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The purchase register from the ERP for July says Rs 12.6 lakh in inbound GST across roughly 340 invoices. The GSTR-2B pulled from the portal on the 15th of August says Rs 8.4 lakh in eligible ITC. The Rs 4.2 lakh gap looks alarming — a working-capital hit, a compliance risk under Section 16(4), or an ITC leak from a mismatch that has been drifting for months. The finance manager wants an explanation before signing off the ITC line in GSTR-3B Table 4, and the controller wants a documented reconciliation before the twentieth. The gap is real but the treatment depends entirely on which of five buckets each rupee falls into, and the buckets have different severities, different owners, and different escalation timelines.
Every rupee in the gap between the purchase register and GSTR-2B falls into one of five buckets. Bucket 1 — supplier has not filed GSTR-1 for the period, either because they are late on monthly filing or because they are on QRMP and have not used the Invoice Furnishing Facility. This is the Rule 36(4) mismatch and the Section 16(4) permanent-loss risk. Bucket 2 — supplier is on QRMP quarterly filing and the invoice will appear in the third-month GSTR-2B when the quarterly GSTR-1 lands on the thirteenth of the month following the quarter. This is a timing bucket, not a leak. Bucket 3 — a colleague took an IMS Reject or Pending action mid-cycle that removed the invoice from the current month's GSTR-2B without updating the purchase register reconciliation working paper. This is an internal-coordination bucket. Bucket 4 — the invoice is on GSTR-2B implicitly but the underlying supply is blocked ITC under Section 17(5), so the eligible-ITC figure the portal reports excludes it. This is a classification bucket. Bucket 5 — the rate on the vendor invoice does not match the rate the supplier reported on GSTR-1 (a 28 per cent vendor bill against an 18 per cent GSTR-1 filing, typically on rate rationalisation transitions), producing a tax-value mismatch rather than an invoice-count mismatch. This is a rate-master bucket.
A three-way workbook that lists every purchase-register invoice, every GSTR-2B invoice, and every IMS action against the same GSTIN and invoice number. A classification column with the five bucket codes. A supplier-side follow-up letter template for bucket 1. A calendar tracking every bucket 1 invoice against the November 30 following-FY deadline with Tier 1 (analyst chase) at 30 days from the invoice date, Tier 2 (finance manager escalation) at 60 days, and Tier 3 (controller written escalation to the vendor's Head of Finance) reverse-calculated from November 30. A rate-master reference for bucket 5 aligned to the current GST rate schedule. A named owner per bucket — the AP analyst on bucket 3 (internal coordination), the indirect-tax executive on buckets 1 and 2 (supplier-side), and the controller on bucket 4 (Section 17(5) classification).
The Rs 4.2 lakh gap is decomposed into five bucket subtotals with owners and escalation dates. The bucket 1 at-risk figure enters the ITC-at-risk register with the November 30 clock running. The bucket 2 timing figure gets a reappearance date in the third-month GSTR-2B. The bucket 3 IMS-action figure closes when the working paper is updated to reflect the colleague's action. The bucket 4 blocked-ITC figure is tagged in the purchase register with a Section 17(5) reference and excluded from the eligible-ITC subtotal. The bucket 5 rate-mismatch figure triggers a supplier reconciliation call and a book-side rate-master update. GSTR-3B Table 4 is populated from the GSTR-2B ceiling under Rule 36(4), the at-risk queue is defensible against a going-back audit sample, and the reconciliation moves out of firefighting mode and into a monthly discipline that the controller signs off on the fifteenth.
You pulled the GSTR-2B on the fifteenth. The portal says Rs 8.4 lakh in eligible input tax credit for the month. The purchase register from the ERP says Rs 12.6 lakh. A Rs 4.2 lakh gap.
You have not miscounted the invoices. You checked the totals twice. The finance manager wants an explanation before signing off the ITC line in GSTR-3B Table 4 on the twentieth. Something is missing — but what, and where do you look?
The quick answer
The gap between purchase register and GSTR-2B almost always decomposes into one of five buckets: the supplier has not filed GSTR-1 for the period; the supplier is on quarterly QRMP filing and the invoice will appear in a later GSTR-2B; a colleague took an IMS Accept, Reject, or Pending action mid-cycle that changed the current-month figure; the invoice is on GSTR-2B implicitly but the underlying supply is blocked ITC under Section 17(5); or the vendor invoice carries a rate that does not match the rate the supplier reported on GSTR-1. Only bucket 1 is a permanent-loss risk. The other four are recoverable, classifiable, or a timing artefact.
