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What Is GST Reconciliation?
GST reconciliation involves comparing the GST recorded on taxable sales and the GST paid on eligible purchases (including input tax credits) with the accounting records, then matching both to the filed or prepared GST return.
In practice, it is like following GST at three stages: in your books, when calculating your GST return, and when reporting to the CRA. Comparing these records helps you identify and address differences between amounts recorded in your books and then reported on the return.
The purpose of the GST reconciliation is to identify and explain the differences rather than adjusting the balance to match the return. Before making corrections, differences should be referred to supporting records, such as invoices, receipts, accounting entries, adjustments, or payment records.
Which documents and reports do you need?
As you start the reconciliation process, you should gather all the accounting records and supporting documents for a reporting period that includes:
- GST/HST return
- General ledger and GST/HST control accounts
- Sales invoices and sales reports
- Purchase invoices and receipts
- ITC supporting documents
- GST/HST payment or refund records
- Journal entries and adjustments
- Previous reconciliation workpapers
These records will help you compare all the GST/HST amounts in your accounting records. They will also help you investigate differences before making adjustments.
Step-by-step GST Reconciliation Process
Step 1: Review GST/HST Collected
Start with the GST/HST collected account in the accounting system. Check the balance against sales invoices and sales and taxable transactions for the reporting period.
Review that the appropriate tax rate and tax code were used. If the business spans provinces, note that GST/HST rates may vary by province.
A mismatch between sales and the GST/HST return is possible due to a tax code error.
Step 2: Review GST/HST Paid and ITCs
Review any GST/HST paid or payable on business purchases and expenses for the reporting period.
For ITCs that are included in the reconciliation, ensure that the business has supporting documents and that the purchase relates to activities where an ITC can be claimed. Supporting records may include receipts, contracts, or other business records, depending on the transaction.
Don’t assume that every GST/HST amount on an expense is automatically eligible for ITCs. Before entering the purchase price in the return, review the nature of the purchase and the supporting documentation and any relevant GST/HST rules.
Step 3: Compare GST Accounts With the GST/HST Return
Verify that the GST/HST collected and the ITCs in the accounting records match the amounts shown on the GST/HST return.
This is where you can see that the books show one amount, but the return is based on a different amount.
Step 4: Identify Differences
Common differences include:
- Wrong GST/HST tax codes
- Missing purchase invoices
- Duplicate transactions
- Transactions recorded in the wrong reporting period
- GST/HST posted to the wrong account
- ITCs included without sufficient supporting documentation
Step 5: Correct and Document the Difference
Identify the cause of the discrepancy before adjusting the records.
The goal is not just to balance the accounts. The adjustment must be backed up by the transaction, invoice, accounting entry, or the return to GST/HST.
GST Reconciliation Example for a Canadian Business
State the example’s assumptions directly. Actual GST/HST treatment will be based on the nature of the transactions, the reporting period, and the circumstances of the business.
Suppose that a Canadian GST/HST registrant is reconciling one reporting period. The example assumes that the GST/HST amounts reported as ITCs have been considered and reviewed for eligibility and supporting documentation.
Calculate the Current-Period Return Position
| GST/HST Item | Amount |
| GST/HST collected on | $12,000 |
| Eligible ITCs for the given period | $4,000 |
| Basic Net GST/HST position | $8,000 |
Using these numbers, the return calculation for the current period gives a net return of $8,000.
Reconcile the GST/HST Control Account.
Now compare the return calculation with the GST/HST control account in the general ledger.
| Reconciliation Items | Amounts |
| Opening GST/HST control account balance | $1,000 |
| Add: Current-period net GST/HST | $8,000 |
| Less: Payment relating to the previous period | ($1,000) |
| Expected closing balance before current-period adjustments | $8,000 |
| Less: Supported correction identified during reconciliation | ($500) |
| Reconciled closing balance | $7,500 |
During the review, the business identified a $500 transaction that was recorded in the accounts but not included in the return for the reporting period. The business reviewed the transaction and supporting documentation to determine the reason for the differences and corrections.
The return calculation and ledger reconciliation differ and follow different steps. The return calculation reflects the GST/HST position for the reporting period. At the same time, the ledger reconciliation explains the opening balance, current-period activity, any adjustment positions, and payments and/or refunds that result in the closing GST/HST balance.
Avoid posting an unsupported adjustment just to get the ledger to agree with the return. Review, analyze, and document the reason for the difference.
