First time in the history of the ITAT, a full court welcome reference of Honourable Justice Mr. P. P. Bhatt, taking over as President, ITAT, on 24th October, 2018, at 10:30 AM, was held in Court Room No. 1 in the presence of the members of the profession and the Department Representatives:

Honourable Vice-president Mr. G. S. Pannu welcomed the Honourable Mr. Justice P. P. Bhatt and the Vice-Presidents and Members of the ITAT and their family members, the members of the Bar and other professionals.

Hon’ble Mr. G. D. Agarwal, Vice-president, introduced Honourable Mr. Justice P. P. Bhatt. While doing so, honourable Vice-president mentioned that the honourable Justice Mr. P. P. Bhatt was born on 6th September, 1956. He had primary education in different districts of Gujarat. Graduated in Arts faculty with Political Science from H. K. Arts College, Ahmedabad and obtained degree of Law from Sir L.A. Shah Law College, Ahmedabad affiliated to Gujarat University. Enrolled as an Advocate with the Bar Council of Gujarat and started practice in the High Court of Gujarat in 1984.

Honourable Vice-president Shri G. D. Agarwal also mentioned about the display of strenuous efforts by the Honourable justice in extending the working hours till 10 in the night for 10 to 12 consecutive days, in the process of protecting and upholding social justice.

After the introduction of Honourable Mr. Justice P. P. Bhatt, honourable Shri G. D. Agarwal handed over the charge where a formal ceremony of the oath taking process was conducted where the Honourable Justice signed on the papers signifying the taking of oath.

Thereafter Shri A. A. Shankar, Principle Chief Commissioner of Income-tax, Mumbai, spoke a few words where he extended a warm welcome to the President, Members and the professionals.

Shri Sushil Kumar Poddar, Commissioner – DR, promised that the department would extend their complete and immense help in reduction of litigation and disposal of pending appeals.

Ms. Arati Vissanji, President of Tax Bar Association, Mumbai, on the occasion of Oath Taking Ceremony, expressed her pleasure in regards to the appointment of Honourable Mr. Justice P. P. Bhatt as the President of the ITAT.

CA. Dinal Shah, Member of Central Counsel of ICAI, welcomed the President and assured that the Institute of Chartered Accountants would give absolute support and help the Honourable President in any manner required.

The Honourable Mr. Justice P. P. Bhatt addressed the gathering where he appealed to all to extend co-operation in disposal of cases, including old cases which are pending since more than five years. The honourable Justice Mr. P. P. Bhatt further mentioned that necessary steps for filling-up vacancies, if any, in ITAT at various levels will be undertaken.

Honourable Vice-president, Mr. R. S. Syal thanked everyone present for the warm welcome of the Honourable Mr. Justice P. P. Bhatt.

The meeting was followed by High Tea, which was hosted by the ITAT, wherein the Members of Bar and the departmental representatives also attended.

A felicitation dinner was arranged by the ITAT Bar Association of Mumbai, in honour of Honourable Mr. Justice P. P. Bhatt on being appointed as the President of the ITAT and also in honour of the newly appointed Vice-Presidents.

A large number of professional attended the function and the Honourable President and the Vice-presidents were felicitated by handing over the bouquet by the Lady-members of the Bar Association.

Shri Y. P. Trivedi, Senior Advocate and the Past-President of the Bar Association conducted the felicitation function.

On behalf of AIFTP, we wish the Honourable President and the honourable Vice-Presidents all the best in their endeavours.

Ganesh N. Purohit
National President

Prior to the enactment of the Maternity Benefit Act of 1961 there were in force several central & state Maternity Benefit Acts in the country. But there was no uniformity in their provisions. It was desirable to have uniform maternity benefit provisions for all women workers in the country. It is true that its object was achieved by the enactment of the Employees’ State Insurance Act of 1948, which superseded the provisions of several Maternity Benefit Acts. But the Employees’ State Insurance Act did not cover all women workers in the country. The Maternity Benefit Act of 1961 was therefore passed to provide uniform maternity benefit for women workers in certain industries not covered by the Employees’ State Insurance Act.

Object

1. To protect the dignity of motherhood and the dignity of a new persons birth by providing for the full and healthy maintenance of the woman and her child at this important time when she is not working.

2. To provide for maternity benefit to women workers in certain establishments.

3. To regulate the employment of women workers in such establishment for certain period before and after child birth.

Applicability

1. Every establishment being a factory, mine, plantation or circus.

2. Every shop or establishment in which 10 or more persons are employed

3. Any other establishment to which the Act is applied by the State Government under the Provision.

4. There is no wage limit and every female employee irrespective of wage limit is covered.

5. Every woman is entitled to maternity benefit whether she is directly employed or through agent.

Note:- The Act does not apply to any factory or other establishment to which the provisions of the ESI Act applies.

Restriction on Termination

When a women absents herself from work in accordance with the provisions of the Act, it shall be unlawful for her employer to discharge or dismiss her during or on account of such absence.

The employer cannot have settlement / agreement with a woman employee for restricting the benefits.

Exemptions

An establishment can seek exemption from the Act on the ground that the benefits granted by it are no less favourable than those under the Act and the appropriate Government can issue a notification granting such exemption.

Eligibility for benefits

Woman including temporary or unmarried is eligible for maternity benefit, when she is expecting a child and has worked for her employer for atleast 80 days in the 12 months immediately preceding the date of her expected delivery.

Nursing breaks till child is 15 months old

Insertion of new Sec. 11A (1) : Women employee should be permitted to visit the crèche 4 times during the day, which includes the regular rest interval until the child attains the age of fifteen months.

Leave for Miscarriage or medical termination of pregnancy

A woman shall, on production of such proof as be entitled to leave with wages at the rate of maternity benefit, for a period of six weeks immediately following the day of her miscarriage.

Medical Bonus

A woman eligible to maternity benefit under the Act shall also be entitled to receive from her employer a medical bonus of ₹ 3,500/- w.e.f. 1-3-2012, if no pre-natal confinement and postnatal care is provided for by the employer free of charge. The medical bonus shall be paid along with the second installment of the maternity benefit-

The Employees State Insurance Act covers only employees whose wage limit does not exceed ₹ 21,000/- p.m. and this does not insure an employee including a female employee whose wage exceeds ₹ 21,000/- p.m. while Maternity Benefit Act has not prescribed any wage limit and thus covers every female employee irrespective of wage limit working in an establishment to which the Maternity Benefit Act applies.

A women becomes eligible to Maternity benefit only when she has actually worked for 80 days in the preceding 12 months before the date of her expected delivery.

Female workers engaged on casual basis or on muster roll on daily wages are also entitled to benefit under the act. Since there is nothing in the act which confers the benefit only on regular woman employees

She has to give a notice in writing in Form 1 to the employer for payment of maternity benefit or any other amount which shall not be earlier than six weeks from the date of expected delivery. She has to nominate a person in Form 1 who can be paid the maternity benefit or such amount on her behalf.

Leave with wages for tubectomy operation

In case of tubectomy operation, a woman shall, on production of such proof as may be prescribed, be entitled to leave with wages at the rate of maternity benefit for a period of two weeks immediately following the day of her tubectomy operation].

Period of Maternity Benefit

It Shall be 26 weeks of which not more than 8 weeks shall precede the date of her expected delivery.

A woman suffering from illness arising out of pregnancy, delivery, premature birth of child [miscarriage, medical termination of pregnancy or tubectomy operation] shall, on production of such proof as may be prescribed, be entitled, in addition to the period of absence allowed to her under section 6, or, as the case may be, under section 9, to leave with wages at the rate of maternity benefit for a maximum period of one month.

No deduction of wages in certain cases

No deduction from the normal and usual daily wages of a woman entitled to maternity benefit under the provisions of this Act shall be made by reason only of- (a) The nature of work assigned to her by virtue of the provisions contained in sub-section (3) of section 4; or (b) Breaks for nursing the child allowed to her under the provisions of section 11.

Obligations for the employer

a. To exhibit the abstract of the provisions of the Act and the rules made there under in a conspicuous place in every part of the establishment in which women are employed.

b. To maintain a muster roll in the prescribed form.

c. To submit annual returns in the four prescribed forms.

d. The Employer cannot dismiss or discharge a woman employee during her absence/ leave due to her pregnancy / delivery, miscarriage or illness or for Tubectomy operations.

Computation of average daily wage

The average daily wage is computed by arriving at an average of the wages paid to a female employee for the days on which she has worked during the period of three calendar months immediately prior to the date on which she absents herself from duty on account of maternity or the minimum rate of wages or Rupees Ten whichever is highest.

In calculating 80 days in the twelve months immediately preceding the date of expected delivery.

The following days are to be included:-

1. The days on which a woman has actually worked.

2. The days of lay-off.

3. And holidays with wages to be counted.

It Includes:- (A) All remuneration in cash paid or payable on fulfilling the terms of employment.

(B) Dearness Allowance (C) House Rent Allowance or any such cash allowance (D) Incentive Bonus 
(E) Money value of concessional supply of food grains other articles.

It Excludes:- a) Any Bonus other than incentive bonus, b) Overtime wage, c) Amounts recovered as fines, d) Employer’s contribution to provident fund and pension fund, e) Gratuity on termination of service.

Maternity Benefit in case of Death of Women:-

1. The maternity benefit is payable only up to and including the date of death, if the woman dies during the benefit period.

2. If she dies during delivery or immediately after delivery, leaving the child behind, the maternity benefit is payable for the entire period of 26 weeks.

3. If the child also dies, the maternity benefit is payable up to and including the date of death of the child.

4. A certificate in Form 4 as proof of death of woman employee or the child as the case may be is to be produced.

5. The employer has to pay it to the persons, nominated in the notice of claim in Form 1 to be issued by her.

Forfeiture of Maternity Benefit / Medical Bonus:—

1. If she works in any other establishment during the period of the maternity benefit during which her absence is permitted by the employer.

2. If the woman is guilty of gross misconduct and dismissed for the same, the employer can by an order communicated to her in writing deprive her of maternity benefit or medical bonus or both.

Tips for Employer

1) Abstract of the Maternity Benefit to be exhibited u/s. 19, shall be in Form

2) Maternity Benefit Register in Form 10 has to be maintained

3) Supply of Maternity Benefits Form to the Women Employees other than Form 9, 10 & 11

4) Every Employer shall furnish to the Competent Authority by the 15th Day of January each year in Form No. 11

Powers and duties of Inspectors

An Inspector may, subject to such restrictions or conditions as may be prescribed, exercise all or any of the following powers, namely: –

(a) Enter at all reasonable times with such assistants, if any, being persons in the service of the Government or any local or other public authority, as he thinks fit, any premises or place where woman are employed or work is given to them in an establishment, for the purposes of examining any registers, records and notices required to be kept or exhibited by or under this Act and require their production for inspection;

(b) Examine any person, whom he finds in any premises or place and who, he has reasonable cause to believe, is employed in the establishment:

Provided that no person shall be compelled under this section to answer any question or give any evidence tending to incriminate himself,

(c) Require the employer to give information regarding the names and addresses of women employed, payments made to them, and applications or notices received from them under this Act; and

(d) Take copies of any registers and records or notices or any portions thereof.

Penal Provision

Imprisonment from 3 months may extend to 1 year & /or Fine up to ₹ 2000/- may extend to ₹ 5000/- .

Query No. 1: [Difference in closing stock shown to bank and books]

AO made addition in respect of difference between closing stock as shown in regular books of account and that declared in statement furnished to the bank in respect of hypothecation facility availed by it. Whether such addition can be made especially when inflated statements have been furnished to banking authorities merely for availing larger credit facilities? Whether such addition can be made by AO in case there is no difference in “quantity” but only “Valuation” of stock differs? Whether such addition can be made when such stock in merely “Hypothecated” and not “Pledged” with bank? Whether verification” by bank shall have any bearing on such addition?

Answer

From the fact, it is clear that “quantity” shown in the books of account tallies with statement furnished to the bank, but there is difference in valuation. In CIT vs. Ramakrishna Mills (Coimbatore) Ltd [93 ITR 49 (Mad.)], the Assessing Officer made addition to the income returned by the assessee on the ground that there was discrepancy between the stock shown in its account books and the declarations made by it to banks with whom goods have been hypothecated for the purpose of obtaining overdraft facilities. The Tribunal deleted the addition on the ground that though the declaration made to the banks were only rough estimates the correct declaration had been made in the return of submitted to the Textile Commissioner and these tallies with the assessee’s books. The High Court in reference held that the Tribunal was justified in coming to the conclusion on the basis of the evidence before it.

Thus, it quantity of stock tallies with the books, generally no addition could be made, only on the ground of valuation.

Query No. 2: [ No refusal under section 80G(5), even if amount applied is less than 85% of the amount by charitable Trust ]

Assessee trust moved an application in Form No. 10G for grant of approval under section. 80G(5) of the Act. CIT called for various details from which he found that trust had failed in making expenditure to the extent 85% in FY 2011-12 which was necessary as per provisions of S. 80G(5). Hence, CIT rejected application moved by the assessee seeking approval under section. 80G(5). Whether, while considering certification of institution for purpose of 
S. 80G(5), the authority granting approval can act as an Assessing Officer and carry out detailed inquiry or should they confine the inquiry merely to find out whether the institution satisfies prescribed conditions or not? Whether, even in a case where 85% of the amount of donations received by the Trust is spent in a given year, approval under section 80G can be denied? Whether like law prevail for registration under section 12AA as well?

