1. RELEVANT PROVISIONS
The objective of the GST audit can be ascertained from the definition of Audit given in Section 2(13) of Central Goods and Services Tax Act, 2017 (CGST Act). The said definition reads as follows:
“audit means the examination of records, returns and other documents maintained or furnished by the registered person under this Act or the rules made thereunder or under any other law for the time being in force to verify the correctness of turnover declared, taxes paid, refund claimed and input tax credit availed, and to assess his compliance with the provisions of this Act or the rules made thereunder.”
Two important provision which are relevant in this context are Section 35(5) and Section 44(2) of CGST Act read with rule 80(3) of CGST Rules.
In terms of section 35(5) “every registered person whose turnover during a financial year exceeds the prescribed limit shall get his accounts audited by a chartered accountant or a cost accountant and shall submit a copy of the audited annual accounts, the reconciliation statement under sub-section (2) of section 44 and such other documents in such form and manner as may be prescribed”.
In terms of section 44(2) “every registered person who is required to get his accounts audited in accordance with the provisions of sub-section (5) of section 35 shall furnish, electronically, the annual return under sub-section (1) along with a copy of the audited annual accounts and a reconciliation statement, reconciling the value of supplies declared in the return furnished for the financial year with the audited annual financial statement, and such other particulars as may be prescribed”.
In terms of Rule 80(3) of the CGST Rules “every registered person whose aggregate turnover during a financial year exceeds two crore rupees shall get his accounts audited as specified under sub-section (5) of section 35 and he shall furnish a copy of the audited annual accounts and a reconciliation statement, duly certified, in GSTR-9C, electronically through the commonportal either directly or through a Facilitation Centre notified by the Commissioner.
The council has recently notified GSTR-9 format on 4 September, 2018 via Notification no. 39/2018 central Tax and Audit reconciliation format on 13 September 2018 via Notification No. 49/2018-central tax.
2. PERSONS WHO ARE REQUIRED TO FILE ANNUAL RETURN AND COMPLY WITH THE AUDIT PROVISIONS –
As per Sec. 35(5) read with Rule 80(3), every registered person whose aggregate turnover during a financial year exceeds two crore rupees is liable to GST Audit. It must be noted that the term aggregate turnover has been defined in CGST Act, as
“aggregate turnover” means the aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable by a person on reverse charge basis), exempt supplies, exports of goods or services or both and inter-State supplies of persons having the same Permanent Account Number, to be computed on all India basis but excludes central tax, State tax, Union territory tax, integrated tax and cess.
Aggregate turnover is PAN based while turnover in a State/UT is similarly worded except to the extent that turnover in a State/UT is limited to a State. For the financial year 2017-18, the GST period comprises 9 months whereas the relevant section 35(5) uses the expression financial year. Therefore, in the absence of clarification from government, also to avoid any cases of default, it is reasonable to understand that to reckon the turnover limits prescribed for audit i.e., ₹ 2 crore one has to reckon the turnover for the whole of the financial year which would also include the first quarter of the financial year 2017-18.
3. DUE DATE FOR FILLING ANNUAL RETURN AND AUDIT REPORT
As per Section 44(1), the due date to file annual return is on or before the thirty-first day of December following the end of such financial year for which annual return is being prepared. Section 44(2) of the CGST/ SGST Act 2017 provides a Registered Person has to file an Annual Return in FORM GSTR-9 along with copy of reconciliation statement in FORM GSTR-9C. Thus, FORM GSTR-9C has to be filed along with FORM GSTR-9 in case where aggregate turnover exceeds ₹ 2 crores. Thus it can be interpreted that due date for filing reconciliation statement in FORM GSTR-9C is also on or before the thirty-first day of December following the end of such financial year for which reconciliation statement is being prepared.
4. ANNUAL RETURN
The Government has notified GSTR-9 format on 4 September, 2018 via Notification no. 39 Central Tax. This GSTR 9 has two parts to it i.e. PART-l of the format contains basic-points.
|3A||Trade Name (If any)|
PART-II – It consist of the details of all outward supplies and advances received during the FY for which the annual return is filed. The details filled in Part II are a consolidation of all the supplies declared by the taxpayer in the returns filed during the FY.
TABLE-4 of GSTR-9 requires reporting of details related to outward supplies (except Sl. No. G which relates to inward supplies which attract GST under reverse charge) it includes
Supplies made to unregistered Persons (B2C)
Supplies made to Registered Persons (B2B)
Zero rated supply (Export) on payment of tax (except supplies to SEZs).
Sl. Nos. I to L describe Credit notes, Debit notes and supplies/tax amendments.
TABLE 5: Details of Outward Supplies on which Tax is not payable as declared in returns filed during the financial Year.
Table 5 has been divided under various segments from Rows 5A to 5N and the Government intends to capture the details of all those outward supplies on which tax is not payable by the taxpayer on fulfilment of essential conditions of the law.