Work through the five in order — each takes minutes if you have a three-way workbook open — and the Rs 4.2 lakh gap resolves into subtotals with owners and next actions rather than an unexplained shortfall you carry into the twentieth.
Bucket 1 — the supplier has not filed GSTR-1
Extract every purchase-register invoice that does not appear on GSTR-2B and group by supplier GSTIN. If the same supplier appears with three or four invoices missing for the current month, the highest-probability explanation is that the supplier has not filed the current-month GSTR-1 yet. The invoice count and value are on the AP ledger; the supplier just has not reported the outward supply to the portal.
Under Section 16(4), an invoice for a supply in FY 2025-26 must be claimed in a GSTR-3B filed by 30 November 2026 or the ITC is permanently lost. This is the escalation clock behind bucket 1 — a March 2026 invoice that a supplier has not filed by August 2026 has under four months to the cliff, and the analyst chase for a missing current-month invoice is different from the controller chase for an at-risk previous-FY invoice.
Illustrative arithmetic on our Rs 4.2 lakh gap — Rs 1.8 lakh sits in bucket 1 across seven suppliers. Two of them are current-month invoices where the supplier will file GSTR-1 by the eleventh of next month. Five of them are older — one January invoice, two February, two March — that have been drifting through the queue since April. The five older ones enter the at-risk register with a Tier 3 controller escalation reverse-calculated from 30 November 2026. The Rule 37A supplier default framework covers the reciprocal case where the supplier files GSTR-1 but not GSTR-3B, which is the different (and equally common) tail-end failure mode.
What to do. Extract the at-risk queue, sort by invoice date ascending, and route the older-FY invoices to the controller for a written escalation to the vendor’s Head of Finance. The current-month invoices go on a routine analyst reminder to the vendor’s AR desk.
Bucket 2 — the supplier is on QRMP quarterly filing
Under the Quarterly Return Monthly Payment scheme, a supplier with aggregate turnover up to Rs 5 crore in the preceding FY may file GSTR-1 quarterly rather than monthly. If the supplier does not use the Invoice Furnishing Facility (IFF) for the first two months of the quarter, the invoice does not flow to the recipient’s GSTR-2B until the quarterly GSTR-1 lands on the thirteenth of the month following the quarter.
An invoice from a QRMP supplier issued in July will therefore only appear on your GSTR-2B pulled in mid-October, after the July-August-September quarterly GSTR-1 is filed by 13 October. Two months of a working-capital drag rather than a leak, but often invisible to the analyst who does not know which suppliers are on QRMP.
Illustrative arithmetic — Rs 0.6 lakh of our Rs 4.2 lakh gap is QRMP timing. Three vendors on our master carry a QRMP flag; the invoice count and value reconcile against a next-quarter reappearance date.
What to do. Add a QRMP flag column to the vendor master. Any missing invoice from a QRMP-flagged supplier gets a “reappearance expected in month X GSTR-2B” note and moves out of the chase queue.
Bucket 3 — an IMS action was taken mid-cycle
The Invoice Management System went live on 1 October 2024. Every inbound invoice appearing on the IMS dashboard must be actioned as Accept, Reject, or Pending before the fourteenth of the following month when GSTR-2B is generated. No action defaults to Accept; Reject removes the invoice from the current-month GSTR-2B; Pending defers it to a subsequent GSTR-2B.
The single most common source of a same-day-to-same-day gap is a colleague taking a Pending or Reject action mid-cycle without updating the reconciliation working paper. The purchase register still shows the invoice; the GSTR-2B correctly does not. There is nothing broken — the two are internally consistent but the reconciler was not looped in.
Illustrative arithmetic — Rs 0.4 lakh of our Rs 4.2 lakh gap is a bucket 3 case. Two invoices were marked Pending by the AP head last week because the supplier had not provided the delivery challan and the AP head wanted to defer the ITC claim rather than book a Rule 37 reversal in 180 days. The action is defensible; the failure was the missing note on the working paper.