Answer

A trust or institution is registered under section 12A/12AA is eligible for approved under section 80G except for religious trusts. Registration under section 12AA is ordinarily sufficient proof for eligibility for approval under section 80G. In DIT(E) vs. Sri Ramakrishna Seva Ashrama [357 ITR 731], the Karnataka High Court observed that where the assessee has utilized 85% of donations excluding corpus donation, it is not a case of denial for registration, which depends upon the eligibility for exemption and its claim for renewal of approval under section 80G cannot be denied.

Even if amount applied is less than 85% of its income then also approval under section 80G cannot be refused, as per CIT vs. Gulab Devi Memorial Hospital [391 ITR 73 (P & H)]. In that case, a medical institution had been approved for exemption under section 10(23)(vi) and had also been registered under section 12AA, there is right to approval under section 80G for deduction in the hands of the tax donors. The denial of approval under section 80G on the ground that the assessee was spending only a small percentage for charitable activities was not material in the light of the finding of the Tribunal that the assessee has not deviated from its objects and was creating a surplus for purpose of expansion.

Query No. 3: [IDS is not valid, when notice for prosecution is issued]

If for the year for which Section 276CC is issued,₹ Assessee has filed declaration under IDS, prosecution notice or prosecution is valid?

Answer

Section 276CC of the Income-tax Act, 1961 is not applicable, when a person “wilfully fails” to furnish return of income in time i.e. under section 139(1) or under 139(4) i.e. belated return before end of the relevant assessment year or before the completion of the assessment, whichever is earlier.

If no return is furnished within the aforesaid period, the Assessing Officer must have issued a notice under section 142(1) or section 148 of the Act calling upon the assessee to file his return of income.

As per Income Declaration Scheme, 2016 no declaration could be made in respect of any undisclosed income chargeable under the Income tax Act for any assessment year 2016/17 or any earlier assessment year in case where a notice under section 142 or 148 of the Act in respect of such assessment year is issued and proceeding is pending before the Assessing Officer.

So, how the assessee could have filed declaration under IDS? And if filed whether it was valid declaration?

Further, punishment under section 276CC can ensue only when it is proved that the assessee has wilfully failed to furnish the return in due time after service of notice.

Query No. 4: [Non compliance of section 47(xiiib)]

In case where conditions for conversion of Companies into LLP is not complied as on very First instance (under section 47(xiiib)) say WIP is more than 5 crores in the previous year. How to calculate capital gains, if any, for Company shareholder and LLP. The assets are transferred at Book Value

Answer

Section 48 provides that the income chargeable under the head “capital gains” shall be computed by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset the following amounts, namely :

(i) Expenditure incurred wholly and exclusively in connection with such transfer;

(ii) The cost of acquisition of the asset and the cost of any improvement thereto ——“

The Supreme Court in CIT vs. George Henderson & Co. Ltd [66 ITR 622] held that “full value of consideration” means the entire consideration received by the assessee and not the market value of the capital asset transferred. But, if the parties themselves use the market value as the basis for fixing the consideration for the transaction, it is the market value that represents the full value of consideration.

As per Baijnath Chaturbhuj vs. CIT [31 ITR 643 (Bom.)], where the consideration for the transfer is in kind, as for instant, in a transfer by way exchange of capital assets, the fair market value of the property granted in exchange as on the date of the exchange shall have to be ascertained in order to arrive at the figure of consideration received.

So, if the assets transferred at Book value and if it is a fair market value, then, there is no question of capital gains as basic condition of section 47(xiiib) is not complied.

Further section 47A(4) provides that “where any of the conditions laid down in the proviso to clause (xiiib) of section 47 are not complied with, the amount of profits or gains arising from the transfer of such capital asset or intangible assets or share or shares not charged under section 45 by virtue of conditions laid down in the said proviso shall be deemed to be profits & gains chargeable to tax of the successor limited liability partnership or the shareholder of the predecessor company, as the case may be, for the previous year in which the requirements of the said proviso are not complied with”.

Under the scheme of GST, there are two types of returns which have to be filed, viz., Periodic and Annual. While periodic returns are filed monthly/quarterly, Annual returns are filed for reporting a summary of the periodic returns filed during a financial year. The periodic returns are required to be filed u/s. 39 of the CGST Act, 2017 read with Rule 61 and Rule 62 of the CGST Rules, 2017, whereas Section 44 of the CGST Act, 2017 read with Rule 80 of the CGST Rules, 2017 mandates the filing of the Annual returns. While period returns are to be filed by every person u/s. 39, the Annual return is required to be filed only by certain taxable persons. The Government has introduced a new set of return forms under GST that will have to be filed for the full year.

1. Annual return

Section 44(1) : Every registered person other than person registered as,

• Input Service Distributor;

• Person liable to deduct TDS u/s. 51;

• Person liable to collect tax at source u/s. 52;

• Casual taxable person; and

• Non-resident taxable person.

Section 44(2) : Every registered person who is required to get his accounts audited in accordance with the provisions of Section 35(5) shall furnish, electronically, the Annual return under section 44(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

Due date for filing of Annual return

Due date for filing of Annual return is on or before 31st December, following the end of the financial year to which the said annual returns pertains to. It is pertinent to mention here a taxable person having aggregate turnover of two crore rupees shall file the return and get the accounts duly audited as specified under Section 35(5) of the CGST Act. In respect of the financial year 2017-18, the annual return has to be filed before 31st December, 2018.

2. Annual return Forms

As per the GST Rules, various forms have been prescribed for the purpose of return, depending upon the categories of the taxable person, which are as follows:

Notification No./Date Category of taxable person Return Form
39/2018-Central Tax dated 
4-9-2018
Every taxable person (other than those covered in the exclusion list) GSTR 9
39/2018-Central Tax dated 
4-9-2018
Person paying tax under composition scheme u/s. 10 of CGST Act, 2017 GSTR 9A
(To be Notified) Every electronic commerce operator required to collect tax at source 
u/s. 52(5) of CGST Act, 2017
GSTR 9B
49/2018 – Central Tax dated 13-9-2018. Every registered person whose aggregate turnover during a financial year exceeds two crore rupees shall get his accounts audited as specified u/s 35(5) of CGST Act, 2017 GSTR 9C

3. Consequences of non-filing/late filing of Annual return :

As per Section 47(2), any registered person who fails to furnish the return required under section 44 by the due date shall be liable to pay a late fee of ₹ 200 per day (₹ 100 CGST and ₹ 100 SGST) of delay or 0.25% of the turnover in the State or Union Territory, whichever is lower.

Section 2(112) – “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) and exempt supplies made within a State or Union territory by a taxable person, exports of goods or services or both and inter-State supplies of goods or services or both made from the State or Union territory by the said taxable person but excludes central tax, State tax, Union territory tax, integrated tax and cess.

A. Background

1. Section 2(13) of the CGST Act1 defines “audit” to mean “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”.

2. Section 44(1) of the CGST Act2 requires every registered person to file an Annual Return in Form GSTR 9 for every financial year and in case such registered person is a composition dealer then the Annual Return is to be filed in Form GSTR 9A. The due date for filing such return is December 31 following the end of such financial year.

3. Section 35(5) read with Section 44(2) of the CGST Act and Rule 80(3) requires such registered persons whose ‘aggregate turnover’ during a financial year exceeds ₹ 2 Crores to additionally get his accounts audited by a Chartered Accountant or a Cost Accountant and submit copies of the audited annual accounts, annual return in Form GSTR 9 along with the reconciliation statement in Form GSTR 9C (certified by such Chartered Accountant or Cost Accountant) by December 31 of the following year.

4. Filing requirements for various tax payers:

a. Registered Person – Section 2(94) of the CGST Act defines the term “registered person” to mean “a person registered under Section 25 of the CGST Act but does not include a person having a Unique Identification Number”. It would be relevant to note the difference between “taxable person” and “registered person”. While the former refers to a person registered / liable to registered under GST Law, the latter refers to only such person who has been granted a registration certificate.

b. Hence, for the Financial Year 2017-18, requirements of annual returns and conducting of audit are applicable only for those tax payers who are registered under GST law in the Financial Year 2017-18. Any tax payer who obtains registration after March 31, 2018 is not required to file annual returns or get his accounts audited for the Financial Year 2017-18.

c. Further, in case a tax payer has, say, three locations of operations in three different States and has obtained registration for two locations in the Financial Year 2017-18 but the third location was registered under GST only in the Financial Year 2018-19, then the annual returns and audit requirements for the Financial Year 2017-18 will be required only for the first two branches which were registered during the Financial Year 2017-18.

d. Aggregate Turnover – Section 2(6) of the CGST Act defines “aggregate turnover” to mean “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”.

e. Hence, a registered person under GST law with all India aggregate turnover exceeding ₹ 2 Crores but having branches with turnover of say ₹ 10 Lakhs per annum will be required to file the annual return in Form GSTR-9 and reconciliation statement in Form GSTR 9C for such branch as well. Additionally, GST audit will be required even in cases where the tax payer is dealing only in exempt supplies.

f. It would also be relevant to note that Form GSTR 9C is required to be prepared by considering the details of each GST registration. However, the Financial Statements are prepared for the entity as a whole and State level bifurcation of data may not be available. The State wise details will have to extracted from the accounting records for the purpose of Annual Return as well as Financial Statements.

5. Section 44(1) excludes input service distributor, person registered for deduction of tax at source under section 51 of the CGST Act, person registered for collection of tax at source under section 52 of the CGST Act, a casual taxable person and a non-resident taxable person from filing of annual return in Form GSTR 9.

6. However, such exclusion under section 44(2) of the CGST Act is not provided for filing of reconciliation statement in Form GSTR 9C for person mentioned in section 44(1) of the CGST Act. Therefore, the question that arises for consideration is as to whether an input service distributor, person registered for deduction of tax at source under section 51 of the CGST Act, person registered for collection of tax at source under section 52 of the CGST Act, a casual taxable person and a non-resident taxable person are required to file Form GSTR 9C. On this aspect it may be noted that section 44(2) of the CGST Act requires a registered person to file annual return along with a copy of the audited annual accounts and a reconciliation statement in Form GSTR 9C. On a combined reading of section 44(1) and 44(2) of the CGST Act, the authors are of the view that since annual return is not applicable to input service distributor, person registered for deduction of tax at source under section 51 of the CGST Act, person registered for collection of tax at source under section 52 of the CGST Act, a casual taxable person and a non-resident taxable person, are not required to file Form GSTR 9C.

7. The definition of registered person excludes persons holding Unique Identity Number– Specified Agency of the UN or such other notified person. Therefore, audit is not applicable to such person.

8. GST Audit is not applicable for the following persons

a. Persons not registered under GST

b. Persons who have opted for composition scheme

c. Input Service Distributor

d. Persons registered under Section 51 and Section 52 for deduction / collection of tax at source

e. Casual Taxable Person

f. Non Resident Taxable Person

g. Persons holding UIN – Specified Agency of the UN or such other notified person

9. Reconciliation v. Certification

a. Section 35 requires a tax payer to get his accounts “audited” and then file a Reconciliation Statement in Form GSTR 9C. The question which arises here is whether Form GSTR 9C is a Reconciliation Statement or a GST Audit?

The format of GSTR 9C has two parts wherein Part A is a reconciliation statement and Part B is a certificate to be issued by a Chartered Accountant or Cost Accountant. Part B has two circumstances – in first circumstance the reconciliation statement is certified by a Chartered Accountant or Cost Accountant who has conducted the audit of the entity; and in second circumstance the reconciliation statement is certified by a Chartered Accountant or Cost Accountant who has not conducted an audit of the entity but relies on the audit report of another auditor.

b. It would be pertinent to note that reconciliation will arise if a particular transaction is recorded in the Annual Returns but not recorded in Audited Financials or vice versa. But transactions not required to be reported in Audited Financials and omitted to be reported in Annual Returns will not find any place in the Part A of Form GSTR 9C and it would be the duty of the auditor to report the same in Part B as part of his certification.

B. Scope of Audit and Certification

1. Audit refers to systematic and independent verification of records / documents. This involves an auditor to rely on various judgements, estimates and opinions which are very subjective and would vary under each circumstance. Consider the case of valuation of goods / services which are supplied to a related party. Section 15 of the CGST Act read with Rule 28 prescribes various options to arrive at the correct value for computation of tax applicable on such transaction. The adoption of one method over another is judgmental and may vary from person to person. The person conducting the audit may be satisfied with the reason for adopting a method over another but the same may be objected by the revenue authorities and yet the auditor may confirm that he is satisfied with the records maintained by the tax payer and that according to him the same are in line with the requirements of the law.

2. Certification is a written confirmation of a fact which cannot be based on an estimate or an opinion. Under the Central Excise Laws, the exporter was required to furnish the value of goods exported by him during a particular period. The said report was to be certified by a Chartered Accountant. This report was a certification because the certificate was issued based on the export invoices, Bill of Export attested by the Customs Officer, Shipping Bill and Forex Realization Advice from the Bank. There was no requirement of framing an opinion whether the transaction was export or not or if the value of exports was received or not since the information was available for validation from more than one source.

3. Form GSTR 9C requires Certification from the Auditor which may not be correct since Certification means confirmation of facts whereas at many occasions, the auditor will be required to use his professional judgement for the purpose of conduct of audit. Further, the format of the Certificate requires the auditor to certify that in his “Opinion”, the particulars furnished in Form GSTR 9C is true and correct which effectively means that the form requires the auditor to frame an opinion and provide the observations / comments.

4. Overview of Form GSTR 9C

Form GSTR 9C is bifurcated into two parts:

1. Part A – Reconciliation Statement which is further divided into 5 tables (detailed below)

2. Part B – Certification which is further divided into 2 parts

a. Part I when the Form GSTR 9C is certified by person who has conducted audit of the financial statements

b. Part II when the Form GSTR 9C is certified by person who has not conducted audit of the financial statements.

