GST Year-End Compliance Checklist FY 2025-26

As the financial year 2025-26 draws to a close, businesses registered under the Goods and Services Tax (GST) regime must undertake a comprehensive review of their compliance records. The year-end is an important period for businesses to reconcile accounts, verify tax positions, and ensure that GST returns accurately reflect their financial transactions.

Increased usage of data analytics and automated matching by tax authorities means that discrepancies between the GST and financial reports will trigger likely invitations for review or audit by the tax authorities. Accordingly, businesses should execute structured new year-end GST compliance reviews in order to verify accuracy, transparency, and compliance with the law.

The following checklist highlights the key GST compliance areas that businesses should review before the close of FY 2025-26.

1. Input Tax Credit (ITC) Reconciliation

Input Tax Credit is one of the most critical areas under GST compliance. Businesses must ensure that ITC claimed in returns is supported by valid tax invoices and reflected in GSTR-2B

A reconciliation should be performed between

ITC claimed in GSTR-3B

ITC as per Books of Accounts

ITC reflected in GSTR-2B

Any excess credit claimed should be reversed in the March 2026 return, along with applicable interest if required.

Practical Example:-

A company has posted ITC (₹ 5,00,000) in the purchase register, while the GSTR-2B has an ITC amount of ₹ 4,60,000. This difference is due to the fact that one of the suppliers has not filed his GSTR-1. If this happens, the business should either contact the supplier or wait until an ITC is posted in the GSTR-2B before claiming that amount. All businesses must also review the blocked credits in Section 17(5), which include items such as motor vehicles, personal items of the business owner, food and drinks, and memberships to clubs.

2. Review of ITC on Unpaid Vendor Invoices (180-Day Rule)

GST provisions require reversal of ITC if payment to a supplier is not made within 180 days from the date of invoice.

Businesses should review vendor outstanding balances and identify invoices exceeding this timeline.

Practical Example:- When a business is issued an invoice dated 1 August 2025 for which it claims an ITC amount ₹18,000, and there is no payment within 180 days from the date of the invoice/date of receipt (as evidenced by receipt of payment) the credit must be reversed in the GST return. The credit can be re-claimed when payments have been made to the supplier.

3. Reconciliation of Outward Supplies

Businesses must ensure that sales data reported in GST returns matches their accounting records. The following reconciliations should be performed:
1) Sales Register vs GSTR-1
2) GSTR-1 vs GSTR-3B
3) E-invoice records vs accounting data
4) E-way bill data vs dispatch records

Practical Example :- A business records ₹50 lakh in sales in its accounting software but only ₹47 lakh is reported in GSTR-1. The missing invoices must be identified and corrected to avoid discrepancies during departmental scrutiny.

4. Reverse Charge Mechanism (RCM) Review

Businesses must verify whether all transactions liable under the Reverse Charge Mechanism (RCM) have been correctly identified and reported. Common RCM transactions include: 1) Legal services received from advocates 2) Goods Transport Agency (GTA) services 3) Director sitting fees 4) Security services 5) Import of services GST liability on such transactions must be paid in cash through GSTR-3B, and eligible ITC may be claimed thereafter.

Practical Example:- If a company pays ₹1,00,000 as legal consultation fees, GST must be paid under reverse charge. After paying the tax, the company can claim the same amount as ITC if eligible.

5. Vendor Compliance Monitoring

Input Tax Credit availability is closely linked to supplier compliance. Businesses should periodically verify whether vendors have filed:

GSTR-1 GSTR-3BIf suppliers fail to file returns, the ITC may not appear in GSTR-2B, which may impact the recipient’s ability to claim credit.

Practical Example:- A supplier issues an invoice with ₹18,000 GST, but fails to file GSTR-1. As a result, the invoice does not appear in GSTR-2B and the recipient may face difficulty claiming the credit.

6. Physical Stock Verification

Year-end stock verification helps ensure accurate financial reporting and GST compliance. Businesses should identify:
1) Damaged goods
2) Lost or stolen inventory
3) Expired or obsolete stock Under GST provisions, ITC must be reversed on goods that are lost, destroyed, or written off.

Practical Example:-If goods worth ₹2,00,000 are damaged during storage and ITC was previously claimed, the corresponding credit must be reversed as per GST rules.

7. Job Work Compliance

Businesses sending goods for job work must ensure that statutory timelines are followed.Under GST law:1) Inputs must be returned within 1 year2) Capital goods must be returned within 3 yearsIf goods are not returned within these timelines, the transaction may be treated as a deemed supply, resulting in GST liability.

Practical Example:-A manufacturer sends raw materials worth ₹10 lakh to a job worker. If the goods are not returned within one year, GST authorities may treat it as a supply and tax may become payable.

8. Filing of Letter of Undertaking (LUT) for Exporters

A supplier of products/services is responsible to file an LUT to avoid paying IGST in regards to goods or services supplied throughout the upcoming financial period (2026 - 2027). When exporting products/services overseas, if you have submitted a LUT before the end of each financial year may avoid an IGST payment on these export transactions.

Practical Example:-An exporter planning shipments in April 2026 should file LUT for FY 2026-27 before the financial year begins to avoid paying IGST on export invoices.

9. Composition Scheme Evaluation

Businesses that will apply the Composition Scheme for the financial year starting on 1 April 2023 and ending on 31 March 2024 need to submit Form CMP-02 before 31 March 2026. Taxpayers who select the Composition Scheme must reverse their input tax credit pertaining to their closing stock and capital goods, by filing a form called 'ITC-03.' When considering whether to adopt the Composition scheme, businesses should assess their level of expected turnover, anticipated tax liability and compliance requirements for using this scheme.

10. QRMP Scheme Assessment

Taxpayers with aggregate turnover up to ₹5 crore may opt for the Quarterly Return Monthly Payment (QRMP) scheme. Businesses should evaluate whether the scheme aligns with their compliance requirements and cash flow management before the start of the next financial year.

Conclusion

A methodical and proactive strategy is essential for year-end GST compliance. Companies must verify that their accounting records, GST submissions, and statutory documentation are all appropriately reconciled prior to the conclusion of the fiscal year. If you take a detailed look at the Input Taxes you are entitled to claim, the outgoing supplies you have made, the documents that you have received/issued under reverse charge, the level of compliance with the documentary requirements from your suppliers, your records of stock, you can dramatically reduce the likelihood of a future GST notice or penalty. As the complexity of GST compliance increases and the scrutiny of tax authorities becomes more technology-driven, more businesses are using formal compliance procedures and digital solutions to help them meet their compliance obligations. For example, Indiafilings provides businesses with information and advice to help them manage GST registrations, lodge returns, reconcile and review compliance efficiently and effectively, and provide assurance to the business that they are in compliance with regulatory requirements while continuing to conduct their core business activities.