What to do. Pull the IMS dashboard action log for the reconciliation period. Cross-reference every Reject and Pending action to the purchase register. Update the working paper. Where the underlying issue that caused the Pending action is resolved, take an Accept action and let the invoice flow to the next month’s GSTR-2B.
Bucket 4 — the underlying supply is blocked ITC under Section 17(5)
The GSTR-2B does report the invoice, but the eligible-ITC subtotal excludes it because the underlying supply is a blocked-credit category under Section 17(5). The most common categories the reconciler will see are food and beverages, health services and health insurance, motor vehicles for transportation of persons up to thirteen seats, membership of a club or fitness centre, and goods disposed of as gifts or free samples.
The purchase register captures the vendor invoice at gross value including the GST charged. GSTR-2B lists the invoice but the portal’s eligible-ITC classification excludes it. The gap is not a defect — it is a compliance boundary that the reconciliation working paper has to classify rather than chase.
Illustrative arithmetic — Rs 0.5 lakh of our Rs 4.2 lakh gap is a bucket 4 case. Two invoices are for corporate off-site food and beverage bills; one is for a company car maintenance service tagged to the CFO’s vehicle (7-seater — fails the seating-capacity test); one is for a set of client gift hampers.
What to do. Tag every bucket 4 invoice in the purchase register with a Section 17(5) reference code. Exclude them from the eligible-ITC subtotal that feeds the GSTR-2B match. Do not remove them from the AP ledger — the vendor still needs to be paid the gross invoice value including the GST. Getting this classification wrong at reconciliation time is what surfaces as a Section 74 demand three years later with interest and penalty.
Bucket 5 — the rate on the vendor invoice does not match the supplier’s GSTR-1
A vendor issues an invoice at 28 per cent GST for a supply that the supplier reports on GSTR-1 at 18 per cent (or vice versa). The invoice appears on both sides; the invoice count matches; the tax value does not. This surfaces most often during rate-rationalisation transitions (the September 2025 GST 2.0 window is a current example) and against vendors whose ERP rate master lags the GSTN rate schedule.
Illustrative arithmetic — Rs 0.9 lakh of our Rs 4.2 lakh gap is a bucket 5 case. One vendor invoiced Rs 30 lakh of raw material at 28 per cent (Rs 8.4 lakh GST) but reported the outward supply on GSTR-1 at 18 per cent (Rs 5.4 lakh GST). The Rs 3 lakh difference is where the two ledgers stop tying, and it needs a supplier conversation to reconcile the correct rate before either side can proceed.
What to do. Compare the tax value per invoice line, not just the invoice count. Route any rate-mismatch invoice to the indirect-tax executive for a supplier reconciliation call, and update the ERP rate master if the vendor invoice was the incorrect side of the mismatch.
Which bucket to escalate first
Bucket 1 — the supplier-unfiled GSTR-1 queue for previous-FY invoices — is the only one of the five with a permanent-loss consequence. Buckets 2 through 5 are recoverable, classifiable, or timing-based. The controller sign-off on the reconciliation should route the at-risk previous-FY subtotal to the top of the queue and treat everything else as second-order housekeeping.
The escalation ladder is not a fixed ninety-day counter — it is reverse-calculated from the 30 November following-FY deadline. A March 2026 invoice sitting in the at-risk queue in August 2026 has under 90 days to write-off. A July 2026 invoice in the same queue has fourteen months. The two need different tempo and different escalation authority: the older invoice needs the controller writing to the vendor’s Head of Finance; the newer invoice is still a routine analyst reminder.
The three-way workbook that makes this repeatable
Working through the five buckets manually the first time takes an afternoon. Doing it every month against a fresh GSTR-2B pull takes a structured working paper. Terra Insight publishes a free three-way ITC workbook — a single Excel file that lays the purchase register, the GSTR-2B extract, and the IMS action log side by side with the five bucket codes as a classification column. Load your three sources, run the auto-classifier, and the workbook produces the bucket-wise subtotals with owner routing and the at-risk queue with the November 30 reverse-calculated escalation dates.
The three-way ITC reconciliation Excel walkthrough documents the workbook usage step by step.
When the manual match stops holding
The Excel workbook holds for a mid-market finance team up to roughly 200 active suppliers under GSTR-2B. Above that threshold, the bucket 1 at-risk queue requires daily refresh rather than a monthly pull, the IMS action log needs continuous reconciliation rather than a fifteenth-of-the-month sweep, and the Rule 37A September 30 clawback queue for the previous FY becomes a separate weekly discipline that the analyst cannot hold alongside the current-month match.