5. Difference in Certification under Part I and Part II

Particulars Part I Part II
To be certified by Chartered Accountant who has conducted audit of the financial statements Any other Chartered Accountant
Financial Statements Auditor to confirm that he has examined the Financial Statements Auditor to merely state that he has annexed the Financial Statements (including other related documents)
Obtaining Information Specifically confirm if all the information has been provided and also mention if any information was not provided or partially provided No such requirement
Location of Books of Accounts Confirm that the books of account are maintained at principal place of business No such requirement

Thus, a Statutory Auditor conducting an audit has a lot more responsibility when he conducts the audit of his clients under GST.

6. Tables under Part-A of GSTR-9C

a. Basic Details

Details of Financial Year, GSTIN, legal name and trade name and liability to get the books audited under any Act is required to be provided.

Legal name refers to the name as appearing on the PAN of the tax payer. Trade name refers to the name / brand under which the tax payer wants to be identified.

Legal name and trade name have relevance in case of Sole Proprietorship Firms where the legal name will be the name of the individual whereas the trade name will be the name by which his venture / entity is recognized by others. These details will be auto populated based on the details provided at the time of migration / registration.

b. Reconciliation of Turnover declared in Audited Annual Financial Statement with the Turnover declared in Annual Returns in Form GSTR 9

The reconciliation process commences with the turnover declared in the Audited Annual Financial Statements and suggests various adjustments which are required to be effected to the said turnover to arrive at the derived Annual Turnover which is to be compared with the Actual Annual Turnover as declared Annual Returns and tables have been provided to list out the reasons for differences between these turnovers. Any irreconcilable difference would require payment of taxes (Difference 1).

The adjustments between values declared in Annual Financial Statements and derived Turnover as per Annual Returns are tabulated below:

Matters related to Financial Statements (Exclude)3 Turnover for Financials but not for GST (Subtract) Turnover for GST and not for Financials (Add)
Unbilled revenue at the beginning and end of the year Unadjusted advances at the beginning of the financial year – NIL in the first year Unadjusted advances at the end of the financial year – Since advances on goods are not taxable from November 15, 2017, this would ideally include unadjusted advances received for services
Adjustment in Turnover due to Foreign Exchange Fluctuation Turnover for the period April 2017 to June 2017

Turnover under Composition Scheme

Deemed Supplies under Schedule I – Branch Transfer, Management Cross Charge but not including import of services from related parties since it is a inward supply etc
Credit Notes issued after the end of the Financial year – The format requires these adjustments to be added. May be the expectation would be to feed in negative values which would effectively mean SUBTRACT Credit Notes not permissible under GST – The format requires these adjustments to be subtracted. May be the expectation would be to feed in negative values which would effectively mean ADD
Trade Discounts not permissible under GST
Supplies by SEZ to DTA – considered as import of goods by DTA if the bill of entry for such supplies is filed by DTA
Adjustment in turnover due to Valuation Rules – Generally, valuation rules only enhances the value of supply and hence these adjustments will be added to the financial statement turnover though the format suggests that adjustment may require subtraction as well

The derived Annual Turnover is again taken as a base and all the sales which are not liable to GST are reduced from the derived Annual Turnover to arrive at the derived Taxable Turnover. This derived Taxable Turnover is then compared with the Actual Taxable Turnover reported in the Annual Return in Form GSTR 9 and tables have been provided to list out the reasons for differences between these turnovers. Any irreconcilable difference would require payment of taxes (Difference 2)

c. Reconciliation of Rate Wise Liability and Amount Payable thereon

Under this table, the Taxable Turnover is required to be classified into various rates including turnover of the supplier where the recipient is required to pay taxes (to be reported by the supplier only) and arrive at the GST Payable.

This GST Payable is compared with the GST Paid in Annual Return in Form GSTR 9 and tables have been provided to list out the reasons for differences between payable and paid amounts. Any irreconcilable difference would require payment of taxes (Difference 3).

Tax payable due to various differences [Difference 1, Difference 2 and Difference 3] is required to be reported and tax payable, if any needs to be mentioned.

d. Reconciliation of Input Tax Credit

Under this table in Part IV of Form GSTR 9C, ITC availed as per the Audited Financials need to be adjusted with the timing difference of credits between Audited Financials and Annual Return in Form GSTR 9 to arrive at the derived ITC availed by the tax payer. This derived ITC availed by the tax payer is matched with the actual ITC availed as mentioned in annual return in Form GSTR 9 and tables have been provided to list out the reasons for differences between the credits. Any irreconcilable difference would require payment of taxes (Difference 4)

Additionally, the inward supplies are required to be reported based on their grouping in the financial statements along with the details of credit available and credit availed on such supplies. The total of the credit availed on such inward supplies is matched with the actual ITC availed as mentioned in annual return in Form GSTR 9 and tables have been provided to list out the reasons for differences between the credits. Any irreconcilable difference would require payment of taxes (Difference 5)

Excess Credit availed due to various differences [Difference 4 and Difference 5] is required to be reported and tax payable, if any needs to be mentioned.

e. Auditor’s Recommendation on Additional Liability due to Non-Reconciliation

The sum total of all the differences arising out of the reconciliation [Difference 1 to Difference 5) are to be summarized in this table along with the details of erroneous refund claimed by the tax payer and details of outstanding demands which needs to be settled.

7. Who can certify Form GSTR-9C?

A practicing Chartered Accountant or Cost Accountant can certify this form. However, a Chartered Accountant who is an internal auditor of a tax payer is not allowed to get himself appointed as GST Auditor to ensure independence while certifying the GST records.

C. Duties and Responsibilities of an Auditor

The duties and responsibilities of the Auditor can be understood by referring to declarations under “Verification” and “Certification”. Declaration under Verification reads as follows “I hereby solemnly affirm and declare that the information given hereinabove is true and correct to the best of my knowledge and belief and nothing has been concealed therefrom.”

1. Solemnly Affirm – “Solemnly” refers to “formally” and “Affirm” refers to “confirmation”. Together, Solemnly Affirm, refers to “a written statement under an oath”. This expression is generally used while recording a statement of a witness during a Court proceeding. Based on the usage of the terminology, it appears that an auditor is required to solemnly affirm that what is mentioned in the report is true and correct which effectively means that he takes the entire responsibility of the disclosures made in the Form GSTR 9C reconciliation statement. While the form may not be complete without providing “solemn affirmation”, it could have larger ramifications in case the revenue authorities want to invoke “abetment” proceedings against the Auditor who has concluded his audit based on best of his judgement and knowledge.

2. True and Correct – The expressions “true and correct” unlike “true and fair” assumes mathematical precision in the information being reported in the Form GSTR 9 C. True and correct rules out any scope for using professional judgement, estimation and assumption. In contrast, True and Fair factors the scope of judgement, estimation, assumptions and more importantly materiality of the transaction when an auditor provides his opinion on a subject matter. Arriving at a mathematical precision on a subject like law, which involves multiple interpretations, is impossible to achieve. There are various avenues where the question of truth and correctness can arise like Eligibility of the credit claimed, rate of tax charged based on the understanding of the composition of the product, valuation of supplies etc.

3. Concealment – “Conceal” refers to “hiding or keeping something a secret. The word finds mention in the Verification Declaration to be given by the tax payer in Form GSTR 9 as well as the Verification Declaration to be given by the Auditor in Form GSTR 9C.

Concealment will arise when the tax payer / auditor hides something which was required to be reported. There are a plethora of decisions under the Excise Laws which clearly states that if an information is not required to be disclosed (based on say the format of the returns) then it cannot be said that the tax payer has concealed the information. Hence, this expression will come into play when there is requirement of disclosure but the same has not been disclosed either by the tax payer or by the auditor.

In this context, it would be relevant to note that Form GSTR 9 appears to be summation of the GST Returns filed by the tax payer (in Form GSTR 1 for outward supplies and Form GSTR 3B for input tax credit) and that Form GSTR 9C requires reconciliation of the details appearing in the financial statements with those mentioned in Form GSTR 9. As long as this requirement is met, there can be no allegation of concealment by the revenue authorities.

D. GST Records and Books of Account

We find reference to the term “Books of Accounts” multiple times under the GST Law. But the said term is neither defined nor a list of what constitutes “Books of Accounts” is provided. Accordingly, reference to “Books of Account” will have to be understood to be accounting records which are generally maintained by the tax payer including those required under any other law applicable to the tax payer. It would be relevant to note that Section 35 of the CGST Act r/w Rule 56 of the CGST Rules requires the tax payer to maintain a true and correct account of :

a. production or manufacture of goods;

b. inward and outward supply of goods or services or both;

c. stock of goods;

d. input tax credit availed;

e. output tax payable and paid;

f. Such other documents as may be prescribed (Reference could be made to Rule 56 which lists down such prescribed documents)

E. Meaning of Term Unbilled Revenue

Unbilled revenue is an accounting concept which implies recognition of revenue on accrual basis though the date for raising invoice could be a future date. Eg. Construction Work done as on say March 31, 2017 will be accounted as revenue for the purposes of drawing the books of accounts but the invoice against the same can be raised only on completing the milestone defined in the Contract. The revenue so accounted will be treated as unbilled revenue but will not find a place in the GST Returns since the time of supply for such transaction has not yet arrived.

Unbilled revenue will be one of the adjustment while reconciling the revenue between financials and GST returns. Unbilled revenue in the current year will be reduced from the revenue of the financial year to reach the revenue as per GST returns and Unbilled revenue of the previous year (provided it is invoiced in the current year) will be added to the revenue of the current financial year to reach the revenue as per the GST returns.

F. Cancellation of Registration during the year

A registered person is required to file both Form GSTR 9 and GSTR 9C for a Financial Year. There could be occasions where the registered person has de-registered himself from GST. In such a scenario, whether these two Forms are required to be submitted or not is not clear. However, based on the current treatment of de-registration applications, we can infer the following

a. Application for Cancellation Filed – The portal is open for the tax payer and he is required to file his regular periodic returns. Accordingly, he would be required to submit the aforementioned forms as well

b. Application for Cancellation Filed and status updated by the officer as “Surrender”- The tax payer cannot file any returns. We could in the absence of any clarification on this aspect, presume that the tax payer is not required to file the aforementioned forms

c. Application for cancellation approved – The tax payer can file the Final Return declaring any balance tax liability. We could in the absence of any clarification on this aspect, presume that the tax payer is not required to file the aforementioned forms.

G. Penalty for Delay in Filing of Form GSTR 9C

There is no specific provision which provides for penalty in the event of delay in filing of Form GSTR 9C. Section 125 of the CGST Act provides for general penalty of up to ₹ 25,000/-. Similar provision is provided under the State GST law and effectively the penalty would be up to ₹ 50,000/- (₹ 25,000/- CGST+ ₹25,000/- SGST).

There is one more school of thought on this matter. Section 44(2) of the CGST Act specifically provides that every person required to get an audit conducted will have to file Annual Returns as well as reconciliation statement in Form GSTR 9C. This would effectively mean that the annual returns and Form GSTR 9C will have to be filed together and non-filing of the same would lead to late fee as applicable to Annual Returns. The late fee for delay in filing of Annual Returns is ₹ 200 per day (₹ 100/- CGST+ ₹ 100/- SGST) subject to a maximum of 0.5% of the turnover in the State.

Conclusion

An attempt has been made in this paper to make a reader understand the basis of aspects of audit under the GST law. This paper only provides a glimpse of the issues that may arise. This paper is written with a view to incite the thoughts of a reader who could have different views of interpretation. Disparity in views, would only result in better understanding of the underlying principles of law and lead to a healthy debate or discussion. The views written in this article is as on 26-10-2018.

 

1. CGST Act and CGST Rules refers to the Central Goods and Services Tax Act, 2017 and Central Goods and Services Tax Rules, 2017 and reference to any provisions of the CGST Act and CGST Rules will include reference to the corresponding provisions under the respective State Goods and Services Tax Act, 2017 and State Goods and Services Tax Rules, 2017 unless specifically mentioned otherwise

2. CGST Act and CGST Rules refers to the Central Goods and Services Tax Act, 2017 and Central Goods and Services Tax Rules, 2017 and reference to any provisions of the CGST Act and CGST Rules will include reference to the corresponding provisions under the respective State Goods and Services Tax Act, 2017 and State Goods and Services Tax Rules, 2017 unless specifically mentioned otherwise

3. Will be required to be added or subtracted based on the nature of adjustment

GST returns comprises of two types of returns – periodic and annual returns. Periodic returns are monthly or quarterly returns for reporting transactions during the month or quarter, while annual return is for reporting the summary of the periodic returns filed during a financial year. As the annual return is last return of the year thus, it assumes special significance.

In terms of Section 44(1) of the CGST Act, 2017, every registered person, other than an Input Service Distributor, a person paying tax under Section 51 (TDS Collector) or Section 52 (TCS Collector), a casual taxable person and a non-resident taxable person, shall furnish an annual return for every financial year on or before the 31st day of December following the end of such financial year. Recently the Government vide Notification No. 39/2018 – Central Tax dated September 4, 2018, had notified GST Annual Return Formats viz., GSTR-9 (for regular taxable persons) and GSTR-9A (for composition supplier). Accordingly, for the financial year 2017-18, last date for filing annual return would be 
31st December 2018. However, unfortunately till date, utility for filing annual return in Form GSTR-9 has not been introduced by GSTIN. GST Law requires that “every registered person” is required to file annual return, it means, if tax payers are having NIL turnover or exempted turnover, it is mandatory for such tax payers to file annual return. Further, mandate to file annual returns is for each registered person and hence if tax payer is having different registration numbers for their unit located in SEZ area or had obtained registration as different business vertical though in same State, annual return have to be furnished within stipulated time period for each such registration.