The supplies which are to be covered under this Table may be exports, supplies to SEZ, outward supplies on which the recipient is liable to pay tax i.e., which are subject to RCM, exempted supplies, nil rated supplies, non-GST supply including no supply to be reported in Rows 5A to 5F.
As far as credit and debit notes issued pertaining to such outward supplies and further amendments made in such outward supplies through Amendment Table-9 of GSTR 1, during the financial year covered as above are to be reported separately Sl.No. 5H to 5K.
Table 6: Details of ITC availed as declared in returns filed during the financial year.
Table 6A of GSTR-9 contains the details of ITC availed in GSTR-3B during the financial year. The purpose of this clause is to aggregate the quantum of Input Tax Credit availed by the Registered Person on import of goods, import of services, Inward Supplies liable to reverse charge, tax credit received from the Input service distributors and any other ITC availed on regular inward supplies. Table 6A will be auto-populated from the system only.
Table 7: Details of ITC Reversed and Ineligible ITC as declared in returns filed during the financial year.
Details of input tax credit reversed due to ineligibility or reversals required under rule 37, 39, 42 and 43 of the CGST Rules, 2017 shall be declared here. This column should also contain details of any input tax credit reversed under section 17(5) of the CGST Act, 2017 and details of ineligible transition credit claimed under FORM GST TRAN-I or FORM GST TRAN-II and then subsequently reversed. Table 4(B) of FORM GSTR-3B may be used for filling up these details. Any ITC reversed through FORM ITC -03 shall be declared in 7H.
Table 8: Table 8 of GSTR-9 contains two sections. The first section relates to comparison of credit availed on forward charge by the tax payer with the credit available as per inward supply uploaded by the suppliers in GSTR-1, duly reflected in GSTR-2A (Clause A to F of Sl. No. 8). The second section relates to comparison of IGST paid on import of goods with IGST availed on import of goods (Clause G to J of Sl. No. 8). The differences in both the cases (Clause K of Sl. No. 8) is sought ‘to be lapsed’. Table 8 primarily seeks to determine:
(a) ITC availed on forward charge which has lapsed
(b) ITC availed on forward charge which is not eligible
(c) ITC not eligible on import of goods
(d) Total ITC which has lapsed : Aggregate of 8E + 8F + 8J
Table 9: Details of tax paid as declared in the returns filed during the Financial Year.
It requires the person filing an Annual Return to report the details of tax, interest, late fee, penalty and other amounts payable and paid thereon on cumulative basis for the financial year (in case of Financial Year 2017-18 it should be considered and read for the period of July 2017 to March 2018 only).
Part-V: It contains Particulars of the transactions for the previous FY declared in returns of April to September of current FY.
Table 10: to Table 13 contains details of additional invoices related to 2017-18 or Debit notes or Credit notes dated before March 31, 2018 but omitted to be reported in 2017-18 and reported in the returns for the months of April 2018 to September 2018.
Table 14: Consist details of any Differential Tax Paid on account of Declaration in Table 10 &11.
Part-VI – It contains Table 15 to Table 19. In Table 15 assesse needs to disclose particulars of Total Refund claimed, Refund sanctioned, refund rejected and refund pending. It also includes details regarding total demand of taxes and Demand outstanding.
Table 16- contains Information on supplies received from composition taxpayers, deemed supply under section 143 and goods sent on-approval basis.
Table 17- HSN wise summary of outward supplies
Table-18 HSN wise summary of inward supplies
Table-19 Late Fees payable and paid.
5. FORM-GSTR-9C RECONCILIATION STATEMENT
Form GSTR-9C is the relevant form prescribed in terms of Rule 80(3) of the CGST Rules. It is for reconciling the value of supplies declared in annual return with the audited annual financial statement. This Form GSTR-9C has two parts to it i.e.:
(i) Part A titled the “Reconciliation Statement” and
(ii) Part B which is the Certification portion. Part I seeks to capture the basic details of the Registered Person under Part A (Reconciliation Statement) which has 4 Sl. Nos. Each of the Sl. Nos in Part I is significant in terms of the disclosure requirement.
Like GSTR-9, PART-l of the format contains basic-points like FINANCIAL YEAR, GSTIN, LEGAL NAME, TRADE NAME.
Part II: Reconciliation of turnover declared in audited Annual Financial Statement with turnover declared in Annual Return (GSTR 9).
Table-5A – Auditor is intended to report the turnover as per the audited Annual Financial Statement for a GSTIN. There may be cases where multiple GSTINs (State-wise) registrations exist for the same PAN. This is common for persons/entities with presence over multiple States or in respect of multiple registration in a single State/UT. The Government vide it is instructions has indicated that such persons/entities will have to internally derive their GSTIN wise turnover and provide to the Auditor to verify and declare in this Sl. No.