At that scale, moving the at-risk ITC queue and the IMS action reconciliation onto continuously refreshed detection — where Terra Insight’s GST reconciliation software treats the five-bucket classification and the November 30 escalation ladder as first-class outputs — is what keeps the finance team’s monthly close inside a twenty-day cadence rather than a twenty-eight-day scramble. Below that scale, the Excel workbook is the right tool and the discipline of running the five buckets by hand is what builds the reconciler’s judgement for when scale demands the shift.
Go deeper
- Section 16(4) ITC time bar — the full treatment of the November 30 permanent-loss deadline
- Invoice Management System reconciliation — the technical treatment of the IMS workflow
- GSTR-2B versus purchase register reconciliation — the pillar-level treatment
- Rule 37 and Rule 37A ITC reversal on supplier default
- Blocked ITC under Section 17(5)
- Three-way ITC reconciliation in Excel — the workbook walkthrough
- Three-way ITC workbook — free download
- GST reconciliation software for India
Frequently Asked Questions
The gap in my GSTR-2B is bigger than what I can chase manually — where do I start?
Start with the highest-severity bucket, not the biggest bucket. The permanent-loss risk is bucket 1 — suppliers who have not filed GSTR-1 for invoices dated in an old financial year, running against the November 30 following-year deadline under Section 16(4). Extract that at-risk queue first, sort by invoice date ascending, and chase every March, February, January invoice from the previous FY before touching the current-month gap. The current-month gap is a working-capital timing issue; the old-FY at-risk queue is a permanent-loss risk. The two need different owners, different tempo, and different escalation ladders — a controller review on the at-risk queue every fifteen days, and an analyst-owned running match on the current-month gap.
The purchase register shows an invoice that GSTR-2B does not. Is it always the supplier’s fault?
Roughly four times out of five, yes — the supplier has either not filed GSTR-1 for the period, filed on a delayed IFF cycle under QRMP, or reported the invoice against the wrong GSTIN. Roughly one time out of five it is a book-side problem — the invoice was booked with the wrong GSTIN, the wrong invoice number that the supplier corrected on GSTR-1, or the wrong invoice date that pushed it into a different month on the supplier’s return. The Excel three-way workbook triangulates all three sources; the book-side one-in-five is what a raw supplier chase misses if the reconciler treats every gap as an external fault.
Some of my gap turns out to be blocked ITC under Section 17(5). Do I remove it from the purchase register?
No — leave the invoice in the purchase register with a blocked-ITC tag so the AP ledger reconciles to invoice count and value against the vendor statement, but exclude it from the eligible ITC subtotal that feeds the GSTR-2B match. GSTR-2B does not distinguish blocked from eligible inbound invoices — it lists every invoice with the recipient GSTIN — so the exclusion has to happen on the book side. The gap between the purchase register total and the eligible-ITC subtotal, tagged and reconciled against Section 17(5) categories, is a classification exercise rather than a chase. Getting this classification right is what stops a wrongly claimed blocked-ITC credit from surfacing as a Section 74 demand three years later with interest and penalty.
How long can an invoice sit in the at-risk queue before it stops being recoverable?
For an invoice dated in FY 2025-26 (April 2025 to March 2026), the deadline is 30 November 2026. For an invoice dated in FY 2026-27, the deadline is 30 November 2027. The Section 16(4) clock is not a rolling window — it is a hard cliff. An invoice that first appears in a GSTR-2B pulled on 15 December 2026 for an FY 2025-26 invoice date is unclaimable in the current cycle and unclaimable retrospectively. The Tier 3 controller review should reverse-calculate the escalation date from November 30 — a March 2026 invoice sitting in the at-risk queue in September 2026 has under 90 days to a permanent write-off, and the supplier chase needs a written escalation to the vendor’s Head of Finance rather than a routine analyst reminder.
When does the manual matching against Excel stop being sustainable?