Tax payers are expected to fill in 19 tables comprising of 6 parts in the annual return and all the details are to be extracted / compiled from the periodic returns (GSTR-1 & GSTR-3B) submitted or filed for the period July 2017 to March 2018. Hence, if any mistake or omissions here been committed by tax payers, at the time of filing these periodic returns and not rectified during the period under consideration, details have to be filled in with same mistakes and omissions.

In Tables 4 and 5 of the annual return, instruction sheet of the annual return state that tax payers are expected to compile details from the periodic return GSTR-1 filed by them. GSTIN portal, at present, only provides summary of details filed by the tax payers and hence it would be difficult for the tax payers to compile details from the return filed by them in GSTIN portal. GSTIN had provided the facility of offline facility to download GSTR-1 but it is only for viewing purpose and cannot be exported in any other format. Hence, it is expected that GSTIN will bring change. Accordingly, tax payers have to completely rely on the data generated and preserved by them. Let us try to understand from the following table, how data are to be once again extracted to fill up the details in Table 4 & 5 of annual return.

Table. No. Content of Table Data appeared in GSTR-1 Data appeared in GSTR-3B Challenge
4B Supplies to registered persons – B2B Table 4A & 4C Table 3.1(a) In GSTR-3B it includes transactions of Deemed exports
4C & 5A Zero rated supply (exports) with & without payment of tax Table 6A Table 3.1(b) Export turnover supplies may not be matched with Export turnover as per financial statement due to exchange rate difference. [Rule 34 of CGST vs. AS-11 & Ind AS 21]
4D & 5B Supply to SEZ with & without payment of tax Table 6B Table 3.1(b) GSTIN portal accepts transactions of supplies to SEZ units at Table 4A (B2B supplies) in Form GSTR-1. Hence, details to be compiled separately
4E Deemed Exports Table 6C

[amended N. No. 70/2017 from 
21-12-17]

However, it reflects in Table 4A

Table 3.1(a) In GSTR-3B such transactions are included in Table 3.1(a) – B2B transaction. Hence, details to be compiled separately
5D, E & F Exempted, NIL rated & Non-GST Supply Table 8 Table 3.1 (c) Instruction sheet provides value of “no supply” shall also to be declared. Big challenge to compile data, which do not attract GST

Part III contains 3 Tables viz., Tables 6, 7 & 8. Tax payers are required to fill in the details of all Input Tax Credits availed and reversed in the financial year for which annual return is to be filed from the periodic return filed in Form GSTR-3B. While providing details of Input Tax Credits in Tables 6B to 6G, further bifurcation is expected in respect of ITC related to Inputs, Capital Goods (CG) and Input Services (IS). At the time of filing periodic returns, such bifurcation was not required to be provided and hence now again tax payers have to compile input tax credits used as Inputs, CG and IS. At Tables 6K & 6L, details in respect of ITC availed through TRAN-I and TRAN-II are required to be provided. Such details are not forming part of the periodic return and hence compilation needs to be done from the Electronic Credit Ledger (ECL). Accordingly, transition credit received in ECL needs to be reported. In Table 6H, details of ITC reclaimed have to be reported as pursuant to S. 16(2) of CGST Act, if taxpayer does not pay the supplier within 180 days then such ITC would be reversed. But same would be eligible once the payment is done. In Table 7A, details of ITC reversed due to non-payment of consideration to suppliers need to reported and such reversal have to be by way of enhancing the output tax liability for the month in which such reversal is carried out. [Rule 37 (2)]. Accordingly, tax payers might have shown in periodic returns (Form GSTR-3B) in Table 3.1(a) and hence data has to be segregated and compiled separately from the internal working prepared at the time of filing of return.

In Table 8A, total credits available for inward supplies received during 2017-18 and reflected in Form GSTR-2A (Tables 3 & 5 only) shall be auto populated. It is an undisputed fact that details in Form GSTR-2A changes moment the supplier uploads or files return (GSTR-1) and hence every day and every hour, such credits change. Hence, a clarification is required as regards date on which such credit would be reflected in GSTR-9. Whether date would be date of preparing the annual return by tax payer or the date as of 31st March 2018? In Table 8C, tax payers who had not entered their inward supplies (other than imports and tax payable under reverse charge), for the financial year 2017-18, in periodic return (GSTR-3B) due to any reason, they had a chance to enter such inward supplies (other than imports and tax payable under reverse charge) in the periodic returns (GSTR-3B) till the return for the month of September following the end of the financial year (i.e. GSTR-3B for the month of September 2018) to which such details pertains or furnishing of the annual return, whichever is earlier. If any inward supplies, imports, which pertains to financial year 2017-18, is not recorded for any reason, such imports have to be recorded along with recorded imports at Table 8G (IGST paid on import of goods). Unfortunately, there is no separate space where, any imports and inward supplies on which tax is payable under reverse charge, and such inward supplies are not recorded in the periodic returns (GSTR-3B) for the financial year 2017-18 but tax is discharged in periodic returns (GSTR-3B) during the period April 2018 to September 2018. Resultantly, it appears that input tax credit in respect of such transactions (imports & inward supplies on which tax is payable on reverse charge basis) will be lost or lapsed (Table 8K). In Table 8K of annual return, it will determine the quantum of Input tax credit lapse. System had been designed in such a manner that tax payer will be eligible to avail the Input tax credit as it is available in the GSTR-2A and out of the available or reflected Input tax credit in GSTR-2A, ITC which are not claimed and ITC which are ineligible, would be lapsed. Unfortunately, system had not considered the situation wherein tax payers may be having higher input tax credits but their suppliers may not have filed the returns resultantly lower input credits reflected in GSTR-2A. However, tax payers have to take solace that annual return is only a compilation of details and its effect is not reflected anywhere i.e. in reconciliation statement (Form-9C)

In Part VI – Table 16, tax payers are expected to compile following details whether or not it has been reflected in while filing their periodic returns GSTR-3B.

Table. No. Content of Table Data appeared in GSTR-3B Challenge
16A Supplies received from Composition Tax payers. (Inward supplies) Table 5 Table 5 contains consolidated details of (i) supplies from Composition tax payers; (ii) Exempt, and NIL rated supply.
16B Deemed supply under section 143 These details were not to be shown separately while filing returns. Further details to be provided though not shown in returns.
16C Goods sent on approval basis but not return

In Part VI – Table 17 & 18, tax payers are expected to provide details of outward and inward supplies against a particular HSN code to be reported in both this table. Tax payers can compile this detail for outward supplies from Table 12 of GSTR-1. Details of inwards supplies HSN would be of greatest challenge as mostly all tax payers may not have kept these details as GSTR-2 wherein this detail has to be provided was suspended till as of today. Moreover, details of HSN wise inward supplies of goods as well as services would also be a challenging task as exemption had been provided to those tax payers whose turnover is less than INR 1.50 Crores from providing HSN. Hence, now tax payers have to compile details of all inwards supplies of goods and services on the basis of HSN in order to fill the details in Table 18 of Annual Return.

Conclusion:

Prima facie perusal of the Annual Return format, it appears that any additional liability arising out of error/omission in GSTR-1 and GSTR-3B cannot be paid at the time of filing annual return. This could be a setback as Industry was looking forward to rectifying all inadvertent mistakes at the time of filing the annual return. Moreover, if errors / omissions are not rectified and additional liability could not be paid through annual return, what is the need to compile all these details which are already with the GSTIN portal. Government can easily combined details which are filled by tax payers of transactions pertaining to 2017-18 but shown in the returns during the period April 2018 to September 2018 in reconciliation statement Form 9C and provide relaxation to tax payers from filing one more additional return.

ERRATA

In October issue of AIFTP Journal Page No. 5 first para Late Justice Dr. B. P. Saraf, the former Chief Justice of India is wrongly printed. He was the former Chief Justice of Jammu & Kashmir High Court. The error is regretted.

1. Introduction

1.1. After a long wait and much deliberation, GST was finally introduced from 1-7-2017. Though there is still some feeling that it is introduced hurriedly, without full preparation etc., but, the ball has to be set rolling and it is expected that in due time things will get adjusted.

1.2. In fact, the tax laws have never got settled. We are still facing litigation for the past years under the erstwhile sales tax and other indirect tax laws. GST being complete transformation of indirect taxation, it will have more teething problems.

1.3. In this article we are going to discuss the issues relating to determining and disclosing Inward Supply in Annual Return and GST Audit Report.

2. Importance of GST Annual Return & Audit

2.1. Unlike under the Bombay Sales Tax Act, the policy of Government under GST is to have self-assessment by way of returns and to deal with only selective issues for assessment. To ensure that the self assessed returns filed by the assessee are true and correct, the concept of audit by an independent agency is prevailing under taxation laws. The concept of audit which is prevalent under Income-tax Act and which was also inducted into various State Value Added Tax Acts is continued under GST. Therefore, there is great importance to audit as it is at par with assessment.

2.2. The GST Audit is to be filed in prescribed Form-9C. There is lot of debate going on as to the scope of an Auditor since Form-9C is only a reconciliation of Annual Return with the Books of Account. Whatever be the conclusion of the debate, one thing is clear that GST Audit plays an important role in vouching that the self-assessed returns filed by the registered person are true and correct.

2.3. Under GST, there is a four tier system of ensuring and checking that correct returns are filed by the registered persons. Firstly, the registered person is required to file self-assessed returns by reporting invoice details of all his outward supplies and claiming eligible ITC on the basis of matching of inward supplies. Secondly, the registered person is liable to file an annual return to consolidate all the returns. Thirdly, if the turnover exceeds certain specified limit, the registered person is liable to file GST Audit Report which is a reconciliation of the Annual Returns with its books of account. Fourthly, all the returns and reports filed by the registered person can be scrutinized and assessed by the Department.

3. Brief introduction of Annual return

3.1. Form GSTR-9 is prescribed as Annual Return for regular tax payers and Form GSTR-9A is prescribed as Annual Return for Composition Tax payer. For the purpose of present Article, I have explained the provisions of Form GSTR 9 for regular tax payer.

3.2. Annual Return is consolidation of monthly/quarterly returns filed by the registered person. It is expected that it will be quantum merely total of monthly/quarterly returns filed by the registered person during a Financial Year. The Annual Return will also give effect to credit notes and debit notes issued against the invoices of the current financial year provided such credit notes and debit notes are issued upto the September following immediately after the end of Financial Year. Now here the issue arises is when the annual return is for a financial year, whether the said return can travel into details available in returns subsequent to said financial year. How can the said return be called as an Annual Return for a Financial Year?

3.3. It is to be kept in mind that though the Annual Return is merely consolidation of returns already filed during the Financial Year, at some places calculations are required to be made for filling the rows.

4. Explanation of relevant Rows in GSTR-9 relating to Inward Supplies

4.1. Input Tax Credit (ITC) is the back bone of any Value Added Tax System. In layman terms, ITC is nothing but tax paid on inward supplies. Where such inward supplies are used for providing outward supplies, the registered person shall be eligible to avail the ITC of tax paid on inward supplies and set off the said ITC against the tax payable on outward supplies.

4.2. Under GST also the basic concepts of ITC remain the same. However, the legislature has prescribed various conditions for availing the ITC. If the said conditions are not fulfilled, then the registered person shall not be eligible to ITC. Therefore, computation of correct ITC is very important to avoid litigation and differential payment with interest/penalty.

4.3. Under the CGST Act, the ITC provisions are contained in Section 16, 17 and 18. The provisions are not discussed herein in detail. However, the points for verification for reporting of ITC in Form GSTR-9 are discussed hereinunder.

5. Part III of Form GSTR-9 – Details of ITC:

5.1. Part III of Form GSTR-9 requires reporting of details of ITC as declared in returns filed during the Financial Year. Now, from a plain reading of the description contained in the heading of PART III, one has to understand that Part III requires reporting of only figures which are reported in monthly returns during the Financial Year. Simply put, Part III is merely consolidation of whatever figures have been shown in the monthly returns. There shall be no amendment or revision of figures in any circumstances, whether the said availment of ITC in monthly returns is incorrect or ineligible. In some of the erstwhile VAT Acts such as Maharashtra Value Added Tax Act, the dealers were eligible to revise the entire years turnover of sales and purchases and ITC by filing one annual return at the time of VAT Audit. However, such is not the case with GST Annual Return. For filling up the GST Annual Return, the old but golden rule for Bank Reconciliation has to be applied, i.e. “DO WHATEVER IS DONE, DO NOT DO WHATEVER IS NOT DONE”. In other words, do not treat the Annual Return as a platform for revising the monthly returns. Under the current law, revising the returns is neither intended nor provided.

5.2. Now, the Part III of GSTR-9 is divided into three main tables of reporting.

  1. Table 6 – Details of ITC availed as declared in returns filed during the FY.

  2. Table 7 – Details of ITC Reversed and Ineligible ITC declared in returns filed during the FY.

  3. Table 8 – Other ITC related information

5.3. In addition to Part III, Rows 12 and 13 of Part V are also relevant for the purpose of reporting ITC reversed or availed in relation to current Financial Year but included in the returns filed for the period April to September of immediately succeeding financial year.