Other points covered under this Table are-
|5B||Unbilled revenue at the beginning of Financial Year|
|5C||Unadjusted advances at the end of the Financial Year|
|5D||Deemed Supply under Schedule I|
|5E||Credit Notes issued after the end of the financial year but reflected in the annual return|
|5F||Trade Discounts accounted for in the audited Annual Financial Statement but are not permissible under GST|
|5G||Turnover from April 2017 to June 2017|
|5H||Unbilled revenue at the end of Financial Year|
|5I||Unadjusted Advances at the beginning of the Financial Year|
|5J||Credit notes accounted for in the audited Annual Financial Statement but are not permissible under GST|
|5K||Adjustments on account of supply of goods by SEZ units to DTA Units|
|5L||Turnover for the period under composition scheme|
|5M||Adjustments in turnover due to foreign exchange fluctuations|
|5N||Adjustments in turnover due to reasons not listed above|
|5O||Annual turnover after adjustments as above|
|5Q||Turnover as declared in Annual Return (GSTR9)|
|5R||Un-Reconciled turnover (Q – P)|
TABLE-6: Reasons for Un-Reconciled difference in Annual Gross turnover. This portion of GSTR-9C identifies the turnover differences to be placed on record for explaining the differences between the GST Returns and the Audited Financials. All the information filled up in the GST returns has to be flown from the Books of Accounts. However, the un-reconciled turnover on account of disclosure norms as per Accounting Standard issued by ICAI or other statutory provisions or practice adopted by the Registered Person on special approval basis, which are not reconciled at turnover level should be disclosed in this Sl.No.
TABLE-7: Reconciliation of Taxable Turnover.
TABLE-8: Reasons for non-reconciliation between adjusted annual taxable turnover as derived from Table 7 above and the taxable turnover declared.
TABLE -9: The table provides for reconciliation of tax paid as per reconciliation statement and amount of tax paid as declared in Annual Return (GSTR-9). Under the head labelled –RC ,supplies where tax was paid on reverse charge basis by the recipient (i.e. the person for whom reconciliation statement has been prepared) shall be declared.
TABLE-10: The given table mandates an Auditor to identify and disclose the reasons for un-reconciled payment of amount of tax, Interest, Penalty, Cess and Others. Reasons, amounts along with description of reason needs to be disclosed.
TABLE-11: Any amount which is payable due to reasons specified under Table 6, 8 and 10 above shall be declared here.
TABLE-12: It contains reconciliation of Net Input Tax Credit (ITC)
Clause 12A of GSTR-9C is the detail of ITC availed in audited financial statements. The row aims to collect information on the ITC availed in the books of accounts by the Registered Person. This shall be the total ITC including that availed in books of account on Inputs, Input Services and Capital Goods.
12B- Any ITC which was booked in the audited Annual Financial Statement of earlier financial year(s) but availed in the ITC ledger in the financial year for which the reconciliation statement is being filed for shall be declared here. Since this is the first year of GST, this column should ideally be zero. However, as per instruction to the form, transitional credit which was booked in earlier years but availed during Financial Year 2017-18.
Clause 12C of GSTR 9C is the Input tax Credit which is booked in the current financial year but claimed in the returns of GSTR-3B filed during FY 2018-19. This includes all credits which were for any reason (inadvertent or conditions not being fulfilled) were not taken in returns as filed from July 2017- March 2018.
12E. ITC claimed in Annual Return (GSTR 9).
12F Un-reconciled ITC
TABLE-14: Reconciliation of ITC declared in Annual Return (GSTR 9) with ITC availed on expenses as per audited Annual Financial Statement or books of account.
This table is for reconciliation of ITC declared in the Annual Return (GSTR-9) against the expenses booked in the audited Annual Financial Statement or books of account. This point calls for examination of ITC in detailed by Auditor to determine the available ITC as booked in ledgers of various expenses as booked in the books of accounts viz a viz the ITC availed by the Registered Person. In case the Auditor finds that any ineligible or unavailable ITC as per the books of accounts, suitable disclosures are to be made
TABLE-16 Any amount which is payable due to reasons specified in Table 13 and 15 above shall be declared here
Part V to GSTR 9C- Auditor’s recommendation on additional liability due to non-reconciliation
6. PART-B OF GSTR-9C- CERTIFICATION
In this part Auditor has to do certification on the basis of reconciliation and audited financial books of the assessee. It can be done in two ways-
Certification in cases where the reconciliation statement (FORM GSTR 9C) is drawn up by the person who had conducted the audit and GST audit certification.
Certification in cases where the reconciliation statement in (GSTR 9C) is drawn up by a person other than the person who had conducted the audit of the accounts.
There can be many instances when differences in Annual Return as compared with Monthly/Quarterly Returns may arise as one is not allowed to revise GSTR-1 or GSTR-3B and, adjustments if any, are made in the subsequent months’ Return. It must also be noted that each and every detail that requires rectification must be originally rectified in GSTR-1 or GSTR-3B, then only the details shall be furnished in GSTR-9. In simple words, it is not possible to correct or rectify any details relating to GSTR-3B or GSTR-1 in GSTR-9 Annual Return as was done earlier under the VAT regime.
The subject matter is very vast and we have just touched upon some important points relating to GST, Annual Return and GST Audit. Let us hope some more clarifications and guidelines are issued by the Government.
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