The threshold most Indian mid-market finance teams hit is roughly 200 active suppliers under GSTR-2B. Below that count, the monthly three-way match in the Excel workbook fits inside the Days 11 to 15 window of a normal monthly close and one analyst can hold it. Above 200 suppliers — or above the point where the Rule 37A September 30 clawback queue for the previous FY becomes a separate weekly discipline in its own right — the reconciliation stops being a Days 11 to 15 activity and becomes a continuous exception queue. That is the tipping point where a system that treats the at-risk ITC queue as a first-class continuously-refreshed output, rather than a spreadsheet the analyst refreshes on demand, becomes economically defensible. Before that threshold, the Excel workbook is the right tool.
Content authored by practitioners with experience at Amazon India, Intuit QuickBooks, and the Tata Group. Meet the team →
- ▸ Section 16(4), Central Goods and Services Tax Act 2017 — A registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after the thirtieth day of November following the end of the financial year to which such invoice or debit note pertains, or furnishing of the relevant annual return, whichever is earlier. This is the permanent-loss deadline behind the bucket 1 escalation — where a March invoice sits in the at-risk queue because the supplier has not filed GSTR-1, the clock runs to the following November 30, and after that date the ITC is written off with no recovery route inside the regime.
- ▸ Rule 36(4), Central Goods and Services Tax Rules 2017 — Input tax credit availed by a registered person in respect of invoices or debit notes the details of which have not been furnished by the suppliers under Section 37 shall not exceed the amount of input tax credit available in respect of invoices or debit notes the details of which have been furnished by the suppliers under Section 37 in FORM GSTR-1 or IFF. The purchase register figure is not the claimable figure — the GSTR-2B figure is the hard ceiling. Every rupee in the gap between the two is either recoverable in a later month or lost by the November 30 deadline.
- ▸ Rule 37 and Rule 37A, Central Goods and Services Tax Rules 2017 — Rule 37 requires reversal of input tax credit where the recipient has failed to pay the supplier the amount of the invoice, along with the tax payable thereon, within a period of one hundred and eighty days from the date of issue of the invoice. Rule 37A requires reversal by the recipient where the supplier has not furnished the return in FORM GSTR-3B for the tax period by the thirtieth day of September following the end of the financial year in which the input tax credit was availed. Both reversals must reflect as a downward adjustment against the GSTR-3B Table 4(B) reversal column, and reclaim is available only once the underlying default is cured.
- ▸ Section 17(5), Central Goods and Services Tax Act 2017 — Notwithstanding anything contained in sub-section (1) of Section 16 and sub-section (1) of Section 18, input tax credit shall not be available in respect of the following, namely — motor vehicles for transportation of persons having approved seating capacity of not more than thirteen persons except when used for further supply, transportation of passengers, or driving instruction; food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery except where an inward supply is used for making an outward taxable supply of the same category; membership of a club, health and fitness centre; goods or services or both used for personal consumption; and goods lost, stolen, destroyed, written off, or disposed of by way of gift or free samples. The purchase register may capture the vendor invoice; the GSTR-2B correctly excludes the credit — the gap is not a defect but a compliance boundary that the reconciliation must classify rather than chase.
- ▸ IMS advisory (October 2024), GST Network — The Invoice Management System went live on 1 October 2024. Every inbound invoice appearing on the recipient's IMS dashboard must be actioned as Accept, Reject, or Pending before the fourteenth of the following month when GSTR-2B is generated. No action defaults to Accept, which locks the invoice into the GSTR-2B; a Reject action removes the invoice from the current-month GSTR-2B; a Pending action defers the invoice to a subsequent GSTR-2B. The bucket 3 walkthrough — a Pending action taken mid-cycle by a colleague who did not update the reconciliation working paper — is the single most common source of an unexplained same-day-to-same-day gap between the purchase register and the freshly pulled GSTR-2B.
- ▸ QRMP Scheme under Rule 61A, Central Goods and Services Tax Rules 2017 — A registered person whose aggregate turnover in the preceding financial year is up to five crore rupees may opt to furnish the statement of outward supplies quarterly, with an optional Invoice Furnishing Facility for the first two months of the quarter to upload invoices for the recipient's ITC benefit. A supplier under QRMP who does not use IFF for the first two months will have invoices flow to the recipient's GSTR-2B only when the quarterly GSTR-1 is filed by the thirteenth of the month following the quarter. This is the bucket 2 explanation — the invoice is not missing, it is on the supplier's next-quarter GSTR-1 and it will appear in the third-month GSTR-2B when the quarterly filing lands.