5.4. Now let us exame the points of verification in each Table of Part III of Form GSTR-9.

6. Points of verification in Table 6 of Part III of Form GSTR 9

6.1. Row 6A of Part III of Annual Return

6.1.1. Row 6A is the annual total of ITC availed during all the months of A Financial Year as Table 4A of GSTR 3B. The figures in row 6A shall be auto populated. However, looking at the forms, it seems that the auto-populated figure can be edited manually if the auto-populated figure is incorrect or if there is an error in generating the auto-populated figure. The total ITC appearing in Row 6A shall be further bifurcated into various heads in Row 6B to 6H. Thereafter, the total of 6B to 6H will be compared with total of 6A in order to ensure that there is no difference. Thus, total ITC in 6A is the basis for comparing the ITC under various. Naturally the said total ITC is the total of all ITC claimed in GSTR-3B under all heads of 4A for a Financial Year.

6.1.2. The total of ITC in row 6A shall also be the basis of comparing the total ITC as per GSTR-2A. GSTR-2A is the total of all inward supplies received by a registered person where his corresponding suppliers have filed return in GSTR-1.

6.2. Rows 6B to 6H of Part III of Annual Return

6.2.1. While filing GSTR-3B, Table 4A only requires bifurcation of total ITC availed in that month on following accounts:

  • ITC on import of goods

  • ITC on import of services

  • ITC on inward supplies liable to reverse charge

  • ITC on inward supplied from ISD

Thus, the Table 4A did not provide for any bifurcation of ITC on the basis of inputs, capital goods or input services.

6.2.2. However, Table 6B to 6E requires reporting of the bifurcation of ITC on the basis of inputs, capital goods and input services.

6.2.3. Row 6B requires reporting of inward supplies including services received from SEZ but excluding imports and inward supplies liable to reverse charge. Now, the difficulty which a Registered Person will face is that while claiming the ITC in GSTR-3B, there was no bifurcation of supplies received from normal suppliers and SEZ suppliers. Further 6B only requires to include inward services received from SEZ suppliers since the inward supplies of goods has to be reported in Row 6E. Thus, a registered person will have to once again visit all the ITC invoices for a Financial Year to find out the bifurcation as required in Table 6B. This will only increase the efforts of the tax-payers. In my view the Government should have simply included the said bifurcation in the GSTR-3B itself in order to avoid the double efforts and save the man hours. If not in the past, at least for the future the said bifurcation can be adopted in the GSTR-3B. This is will further help in autopopulating the figures in the annual return which in essence is nothing but mere mathematical consolidation of 12 month’s figures.

6.2.4. In a case where the Total in Row 6A is more than Total ITC as per GSTR 2A, it means that, the registered person has claimed ITC in GSTR 3B in excess of what is shown by its suppliers in their GSTR 1. This difference can be on account of ITC on import of goods and services of ITC on supplies liable on RCM basis. Assuming, that proper ITC has been availed by the Registered Person based on the tax invoices available with him and there is no import or RCM based ITC, one of the most common reason for difference is that some of the suppliers may not have filed returns in GSTR – 1 or have filed the returns but have filed incorrect data.

6.2.5. As per Section 42 of the CGST Act, 2017 the details off every inward supply furnished by a registered person shall be matched with the corresponding outward supply shown by the corresponding supplier. In a case where the ITC claimed by the registered person of an inward supply is in excess of the tax declared by the supplier for the same supply or where the outward supply is not declared by the supplier in his returns, the discrepancy shall be communicated to both the persons. Where the amount claimed as ITC is found to be in excess, it shall b added to the output tax liability of the registered person who claimed excess ITC.

6.2.6. Now, the above mechanism prescribed in Section 42 of matching inward supply with outward supply would be possible only if the return system as originally envisaged under the GST law would have been if force, i.e. GSTR-2 which is the details of inward supplies would have been in force. In the absence of GSTR-2, matching the inward supply with outward supply is not possible on the system.

6.2.7. However, the Revenue can still check whether there is any excess ITC claimed by the registered person by simply comparing the total of Row 6B with the Total ITC as per GSTR-2A. When, there is an exess amount in Row 6B, there can be only two conclusions, either the supplier of the registered person has not filed the return or the registered person has claimed excess credit.

6.2.8. Thus, in case where the total of Row 6B is more than the total of ITC as per GSTR 2A, it is advisable that the registered person carries out the exercise of invoice wise matching of inward supplies with his GSTR 2A for that F.Y. and find out the discrepancy. If the excess credit is taken due to any reason such a duplicay of invoices, error in figures, etc. the same shall be part of reconciliation in GSTR-9C. No effect shall be given in GSTR-9 for that Financial Year.

6.2.9. However, if the ITC pertaining to the concerned FY. is already reversed by the registered person in the returns filed for the month of April to September following the concerned FY., then the same shall be reported in Row 12 of Part V of Form GSTR-9 of th concerned FY.

6.2.10. In a reverse case where the total of ITC in GSTR-2A is more than the total in Row 6B, it can be safely concluded that the registered person has availed lesser ITC that eligible to him. Now, this lesser ITC may be due to various reasons such as, blocked ITC under Section 17(5) is not availed at the threshold, the registered person missed out to include or did not receive certain invoices for the inward supplies received during the FY., the registered person has not accounted for the debit note raised by the supplier, etc. In such case, one has to be careful to avail the eligible ITC on missed out invoices and debit notes by including the same in returns filed for April to September immediately succeeding the FY. No ITC shall be allowed for any invoice pertaining to a particular FY. after the due date of furnishing return for the month of September following the end of FY. as per Section 16 (4) of the CGST Act, 2017.

6.2.11. It may be noted that the Government’s intention as per the recent press note and tweets has been clear that any ITC for invoice pertaining to FY. 2017-2018 shall be not allowed after due date for filing GSTR 3B for September 2018. The due date for filing GSTR-3B for September 2018 was 25th October 2018. In my view the above stand of the Government is debatable and needs to be tested in court of law. Firstly, GSTR-3B is not a return as envisaged under Section 16(4) read with Section 39 of the CGST Act, 2017. GSTR-3B is merely a makeshift return or a summary return till the time the actual return in GSTR-3 is brought into force. The implementation of GSTR-3 has been stalled due to various system problems being faced by the Government. Without referring to such problems, it will be suffice to say that the restricting or foreclosing the rights of the registered person without fulfilling the promise on their part will be wholly unjustifiable on the part of the Government. Secondly, looking at the larger perspective, the said restriction for availing the credit may also be challenged as unconstitutional since it is against the basic tenets of a value added tax system wherein the tax paid on inward shall be set off against the out put tax liablity. Having said so, the restriction on time limit for availing ITC is not uncommon to Indirect Tax legislation. The Service Tax Acts (Finance Act, 1994) as well as certain State VAT Act already had provisions similar to GST putting restriction on time limit for availing the ITC on inward supplies.

6.2.12. As this point is also relevant to the recent press note of CBIC wherein it has been clarified that in September return eligible ITC for 2017-18 can be claimed irrespective of reconciliation with GSTR 2A. In other words, it is conveyed that one should avail all eligible ITC whether reflected in 2A or not in September, 2018 return and the actual reconciliation can be done subsequently.

6.2.13. As far as the reporting in the Annual Return is concerned of inward supply invoices of concerned FY for which the ITC is availed in the returns filed for the period April to September following the concerned FY, the same shall be reported in on consolidated figure in Row 13 of Part V of Form GSTR 9.

6.2.14. Row 6C and Row 6D requires reporting of inward supplies attracting reverse charge liability on which tax is paid and ITC is availed. It may be noted that there are two Sections for liability on RCM basis. One is Section 9(3) of CGST Act, 2017 which is in case of specific notified services such as GTA, Sponsorship, Legal Services, etc. Another is liability for RCM under Section 9(4) of CGST Act, 2017 which is on any supplies received from an unregistered person. Corresponding provisions in IGST Act, 2017 is Section 5(3) and Section 5(4) respectively. In Table 4A of GSTR-3B, the registered person may have already reported ITC on inward supplies liable on RCM basis. However, now the same needs to be bifurcated in Inward Supplies from Unregistered Person under Section 9(4) which is to be reported in Row 6C and Inward Supplies from specified suppliers in Row 6D. Again the said bifurcation needs to be worked out. One may also note that w.e.f. 13-10-2017, the RCM liability under Section 9(4) has been exempted till further notification. Thus, atleast from 13-10-2017 there shall be no liability under Section 9(4) for the FY 2017-2018.

6.2.15. Row 6E requires reporting of ITC availed only on imports of goods including supplies from SEZ. This will be readily available in Table 4A of GSTR-3B.

6.2.16. One more important task to be done in reporting all the above Row 6B to 6E is that there is sub-bifurcation required between ITC on inputs, capital goods and input services. Now, this requirement is a herculean task at this stage. If this had been included in the monthly returns itself or had been prescribed earlier, the registered person would have maintained the data or customized the system accordingly. To take out the bifurcation now for the entire year is like rebooking all the invoices for the entire year based on the above heads of inputs, capital goods and input services. Large business houses which have robust accounting softwares may still manage to do it, however for small and medium enterprises this will be additional efforts.

6.2.17. Row 6F requires reporting of ITC availed on Import of Services but excluding services received from SEZ suppliers. Services received from SEZ suppliers is included in Row 6B. The same is available in Table 4A of GSTR-3B with little work over on supplies from SEZ.

6.2.18. Row 6G requires reporting on ITC on inward supplies received from input Service Distributor. The same is readily available in Table 4A of GSTR 3B.

6.2.19. Row 6H requires reporting of reclaimed ITC under any of the provisions of Act. For example, where the registered person has reversed the credit on inputs for non payment to the vendor beyond 180 days, the ITC can be availed on making the payment. The same said reclaimed ITC shall be reported in Row 6H and not in Row 6B. In Row 6B it is already reported once and the reversal of same is also reported in Row 7A.

6.3. After reporting the bifurcation of ITC in Rows 6B to 6H the total of the said rows will be reported in Row 6I. The total in Row 6I will be compared with Total in Row 6A and the difference shall be reported in the Row 6J. According to me, there should be no difference in total of 6I and 6A since it is total in row 6A only which is bifurcated into 6B to 6H. Thus, if there is any difference, then the total in Row 6B to 6H need to be checked until the difference becomes zero.

6.4. Rows 6K to 6L of Part III of Annual Report

6.4.1. Row 6K requires reporting of Transitional Credit availed by a registered person by filing TRAN I or revised TRAN I as the case may be. The final figure appearing as per the Revised TRAN I will be reported over here.

6.4.2. Row 6L requires reporting of Transitional Credit availed by a registered person by filing TRAN II or revised TRAN II as the case may be. The final figure appearing as per the Revised TRAN II will be reported over in this Row.

6.4.3. It may be note that only transitional credit availed during the concerned FY will be appearing in these Rows. The time limit of filing TRAN-I and 
TRAN-II has been extended periodically and as of now the last date is 31st January 2019. In such case, even though the transitional credit is availed by the registered person by filing the TRAN-I in say December 2018, it will not be reported in Annual Report for 2017-2018. The said transitional credit availed by filing the TRAN-I or TRAN-II shall be disclosed in Annual Return for 2018-19.

6.4.4. It is further to be noted that any reversal of excess transitional credit actually done in the concerned financial year only will be reported in Row 7F and 7G of Annual Return for that FY. Where the reversal is made in any subsequent financial year, than said reversal shall be reported only in the Annual Return for such subsequent financial year.

6.5. Row 6M requires reporting of ITC availed but not specified in Rows 6A to 6L. As per the instructions the said Row 6M will contain details of ITC availed under Form GST ITC-01 on account of stock held on application of new registration within the prescribed limit. Row 6M may also cover ITC availed in Form GST ITC-02 on account of transfer of ITC on sale, merger, demerger, amalgamation, lease transfer, etc.

6.6. Thereafter Row 6O will contain the total of ITC availed by the registered person during the Financial Year.

7. Points of verification in Table 7 of Part III of Form GSTR-9

7.1. Table 7 of the Annual Report requires reporting of ITC reversed and ineligible ITC declared in the returns filed for the Financial Year. Again, the figures are merely the addition of the monthly returns and no revised figure can be added or deducted from Table 7. If there is any less reversal or excess reversal, the same can be either given effect by row 12 or 13 if such changes are effected in the monthly returns filed for the period of April to September following the end of financial year.

7.2. Row 7A requires reporting of reversal of ITC on account of non-payment of conservation beyond 180 days as per Section 16(2) of the CGST Act, 2017. It is to be noted that, in Row 7A only that figure which has been reported in the monthly returns will be shown. If for any reason the registered person has failed to report any such reversal any of the monthly return than the same will not appear in Row 7A. The effect for the same shall be either given in Row 12 or in the Annual Return of the next financial year. The said figure of reversal under Rule 37 will be included in Row 4B(2) of the GSTR-3B. Individual bifurcation of the same needs to be worked out for reporting in Row 7A.

7.3. Row 7B requires reporting of ITC which is reversed from the distribution made by the Input Service Distributor under Rule 39 of the CGST Rules. The said figure is not separately shown in Table 4B of GSTR-3B, hence it needs to be worked out manually. Rule 39(1)(i) provides for reversal of ISD, if there is credit note in respect of which ITC is distributed. When the supplier of ISD issues credit note there will be reduction in distributable ITC. Therefore, ITC has to be correspondingly reduced by the recipient. Rule 39(2) provides similar position for reduction in distributable ITC for any other reasons. The reversal of ISD credit can be verified from the GSTR – 6 filed by the ISD for distributing the credit.

7.4. Rows 7C and 7D requires reporting of reversal made by the registered person on account of Rule 42 and Rule 43 of the CGST Rules. As per section 17(1) or (2) of CGST, the ITC which pertains to Input or input services used for non business activity is required to be reduced. Similarly when the ITC is for taxable as well as for exempt supplies, it is required to be reduced on pro rata basis given in rule in relation to exempt supplies.