Common GST/HST Differences and How to Investigate Them
If your GST/HST records don’t match your accounting records, you should investigate the transactions before making any adjustment.
| Difference | Possible Cause | Records to Check | Required Action |
| Duplicate GST/HST amount | If an invoice, bill, or transaction was entered twice | General ledger, sales or purchase invoices, transaction reports | Check the duplicate records, confirm which entry is right, and then correct the accounting records. |
| Missing invoice or receipt | A transaction recorded without the supporting document or any invoice omitted from the accounting records | Purchase invoices, receipts, supplier statements, and accounts payable records | To keep or locate the supporting document and check whether the accounting and GST/HST treatment needs correction |
| Incorrect GST/HST tax code | Any type of zero-rated or any kind of exempt transaction recorded in the wrong accounting treatment | Invoice, transaction details, tax code report, and applicable GST/HST guidance | You should correct the accounting treatment and also correct the accounting entry. |
| Timing difference | A transaction recorded in one period but later included in different GST/HST periods. | Transaction dates, invoices, general ledger, and GST/HST return workpapers | You should check both the accounting period and the applicable GST/HST reporting treatment. |
| Incorrectly posted payment or refund | A CRA payment or refund that is posted to the wrong account or the wrong period | Bank statement, CRA account information, payment confirmation, and GST/HST control account | For this issue, you trace your payment or refund and make corrections in accounting classifications. |
| Unsupported or unclear ITC | If eligibility or documentation of an ITC is unclear in your accounting record | Invoice, receipt, contract, supplier information, and ITC workpapers | First verify the supporting document and applicable ITC requirements. |
| Unexplained ledger difference | Any type of return or adjustment not recorded in the general ledger | Filed return, reconciliation workpapers, journal entries, and GST/HST control accounts | Check the difference; you can also take professional assistance if you are unable to find appropriate treatment. |
Don’t make an unsupported journal entry for the sake of balancing the accounts just because there is a difference in the underlying records. When making a change to the return or ledger, think about getting professional GST/HST or accounting advice.
Need Help Resolving GST/HST Differences?
Discuss your GST/HST records and reconciliation requirements with Aone Outsourcing Canada. We support Canadian businesses and CPA firms with accurate reconciliation and exception review.
How Often Should You Perform GST Reconciliation?
GST reconciliation should be done regularly, not just when the GST/HST filing deadline is approaching. The appropriate frequency depends on…
- Transaction volume
- GST/HST reporting frequency
- The number of GST/HST accounts you have.
- Business complexity
- The number of people managing your bookkeeping.
- Quality of accounting records
For businesses with large numbers of transactions or that must file a GST/HST return often, reconciling more regularly may help catch errors before you file the return.
Checklist before Filing and after Payment
When preparing a GST/HST return, before filing:
Quick Reconciliation Checklist
Use this checklist to review your GST/HST records before finalizing the reconciliation.
After Filing/Payment:
After Filing & Payment
Complete these final checks after submitting the GST/HST return and making or receiving the payment.
When to Seek Professional Reconciliation Support
Professional assistance may be needed when:
- GST/HST accounts regularly fail to balance.
- Books are several months behind.
- Transaction volume surges.
- Verifying ITCs is not straightforward.
- Several individuals are responsible for bookkeeping.
- Returns include unexplained differences in GST/HST.
- Year-end GST/HST reconciliation is time-consuming.
A bookkeeping or reconciliation team can review accounting files, trace GST/HST differences to underlying transactions, organize supporting documentation, and identify items that may need review by a Canadian tax professional.
Keep Your GST/HST Records Accurate & Reconciled
Aone Outsourcing Canada provides GST/HST reconciliation support for Canadian businesses and CPA firms, including account reconciliation, discrepancy investigation, ITC review, supporting documentation, and reporting support.
Wrapping Up
GST reconciliation helps Canadian businesses confirm that their accounting records, GST/HST return, and supporting paperwork align. Frequent reconciliation helps catch tax-code issues, missing invoices, unsupported ITCs, duplicate entries, and timing differences before they become bigger problems.
If your business has complex transactions or frequently deals with GST/HST discrepancies, reconciling GST/HST as part of your regular bookkeeping services may make GST/HST reporting more accurate and manageable.
Frequently Asked Questions
Q1: What Is the Difference Between GST Reconciliation and Bank Reconciliation?
Bank reconciliation compares transactions in your books with transactions on your bank statement to identify any discrepancies in your cash balance. GST/HST reconciliation compares the GST/HST amounts in your accounting system with supporting documents, applicable ITCs, adjustments, and reported GST/HST return amounts.
Q2: How Do You Reconcile GST/HST in Canada?
Review sales and purchases for the reporting period for GST/HST recorded. Review supporting documentation for ITCs, reconcile GST/HST control accounts to the amounts reported on the GST/HST return, and investigate any discrepancies before making corrections.
Q3: Why Doesn’t My GST/HST Return Match My Accounting Records?
Common causes include incorrect tax codes, missing invoices, transactions reported in the wrong periods, and manual adjustments or ITCs reported on the return but not properly recorded in the books.
Q4: What documents do you need to reconcile GST in Canada?
Typical supporting records include sales invoices, purchase invoices, receipts, accounting records, GST/HST returns, and documents supporting ITC claims.
Q5: Can a Bookkeeper Help Fix GST Reconciliation Differences?
Yes. A bookkeeper can review transactions to find differences, review tax codes and supporting documents, correct accounting entries, and help ensure GST/HST accounts align with the tax return.
Q6: What should I do if I find an error after filing my GST/HST return?
If you find an error while filing your GST/HST return, review the error and your accounting records first. If any corrections are needed, then follow the CRA’s process to change the filed return. Keep the documents that support your corrections.
