applicable
From the portals
- GST portal access or GSTR-2B downloads
- TDS returns and challans
- Previous reconciliation, if any
How it works
Collect ledgers and statements
We pull your vendor ledgers and request statements from suppliers, or use the ones you have.
Match line by line
Invoices, payments, notes and TDS are matched, and each unmatched item goes into a difference list with its reason.
Match the purchase register with GSTR-2B
We compare your purchase register with GSTR-2B and the IMS dashboard, and list invoices to accept, reject or keep pending.
Follow up with suppliers
Here is where most credit is won back. Each supplier gets a short list of what is missing or wrong in their GSTR-1 or statement.
Correct the books and report
We propose the correcting entries, ITC reversals or re-claims, and hand you a supplier-wise summary of open items.
Timelines
Every month, before GSTR-3B
A draft GSTR-2B is ready on the 14th of the following month. Take IMS actions and match before filing GSTR-3B, because no IMS action is possible after the return is filed.
Every half-year, for MSME-1
Companies with delayed payments to micro or small suppliers file Form MSME-1 by 31 October for April–September and by 30 April for October–March.
Before 30 November, for last year’s ITC
ITC for a financial year can be claimed only up to 30 November of the next year or the date of the annual return, whichever is earlier, under Section 16(4).
What happens if you skip reconciliation
Lose credit for good
Picture a contractor who finds in December that a supplier’s invoice from last March never reached GSTR-2B. With 30 November gone, that credit is lost. ITC claimed on invoices missing from GSTR-2B can also be denied with interest.
Push the deduction to a later year
Under Section 43B(h) of the Income-tax Act, 1961, dues to micro and small suppliers paid beyond the MSMED Act limit are allowed only in the year you actually pay.
Pay an MSME-1 penalty
A company that fails to file MSME-1 faces a penalty under Section 405(4) of ₹20,000 plus ₹1,000 a day, up to ₹3 lakh, and officers in default are liable too.
Frequently asked questions
What is vendor reconciliation?
Vendor reconciliation compares each supplier’s account in your books with the supplier’s statement and the GST portal, and explains every difference. It covers invoices, payments, debit and credit notes and TDS. Under GST, it also checks that each purchase invoice appears in GSTR-2B, because Section 16(2)(aa) allows credit only for those. Done every month, it keeps your payables and ITC accurate.
How often should vendor reconciliation be done?
Monthly for GST, and at least quarterly for ledger balances with major suppliers. The GSTR-2B match should happen every month after the draft GSTR-2B is ready on the 14th and before you file GSTR-3B. A full ledger reconciliation at the half-year and at 31 March catches the rest. Small monthly rounds beat one big year-end clean-up.
What is the Invoice Management System on the GST portal?
IMS is a GST portal facility, live since 1 October 2024, where you accept, reject or keep pending each invoice your suppliers upload. Accepted invoices flow into the ITC available section of GSTR-2B, and rejected ones do not. Any invoice left without action is treated as deemed accepted when GSTR-2B is generated. A monthly IMS review keeps wrong invoices out of your credit.
What is the 180-day rule for input tax credit?
If you do not pay a supplier the invoice value, including GST, within 180 days of the invoice date, the ITC on that invoice must be reversed with interest. Once you make the payment, the credit can be claimed again. A vendor reconciliation flags old unpaid invoices before day 180, so you can usually pay in time and avoid the reversal.
What if my supplier has not filed GSTR-1?
Then the invoice will not appear in your GSTR-2B, and you cannot claim its ITC yet under Section 16(2)(aa). Ask the supplier to file or correct GSTR-1, and claim the credit in the month it shows up. You can do this until 30 November of the next financial year or the annual return date, whichever is earlier. Chasing early usually gets it fixed within a month or two.
How does vendor reconciliation help with MSME payments?
It shows which suppliers are micro or small enterprises and which of their bills are close to the MSMED Act payment limit of 15 days, or up to 45 days if agreed in writing. Under Section 43B(h), late payments are deductible only in the year paid, and companies must report delays in Form MSME-1. A monthly list of such dues lets you pay on time and keep the deduction.
Is vendor reconciliation different from GSTR-9C reconciliation?
Yes. Vendor reconciliation works supplier by supplier, through the year, on ledgers and ITC. GSTR-9C is a yearly reconciliation statement between your audited financial statements and the GSTR-9 annual return, required for taxpayers with turnover above ₹5 crore. Regular vendor reconciliation makes the GSTR-9C much easier, because purchase-side differences are already explained by the time it is prepared.
Can you reconcile only our largest suppliers?
Yes, many businesses start with the top suppliers by value, often a small group that accounts for most purchases. We then extend the work to vendors with frequent GST mismatches. For the GSTR-2B match, though, we cover every invoice, because even a small supplier’s missing filing blocks credit under Section 16(2)(aa). Either way, you get a clear list of open items each month.
What it costs
Our fee plus the government fee that applies to your case, quoted before you commit. Tell us the situation and we will price it exactly.
Vendor reconciliation carries no government fee. Any GST interest on reversed credit, or a late fee on a return, is paid separately to the government and shown to you first.
Ready to begin?
Send us your vendor ledgers and last GSTR-2B, and we will show you which credits and balances need attention first.