7.5. Rule 42 of the CGST Rules provides for manner of distribution of input tax credit in respect of inputs or input services used partly for business purposes and partly for other purposes, or partly for effecting taxable supplies including zero rated supplies and partly for effecting exempt supplies. Similarly, Rule 43 provides for manner of distribution of input tax credit in respect of capital goods used partly for business purposes and partly for other purposes, or partly for effecting taxable supplies and partly for exempt supplies.

7.6. The above figure for reversal under Rules 42 and 43 is available in Row 4B(1) of GSTR-3B. The same needs to be bifurcated into Rows 7C and 7D. Any lower reversal or excess reversal which has been given effect to in the returns filed for April to September following the end of financial year shall be shown in Rows 12 or 13 of the Annual Return.

7.7. Row 7E of the annual return requires reporting of ineligible ITC on account of blocked credit under Section 17(5) of the CGST Act. The said figure is readily available in Row 4D(1) of GSTR-3B. It is to be noted here that many registered persons while filing the return had shown the ITC in Row 4A of GSTR 3B as net of blocked credit in Section 17(5). In such case, my opinion would be to continue to show the ITC in Row 6A as net ITC excluding blocked credit under 17(5) in order to avoid the difference. The figure in Row 7E relating to blocked credit will appear only if the same is also included in total ITC as pr Row 6O. If the blocked credit is not included in Row 6O, then it will result in difference in Net ITC as per Annual Return and as per GSTR 3B.

7.8. Rows 7F and 7G require reporting of any reversal in Transitional Credit made during the F.Y. The same will be included in Row 4B(2) of GSTR-3B.

7.9. Row 7H relates to any other ITC Reversal which may be made but not included in any other Rows of Table 7. This may include the reversals made on account of Show Cause Notice or pursuant to any order of the court, etc.

7.10. Row 7I is the total ITC reversed or ineligible included in Rows 7A to 7H.

7.11. Row 7J provides the total of net ITC availabe for utilization by deducting the total ITC reversal in 7I from the total ITC availed in 6O. The Net ITC availed in 7J is an important figure as the same will be taken as base to compare the ITC as per books of account in Row 12E of the Audit Report in Form GSTR-9C. The total in Row 7J will also be the base for comparison of expenses wise ITC in Row 14S of Audit Report in Form GSTR-9C.

8. Points of verification in Table 8 of Part III of Form GSTR-9

8.1. Table 8 of the Annual Return prescribes other information relating to ITC such as total amount of ITC available as per GSTR 2A, total amount of ITC lapsed during the Financial Year. The said figures of lapse of ITC will then be available in the system of GST for cross reference during assessment.

8.2. Row 8A will be auto populated figures of total ITC as per the GSTR-2A. The same will be used for comparison of ITC as per Row 6B. The same is intended to verify that the total ITC availed matches with the tax paid by the suppliers on supplies made to the registered person.

8.3. Row 8B will also be auto populated figure containing total of Row 6B and 6H. Row 8C requires reporting of total ITC on inward supplies received during the FY 2017-18 but availed in the return filed for the period April 2018 to September 2018.

8.4. In Row 8D, the total ITC as per GSTR 2A will be compared with the Total ITC claimed by the registered person for FY 2017-18. The difference of the total ITC as per GSTR-2A and total ITC claimed by the registered person for FY 2017-18 upto the due date for filing the return for the month of September 2018 will be reported in Row 8D.

8.5. If the difference in Row 8D is in positive, it means that Registered Person has claimed less ITC than what is available as per GSTR-2A. If the difference in Row 8D is negative, it means that Registered Person has claimed excess ITC than what is available as per GSTR-2A. In such case, again the reason needs to be found out for such excess credit. The excess credit may be on account of duplicate credit availed in monthly returns or the suppliers of the registered person have not filed the 
GSTR-1.

8.6. If the difference is in positive, than said difference will be further bifurcated in Rows 8E and 8F. Row 8E is the amount of ITC out of the difference in 8D which was available as per GSTR 2A but has not been availed by the registered person in any of the GSTR-3B till return filed for the month of September 2018. Row 8F is the amount of ITC out of the difference in 8D which was available as per GSTR-2A bot not availed by the registered person on account of ineligibility, e.g. blocked credits.

8.7. Row 8G requires reporting of Total IGST paid on import of goods (including supplies from SEZ). The same needs to be found out by the registered person for the FY from its books of account. Row 8E is the Total ITC availed on import of goods including supplies of goods from SEZ. The same will be autopopulated as per Row 6E.

8.8. The difference between, 8G and 8E is reported in 8I. The said difference amount in 8I is nothing but ITC available on import of goods but not availed by the registered person as appearing in Row 8J.

8.9. Row 8K is the total of Row 8D and Row 8J. The said total is the amount of ITC which was available to registered person but not availed for any reason. As per description of Row 8K, the same total is proposed to be lisped ITC for the said FY.

8.10. In my view, the legal effect of the said Row 8K needs to be challenged on two grounds, 1) the unveiled ITC which was eligible but not availed beyond September 2018 may be challenged on the grounds discussed in Para 6.2.11 above. 2) the unallied ITC on import of goods needs to be challenged on the ground that there is no time limit prescribed under the CGST Act or the Rules for availing ITC on the basis of Bill of Entry filed for imported goods. As per Section 16(2)(a) the registered person shall be entitled to claim ITC on the basis of three documents, namely;

  • Tax invoice issued by registered supplier

  • Debit note issued by registered supplier

  • Such other tax paying documents as may be prescribed in Rule 36(1). Bill of Entry is one of the tax paying documents.

8.11. Section 16(4) of the CGST Act, 2017 provides that a registered person shall not be entitled to ITC is respect of any invoice or debit note after the due date for filing return for the month of September following the end of FY. The said Section 16(4) does not speak about ITC on the basis of specified documents such as Bill of Entry. It only provides for invoice or debit note.

8.12. Thus, Row 8K providing for lapse of unavailed ITC on import of goods is not sustainable and against the provisions of law.

9. Brief introduction of GST Audit Report

9.1. After GSTR-9, the next requirement is filing GSTR-9C which is the prescribed Form for GST Audit Report. The GST Audit is applicable only when the turnover of registered person exceeds ₹ 2 crores in a financial year.

9.2. This is last tier of self-assessment and verification of correctness of returns filed during the year is carried out by an Independent Auditor.

9.3. Though the Form-9C is loosely called as GST Audit Report, in essence it is a reconciliation of Annual Return with the books of account. Form GSTR-9C is reconciliation of figures given in GSTR-9 vis-à-vis books of account for the financial year. An issue can arise whether the auditor is required to see correctness of the books of account or to report the details as asked in Reconciliation Statement.

9.4. For example, the registered person has claimed ITC on food services to employees. It is blocked credit as per section 17(5). It will be reflected in ITC availed in 3B and correspondingly in GSTR-9. While giving reconciliation statement, auditor notices this wrong availing. Whether auditor should do reconciliation with account as filled up in GSTR-9 by audited or should change the same to correct position? Issue requires clarification from authorities.

10. Explanation of relevant Rows in GSTR-9C relating to Inward Supplies

10.1. Tables 12, 13, 14, 15 and 16 are relevant for reporting on Inward Supplies. Out of the aforesaid Tables, Tables 13 and 15 are merely list of reasons for differences in reconciliation of Table 12 and Table 14 respectively. Table 16 is further calculation of liability on difference listed in Table 13 and Table 15.

11. Points of verification in Table 12 of Part IV of Form GSTR-9C

11.1. Table 12 is reconciliation of Net ITC availed as per Annual Return with ITC availed in the books of account. The reconciliation starts with manually filling the figure of Net ITC availed for the FY. in a State as per the Books of Account. The first problem which may be faced by a multi state registered person not maintaining separate trial balance for each State will be about finding out the Net ITC for each State. Here, the registered person is expected to internally derive their ITC for each individual GSTIN and declare the same in Row 12A. The next question which may arise is whether the Auditor is to verify the correctness of Net ITC figure derived by the Registered Person for declaration in Row 12A. In my view, the same is the responsibility of the registered person to arrive at the correct figure and any figure nearest to the correct figures. The Auditor may not be required to go behind the figures declared by the Registered Person for verifying the same. In any case, the more the difference between the GSTR-9 and the declared figure, more will be the liability on the Registered Person. At the same time, to avoid any discrepancy, it will suffice if the Auditor merely takes note of the method employed for arriving at the figure of Net ITC for each State.

11.2. Row 12B requires addition of ITC which was booked in the earlier FY years but claimed in the current FY of Audit. The said addition is to arrive at the figure 
of Net ITC as per GSTR-9 where the ITC is claimed in this FY. This will also include Transitional Credit which may have been booked in the earlier FY year but claimed in the GST Return in current FY.

11.3. Row 12C requires deduction of ITC booked in the current FY but claimed in the return of subsequent FY. This is required to arrive at the ITC claimed in returns for the current FY.

11.4. Row 12D arrives at the net ITC availed as per the audited financial statement for the current FY. The said total in Row 12D will be compared with Net ITC claimed in the Annual Return as shown in Row 7J of Annual Return equal to Row 12E of the Audit Report.

11.5. If there is difference in the ITC as per Audited Books of Account and Annual Return, the same shall be shown as un-reconciled ITC in Row 12F. If there is a positive difference, it means that ITC in audited books of accounts is higher than the ITC as per Annual Return. The balance ITC not availed in Annual Return may lapse for not being availed within time limit prescribed subject to other provisions of the Act. In any case, the difference for un-reconciled ITC needs to be explained in Table 13. However, if there is negative difference meaning thereby the ITC as per the Audited Books is less than the ITC as per the Annual Return, the difference needs to be be explained in Table 13. It also means that registered person has availed more ITC than what is available as per books of account. This may result in demand depending upon the reasons for difference.

12. Points of verification in Table 14 of Part IV of Form GSTR-9C

12.1. Apart from the Reconciliation of Net ITC as per Annual Return with the Net ITC as per Books of Account, the registered person is also liable for reconciling the ITC on the basis of each expense head.

12.2. Row 14A to 14Q require the registered person to classify the net ITC as per the books of accounts and Annual Return on the basis of various expense heads such as, purchases, freight / carriage, power and fuel, rent and assurance, imported goods (including received from SEZ), goods lost, stolen, written of, or disposed of by way of gift or free samples, royalties, employee’s cost, etc. The said list is only illustrative and not exhaustive. Thus, it may happen that whatever heads of expenses are shown in the debit side of trading and profit and loss account, all such heads needs to be mentioned in Table 14. The ITC on each of such head as per the books of accounts needs to be mentioned in the Table 14 along with its value, the total amount of ITC, the total amount of eligible IT availed in the books of account. This, is going to be a challenging part of the Audit Report, as many registered persons may not have maintained the books of accounts in a manner in which the ITC on above heads can be clearly distinguished and arrived at. If the ITC is parked in a common account, the same needs to be worked out entirely for a particular year with utmost accuracy to avoid any differences. The various heads of expenses in Table 14 are extracted below for ready reference:

Description Value Amount of Total ITC
Amount of eligible ITC availed
1 2 3 4
A Purchases
B Freight / Carriage
C Power and Fuel
D Imported goods

(Including received from SEZs)

E Rent and Insurance
F Goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples
G Royalties
H Employees Cost (Salaries, wages, Bonus etc.)
I Conveyance charges
J Bank Charges
K Entertainment charges
L Stationery Expenses (including postage etc.)
M Repair and Maintenance
N Other Miscellaneous expenses

12.3. Row 14R is the total of ITC availed on all the expense heads mentioned in Table 14. The said total in Row 14R will be compared with Net ITC claimed in the Annual Return as shown in Row 7J of Annual Return equal to Row 14S of the Audit Report.

12.4. If there is difference in the ITC as per Audited Books of Account and Annual Return, the same shall be shown as un-reconciled ITC in Row 14T. If there is a positive difference, it means that ITC in audited books of account is higher than the ITC as per Annual Return. The balance ITC not availed in Annual Return may lapse for not being availed within time limit prescribed subject to other provisions of the Act. In any case, the difference for un-reconciled ITC needs to be explained in Table 15. However, if there is negative difference meaning thereby the ITC as per the Audited Books is less than the ITC as per the Annual Return, the difference needs to be be explained in Table 15. It also means that Registered Person has availed more ITC than what is available as per books of account. This may result in demand depeding upon the reasons for difference.

13. Conclusion

13.1. Though the attempt by the GSTR-9 and GSTR-9C is well intended to find out ultimate ITC as per books, the process will be far fetched and will require separate exercise and efforts. There are chances that there will be multiple interpretation of various ITC items like expenses heads. No provision is made to give details about grouping made. Great care will be required as well as consistency will be required to be maintained from year to year.

The details in audit report also required to auditor to prevail in the records and returns of the previous and subsequent year. This is also unexpected like the auditor will be reporting about ITC taken in the returns of April to September of subsequent year from the end of the financial year under Audit. This figures will be unaudited and will be incorporated as given by auditee. In my opinion this aspect is also required to be clarified by the authority.

13.2. One more missing aspect is as to how to carry out recommendation for payment etc. There should be provision for filing up one final return post audit like it is under MVAT Act. Such return will be updated and will be in consensus with report and finality will come to the GSTR-9 and returns. At the end, we expect modification and much more clarification in the forms in future.

 

Who makes us ignorant? We ourselves. We put our hands over our eyes and weep that it is dark.

Swami Vivekananda

Introduction

Goods and Services Tax revolves around the occurrence of the event “supply”, the whole concept of indirect taxation in the new GST regime have changed from the point of ‘manufacture’ under erstwhile central excise law or providing of ‘service’ under erstwhile service tax law or point of ‘sale’ under erstwhile Sales Tax/ VAT law to the point of ‘supply’ under the new GST law.

GST can be levied inaccordance to Section 9 on the ‘supplies’ of ‘goods’ or ‘services’ or both and scope of supply has been provided in Section 71 of the CGST Act 2017, so first, we need to understand that whether the event of occurrence of a transaction falls within the ambit of ‘Scope of Supply’ and the Schedules prescribed therewith.

In the light of the ‘Scope of Supply’ as provided in Section 7 and the Schedules prescribed therein under the CGST Law, it is also essential to critically analyse the event of occurrence of a transaction that whether it is a transaction of ‘goods’ or a transaction of ‘service’ specially in the light of the deeming fiction used in the legislation. The provisions for application of the GST Law has been separately provided for a transaction of ‘goods’ and a transaction of ‘service’ like time, place and value of the supply of goods and service are quite different and need to be carefully applied and analysed. The provisions of the Input Tax Credit as well as the various Notifications issued under GST Law needs to be appropriately identified and applied inrelation to the specific facts and circumstances of the event of the occurrence of a ‘supply’ transaction in either case of an ‘outward supply’ or an ‘inward supply.’

The taxation in GST is primarily based on ‘outward supply’ which have been defined in Section 2(83) of the CGST Act 2017 as ‘outward supply’ in relation to a taxable person, means supply of goods or services or both, whether by sale, transfer, barter, exchange, license, rental, lease or disposal or any other mode, made or agreed to be made by such person in the course or furtherance of business”.2 Since scope of this Article is confined to issues relating to outward supply we are not touching the other areas of supply mainly ‘inward supply’ in the GST which in itself needs detailed analysis.

While, considering ‘outward supply’ we need to recognise the concept of ‘taxable person’, ‘goods’, ‘services’, ‘sale’, ‘transfer’, ‘barter’, ‘exchange’, ‘license’, ‘rental’, ‘lease’, ‘disposal’ etc., as first by their definition provided in the GST Law and also their legal meaning from the jurisprudence. The colour from correct interpretation of each of the segment of ‘Outward Supply’ is essential to be recognised. Lot of established law from the Indian Courts as well as International Courts are available on these words which may be considered in the light of the specific definitions wherever provided under the GST Law.

The determination of the GST liability is the ultimate requirement of disclosure in the Annual Return, so we need to determine every ingredient or requirement to logically decide by dissecting in the light of the provisions of GST Law for the ‘outward supply’. The process of determination of nature of the transaction and the tax due thereon under GST Law starts from the very beginning i.e., at the time of issue of tax invoice or even prior to that i.e. at the time of receiving the advance for the expected supply of goods or service or both, so we need to be careful in determining every relevant attribute of an outward supply transaction at the time of structuring the transaction itself at the very initial stage. Thus, the determination of the tax liability in accordance to the nature of the transaction has already happened at the time of performing the transaction and recording it in the books of account, which is also being disclosed to the Government either by way of tax invoice being raised on the webportal itself or through the supporting e-way Bill being issued from the web-portal of the Government. However, the further disclosure of the transaction is again required to be made at the time of filing the Monthly/Quarterly Return in GSTR-13or GSTR-3B or GSTR-44 while the Annual Return in GSTR-95 or GSTR-9A6 are the summary of the transactions already disclosed and declared in the Monthly/Quarterly Returns.

Now, we need to discuss within the scope of this Article viz., Issues relating to determining and disclosing outward supply in Annual Return, so we are confining to the details of outward supplies which have been specified in Part-II of Form GSTR-9 as prescribed u/r. 80 known as ‘Annual Return’.7

In Part-II of Form GSTR-9 i.e., Annual Return the details of outward supply and inward supply during the Financial Year in the tabular form in following categories has been required with their taxable value, Central Tax, State/UT Tax, Integrated Tax and Cess. It is important to note that not only the taxable value and tax payable thereon for a completed supply, but also the advance received have to be disclosed. The calculation of the ‘taxable value’ should be inaccordance to the provisions of the GST Law and also should be as declared in the returns filed during the financial year i.e., Monthly/Quarterly Returns regularly filed as required under the provisions of GST Law. Thus, the Annual Return in Form GSTR-9 is precisely a consolidated statement/summary of the Monthly/Quarterly Returns. However the various categories of supplies needs to be differently disclosed in the Annual Return than they were earlier disclosed in the Monthly/Quarterly Return, so care must be taken to understand the requirement of exact disclosure in Annual Return.

Under the same Notification and Provisions of Law as referred above, the Annual Return i.e., Form GSTR-9A has also been prescribed for ‘composition tax payers’.8 The details required for outward supply and for inward supply in GSTR-9A are quite simpler to analyse, calculate and disclose as well as are also different than the GSTR-9.

Now, brief discussion about the specifically required information viz., ‘taxable value’ and ‘tax payable’ thereon under various categories of the ‘Outward supplies’ in Part-II Column 4 of GSTR-9 shall be made in the sequence as they are required in the ‘Annual Return’:-

A. Supplies made to Unregistered customers (B to C)

Aggregate value of supplies made to consumers and unregistered persons on which tax has been paid shall be declared in this column. These will include details of supplies made through e-Commerce operators and are to be declared as net of credit notes or debit notes issued in this regard. Table 5 i.e., outward interstate supply to unregistered dealers, Table 7 i.e., Inter-State supply alongwith respective amendments in Table 9 and Table 10 i.e., Amendments for outward supplies of Form GSTR-1 may be used for filling-up these details.

B. Supplies made to registered person (B to B)

Aggregate value of supplies made to registered persons under GST (including supplies made to UINs) on which tax has been paid shall be declared in this column. This also includes business to business transactions. These will include supplies made through e-Commerce operators, but shall not include supplies on which tax is to be paid by the recipient on reverse charge basis. Details of debit and credit notes are to be mentioned separately. Table 4A i.e. details of invoice details of all supplies (rate wise) other than reverse charge/made through e-commerce operator and Table 4C i.e., meant for invoice details of supplies (operator-wise and rate-wise) effected through e-Commerce Operator attracting collection of tax at source of Form GSTR-1 may be used for filling up these details.

C. Zero-rated supplies on payment of tax (except supplies to SEZ)

Zero rated supply are the supply on which 0% GST is to be discharged while making an outward supply of goods, e.g., Supply made for exports of goods or services under GST. Assessee gets the ITC on inputs used for making such supplies subject to ITC restrictions under Sec. 17.

Aggregate value of exports (except supplies to SEZs) on which tax has been paid shall be declared in this column. Table 6A of Form GSTR-1 may be used for filling-up these details. Care is to be made by recognising the distinction between an export without payment of tax e.g., export under LUT9 or export with payment of tax or purchase of export goods from domestic market at concessional rate of 0.1%.10

D. Any supplies which are made to SEZs

Aggregate value of supplies to SEZs on which tax has been paid shall be declared in this column. Table 6B of GSTR-1 may be used for filling up these details. The concerns as explained above for exports also needs to be considered.

E. Deemed Exports

It means such supplies of goods as may be notified under section 147.11 Section 147 says, Government can notify deemed export of goods where goods supplied do not leave India, and payment for such supplies is received either in Indian rupees or in convertible foreign exchange, if such goods are manufactured in India. The legal position needs to be examined with regard to the deemed export transaction for claim of the exemption or concession under the GST Law.

Aggregate value of supplies in the nature of deemed exports on which tax has been paid shall be declared here. Table 6C of Form GSTR-1 may be used for filling-up these details.

F. Advances on which tax has been paid but invoice has not been issued.

Details of all unadjusted advances as on 31st March, advance has been received and tax has been paid, but invoice has not been issued in the current year shall be declared in this column. Table 11A of Form GSTR-1 may be used for filling-up these details.

G. Inward supplies on which tax is to be paid on reverse charge basis.

Aggregate value of all inward supplies (including advances and net of credit and debit notes) on which tax is to be paid by the recipient (i.e., by the person filing the Annual Return) on reverse charge basis. This shall include supplies received from unregistered persons on which tax is levied on reverse charge basis. This shall also include aggregate value of all import of services. Table 3.1 (d) of Form GSTR-3B may be used for filling-up these details.

H. Credit Notes issued in respect of transactions specified in Item (B) to Item E above (-)

Aggregate value of credit notes issued in respect of B to B supplies (4B), export (4C), supplies to SEZs (4D) and deemed exports (4E) shall be declared here. Table 9B of Form GSTR-1 may be used for filling-up their details.

I. Debit Notes issued in respect of transactions specified in Item (B) to Item (E) above (+)

Aggregate value of debit notes issued in respect of B to B supplies (4B) exports (4C), supplies to SEZs (4D) and deemed exports (4E) shall be declared here. Table 9B of Form GSTR-1 may be used for filling-up these details.

J. Supplies/tax declared through amendments (+)

K. Supplies/tax reduced through amendments (-)

Details of amendments made to B to B supplies item (4B), exports item (4C), supplies to SEZ’s item (4D) and deemed exports item (4E), credit notes item (4I), debit notes item (4J) and refund vouchers shall be declared in column J and K. Table 9A and Table 9C of Form GSTR-1 may be used for filling-up these details.

Details of outward supplies on which tax is not payable as declared in monthly/quarterly returns filed during the financial year.

A. Zero rated supply (Export) without payment of tax

Aggregate value of export (except supplies to SEZs) on which tax has not been paid shall be declared in this column. Table 6A of Form GSTR-1 may be used for filling-up the details.

B. Supply to SEZs without payment of tax

Aggregate value of supplies to SEZs on which tax has not been paid shall be declared in this column. Table 6B of GSTR-1 may be used for filling-up these details.

C. Supplies on which tax is to be paid by the recipient on reverse charge basis

Aggregate value of supplies made to registered persons on which tax is payable by the recipient on reverse charge basis shall be declared in this column. Details of debit note and credit notes are to be mentioned separately. Table 4B of Form GSTR-1 may be used for filling-up the details.

D. Exempted

The supplies made under Schedule-III as prescribed u/s 7 of the CGST Act is to be declared under the category of exempted as legally they are supplies covered under GST Act, but specifically exempted from payment of tax. The value of ‘no supply’ shall also be declared here.

E. NIL rated

F. Non-GST Supply

Aggregate value of exempted, NIL rated and non GST supplies shall be declared in columns D, E and F respectively. Table 8 of Form GSTR-1 may be used for filling-up these details.

The ‘HSN-wise summary of Outward Supplies’ have been required in Part-VI Column 17 of GSTR-9 which needs to be carefully segregated inaccordance to the correct classification of the goods or service. For the Annual return to be filed by 31st December 2018 i.e., for the period from1st July 207 to 31st March 2018 of Financial Year 2017-18 the Government has given leverage that tax payer having turnover in the preceding year upto ₹ 1.50 crore has an option not to give any of these details, while it is mandatory to report HSN Code at 2 digits level for tax payers having annual turnover in the preceding year from ₹ 1.5 crore upto ₹ 5 crore and at 4 digits level for tax payers having Annual Turnover above ₹ 5 crore. UQC i.e. Unique Quantity Code is only to be furnished for supply of goods. It is important to note that the quantity is to be reported net of the quantity of goods return. Table 12 of Form GSTR-1 may be used for filling-up details in Table 17.

Conclusion

As the name suggests ‘Annual Return’ i.e. GSTR-9 acts as a consolidated statement of all the previous returns like GSTR-1 and GSTR-3B for an entity. Since, the tax liability arises when the chain of outward supply continues, the discussion above should be of sufficient help to file Annual Return. It is important to note that the Annual Return in Form GSTR-9 reports all the outward as well as inward supply of the entity and its quantum value. The important point that is to be noted in the return is with respect to correct entry being made under relevant heading. Even though GST is new law for Indian businessman, lot of improvements and modifications have been made to ease the working of entity and enable smooth supply of goods and/or services in the country. GSTR-9 also aims the same and meets continuous changes to avoid multiple interpretations. There are numerous intricate issues of interpretation on the basis of which different course of action arises for filing of the Annual Return, we need to dwell upon them in depth to arrive at an appropriate decision.

Some Issues

Some pertinent issues have been raised in respect to preparation and filing of Annual Return for which discussions seems to be necessary, so they are placed in the shape of queries and their clarification.

  1. How and which Annual Return to be filed if the Composition Scheme has been opted by a dealer for part of the Financial Year and for the balance period GSTR-3B were filed?

ANS. The tax payer-assesse who is registered in GST under the special category known as ‘Composition Dealer’ need not to file GSTR-9 which is quite exhaustive and required extensive details about the Outward and Inward Supplies, but they have to file Quarterly Return in Form GSTR-4 and Annual Return in Form GSTR-9A. This facility with the aim of reducing tedious procedural formalities is only for composition dealers whose turnover is upto ₹ 1 crore as discharge their GST liability on their total taxable turnover. The limit of total taxable turnover is 
₹ 75 lakhs for ones in Himachal Pradesh or north eastern states.

If a particular dealer has opted ‘Composition Scheme’ only for some part of the Financial Year while he had paid tax due under GST as a normal dealer than such dealer has to file Annual Returns in GSTR-9 as well as GSTR-9A for the respective periods otherwise there would be a mis-match from the Monthly Return filed under Form GSTR-1 and GSTR-3B as normal dealer vis-à-vis GSTR-4 as Composition Dealer in the respective periods.

  1. Which ‘turnover’ as per audited final accounts is to be declared in GSTR-9C?

ANS. The word ‘turnover’ has not been defined under CGST Act while the concept of ‘total turnover’ and what components are included in ‘total turnover’ has been referred in Forms for Annual Return. However, the term “aggregate turnover” has been defined which 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.

In the ‘Reconciliation Statement’ i.e. Form GSTR-9C the turnover to be declared in Part-II Column 5A has been mentioned as ‘Turnover (including exports) as per audited financial statements for the State/UT(for multi-GSTIN Units under same PAN the turnover shall be derived from the audited annual financial statement)’. This amount of ‘turnover’ needs to be reconciled with the amount in Part-II Column Q which mentions ‘turnover as declared in Annual Return (GSTR-9)’ which is as per Part-II Column 5N of GSTR-9 viz. Total Turnover (including advances) and has been explained in the footnotes as Total Turnover including the sum of all the supplies (with additional supplies and amendments) on which tax is payable and tax is not payable. It has further been explained that this Total Turnover shall also include amount of advances on which tax is paid but invoices have not been issued in the current year. However, this turnover shall not include the aggregate value of Inward Supplies on which tax is paid by the recipient (i.e. by the person filing the Annual Return) on reverse charge basis. It is important to mention that additions and deletions needs to be made with their reasons and of course subjected to verification to reconcile the turnover declared in Item A and Item Q of Column 5 of Part-II of GSTR-9C. Further, taxable turnover needs to be arrived after certain adjustments in-accordance to the provisions of GST Law to calculate the correct liability of GST by the tax payer.

  1. Whether the turnover declared in GSTR-9 to include for the full Financial Year i.e. including the turnover declared under VAT or under Central Excise Act of the earlier period?

ANS. The GSTR-9 is the Annual Return prescribed and mandatorily required under the GST Law, the turnover after the implementation of GST i.e., w.e.f. 1st July 2017 is subject to GST, so the turnover for the period from 1st July 2017 to 31st March 2018 i.e., for 9 months needs to be disclosed in GSTR-9. The turnover for the period of April to June 2017 is subject to earlier laws of VAT or Service Tax or Central Excise and so the requirements provided under such laws needs to be adhered with.

  1. Whether the ‘rate of tax’ on ‘outward supply’ needs to be examined and verified while filing of the Annual Return GSTR-9?

ANS. Yes. ‘Rate of tax’ applicable on the goods or service or composite supply or mixed supply is a matter of classification of the supply based on various factors and interpretations of the established analysis of HSN/ SAC Codes and the respective entries of the goods or services. The question of applicability of correct rate of tax on the supply is an important factor and must be properly examined and verified in-accordance to the existing provisions of the Law. The correct rate applicable for the period for which the Annual Return is being filed is necessary to be verified from all angles.

  1. Whether the Foreign Exchange gain or loss on a supply transaction which is subsequently arrived could be a part of the taxable turnover?

ANS. The component for foreign exchange gain or loss specifically attributable to a transaction of supply of export or import shall be considered as a part of the taxable turnover and needs to be taxed inaccordance to the provisions of GST Law and has to be accordingly declared in the Annual Return.

  1. What will be the treatment of ‘Sale of Assets’ under GST and how will it be declared in GSTR-9?

ANS. Sale of Assets is a usual transaction of outward Supply of goods and as such it will be subject to GST as a usual transaction of supply of goods under the classification appropriate to such asset. This transaction of supply of goods as assets shall be declared in the category of supply as required in GSTR-9.

  1. Should the verification of valuation of outward supply be made for disclosure of turnover in respective categories of GSTR-9?

ANS. Correct valuation of supply and its proper disclosure is of great importance as the liability of tax due is based on the valuation. Valuation of goods and service is a ticklish issue and must be verified at the time of filing of the Annual Return as wrong declaration may lead to penalties and interest. Valuation of supply between the related parties is a sensitive issue and needs to be dealt-with carefully. The provisions of valuation must be appropriately applied considering the facts and circumstances of the transaction of supply. However, it would be much prudent to examine the issue of valuation of supply in an intricate transaction at the time of the transaction itself i.e., at the time of issuing the tax invoice, as once the tax invoice is issued and the transaction is reported in GSTR-1 then it would be little critical to rectify the same.

 

 

1 Gives the meaning of expression “supply”

2 CGST Act 2017, S. 2 (83)

3 Details of outwards supplies of goods or services

4 Quarterly return for registered persons opting composition levy

5 Rule 80 of CGST rules 2017

6 Provision of Rule 80(1) of CGST rules 2017

7 Notification No. 39/2018-CENTRAL Tax, dated 4th September 2018 as gazetted at Entry No. 613, Part-II, Section 3(i) dated 4th September 2018 on Page 21.

8 Sec. 10 CGST Act 2017

9 Vide circular No. 40/14/2018-GST dated 6/4/2018

10 Vide Notification no. 41/2017- Integrated tax(Rate) dated 23/04/2017

11 CGST Act 2017, Sec. 2 (39)

In this article, an endeavour has been made to explain the various terms and expressions used in the annual return as well as audit report/reconciliation statement prescribed under the GST law. The relevant provisions thrusting these obligations on the registered persons under GST law are contained in sections 35(5) and 44. Certain terms employed therein require more explanation/clarification so that compliance is done correctly. The provisions of CGST Act are referred to, for the purpose of explaining the meanings and wherever necessary, IGST Act is referred.

1. Turnover-Section 35(5) uses the expression “turnover”as opposed to the terms defined under the Act. Section 2 of the CGST Act which defines various terms employed in the said Act, has provided definitions of the terms “aggregate turnover” under clause (6) and “turnover in State” or “turnover in Union territory” under clause (112) thereof. There is a marked difference in the two types of turnover. “Aggregate turnover” covers the supplies to be computed all over India basiswhereas “turnover in State” or “turnover in Union territory” covers such supplies made from the specific State or UT, as the case may be. However, section 35(5) refers to only “turnover”. At the same time, rule 80(3) which prescribes such turnover limit refers to aggregate turnover and therefore, one can infer that section 35(5) considers aggregate turnover for all over India. The limit prescribed is ₹ 2 crores.

Take a case of a supplier who has multi state activities. The supplier has his principal place of business in the state of Gujarat. He usually supplies goods from the State of Gujarat. Therefore, the major turnover is effected from the State of Gujarat. However, as one of stray transactions, he imports goods in the State of Maharashtra and sells them to the customers in Maharashtra. The question here is whether he is required to obtain a registration in the State of Maharashtra. As per the provisions relating to place of supply as also the principles laid down by sections of IGST Act as regards interstate and intra-state supplies of goods/services, the above supplier can treat his supplies in the State of Maharashtra as inter-state supplies so that he does not have to obtain registration in Maharashtra. The location of the supplier of goods, in this case, is in Gujarat whereas the place of supply is in Maharashtra. Therefore, such supplier can continue supplying the goods based on his registration in Gujarat. However, section 22 clearly states that every supplier shall be liable to get registered in the State or Union Territory from where he makes taxable supply of goods or services of both. The expression used here is “from where he makes taxable supply”. Therefore, the supplier in this case is obliged to take a registration in the State of Maharashtra since he is making the supplies from that State. By virtue of his being registered in the State of Maharashtra, he also has to comply with the provisions, inter-alia, of section 35(5) and 44 i.e., file annual return and GST audit report in the State of Maharashtra as well.

Stretching the example further, a person may be registered in various states and his aggregate turnover considering all states exceeds ₹ 2 crore which is the limit of TO prescribed by rule 80. However, in one of the states, he has TO much below ₹ 2 crores. Still, he will have to file audit report u/s. 35(5) in that state as well.

2. Registered person-Section 35(5) uses the term “registered person” which is defined u/s. 2(94) to mean a person who is registered u/s. 25 but does not include a person having a unique identity number (UIN). Thus, any specialized agency of the United Nations organisation or any multilateral financial institution and organisation notified under the United Nations (Privileges and Immunities) Act, 1947, Consulate or Embassy of foreign countries are not required to get their accounts audited under section 35(5) or file audit report and reconciliation statement under section 44.

Similarly, persons not liable for registration under section 23 also are not required to comply with section 35(5) and 44. They include the persons engaged exclusively in the business of supplying goods or services or both that are not liable to tax or wholly exempt from tax under CGST Act or under IGST Act. They also include an agriculturist to the extent of supply of produce out of cultivation of land.

If as per the proviso under sub-section (2) of section 25, separate registration have been obtained for business verticals, separate annual returns and GST audit reports will have to be filed.

Person who gets registered himself voluntarily also has to comply with the said provisions provided of course, his TO exceeds the prescribed limit.

The next question comes of the persons who, though liable to get registered have not obtained registration. The other consequences under the Act will certainly follow but can they be made to file annual return and audit report as well? Section 25(8) empowers the proper officer to get such person registered and, in my view, the obligations cast upon a registered person including that of annual return and audit report etc. will have to be complied as a consequence.

3. Non-GST supply: The Act defines “non-taxable supply”, not “non-GST” supply. However, in the context of the form of Annual return (Table 4-row F), it will have to be allotted same meaning. Clause (78) of section 2 defines “non-taxable supply” which means supply of goods and services on which no tax is leviable under CGST or IGST Act. In short, no GST is leviable thereon. This could happen when the transactions of such goods or services do not constitute supply or the goods/services or are completely out of the purview of GST law. The term is definitely referring to supplies other than the exempt or nil rated supplies.

The first category falling into non-GST supply that strikes our mind is that of the goods covered under the definition of “goods” but levy of tax thereon is deferred for the time being. They are 5 types of motor spirits (crude oil, petrol, diesel, aviation turbine fuel, natural gas). Section 9 categorically excludes levy on alcoholic liquor for human consumption. Thus, these are 6 types of goods which are outside the ambit of levy of GST. Therefore, they can be considered as “non-GST” supply. The oil companies dealing in these products have to file returns both under State VAT law and GST law. They are required to disclose the motor spirit TO in the GST returns as well though no tax is payable. Similarly, subsequent dealers in these products such as petrol pumps, bunker oil agents etc. also have to disclose this TO in their GST returns under the same category.

The transactions in Schedule III are the ones which are considered as neither supply of goods nor of services. Sale of land or building, subject to clause (b) of paragraph 5 of schedule II, is one of such transactions which is required to be disclosed here. However, the same cannot be treated as non-GST supply and hence, need not be disclosed in the returns or annual return.

Another such example would be high sea sales. Notification No. 3/1/2018 dated 25-5-2018 has now clarified that the high sea sales effected prior to the transaction on which customs duty is paid u/s 12 of the Customs Act, 1962, shall not be subject to tax. However, section 7(2) of the IGST Act postulates that supply of goods imported into India, till they cross the customs frontiers of India, shall be treated to be a supply of goods in the course of interstate trade or commerce. Thus, under the law, these transactions of high sea sales are not exempted from tax but the point of levy of tax is merely deferred till the goods are cleared from customs as per the proviso to section 5(1) of the IGST Act. Therefore, the question arises whether such sales are to be shown as exempt sales, which strictly speaking, they are not, or non-GST sales, where again they do not fall. In absence of any clarification, it is advisable to disclose them in either of the two columns in annual return. Further, a moot question that arises here is whether the TO of high sea sales should be considered for the purpose of calculating the limit of ₹ 2 crores as per rule 80. Keeping in view the above legal position, in my view, such sales have to be considered in the TO limit. However, the impending amendment in CGST Act proposes to include such sales in Schedule III which will mean that such transactions will neither be treated as supply of goods or as supply of services. In that case, there is no need to consider them for computing the TO limit of ₹ 2 crore.

Capital Goods: Table 6 of form 9 mandates separate details of inward supplies of inputs, input services and capital goods which are not readily available in form GSTR-3B. This is a challenge before the RPs to segregate these details form the total turnover of inward supplies. These terms are defined under the CGST Act. Let us examine the definition of “capital goods” u/s 2(19) which states that capital goods mean goods, the value of which is capitalized in the books of account of the person claiming the input tax credit and which are used or intended to be used in the course or furtherance of business.

The said definition is not linked to any Act such as Income-tax Act. All that needs to be seen is whether the said goods are capitalized in the books of account or not. If yes, then those are to be considered as capital goods. The decision to capitalize particular goods may be influenced by the provisions of Income Tax Act. It may so happen that the decision regards capitalization of assets/goods may have to be reversed based on the statutory/tax auditors. In that case, the GST auditor will have to reconsider the issue and classify such goods accordingly.

Normally, the assets in a business are built by way of a composite contract of work and labour which ultimately result into immovable properties. The term “works contract” is defined u/s. 2(119) to mean all such contracts giving rise to immovable properties including plant and machinery. By virtue of clause 6(a) of schedule II, the activity of works contract is treated as service. Here the question arises whether such services which are capitalized should be considered as capital goods. Especially in view of clause (c) of section 17(5) which allows set off in respect of works contract services resulting into immovable property being plant & machinery, it is more necessary to ascertain these services.

There is no definition provided for “capital services”. However, it is a common phenomenon that services utilized in building up a capital asset also go into the value of the capital asset. The capital assets may include either tangible or intangible goods. Intangible assets such as copy rights, trade marks, brand names etc. are capitalized in many cases in the books of account. The services which are utilized in building up such incorporeal rights are capitalized. What treatment should be given to such services?

Clause 5(d) of Schedule II treats development, design, programming, customization, adaptation, upgradation, enhancement, implementation of information technology software as service. Purchase of sophisticated software may be capitalized in the books. Whether such services can be considered as capital goods?

Here, one needs to understand that schedule II seeks to treat certain activities as either supply of goods or supply of services in the hands of the supplier for the purpose of taxation. It will merely have an impact on the discharge of liability. However, in the hands of the recipient, the same activity may be either be goods or services depending upon the true nature of the transaction. The supply of above referred software may be treated as supply of services in the hands of the supplier but the recipient may treat it as goods to be capitalized since time and again, the customized as well as off the shelf software is treated as goods by the courts. This aspect also needs to be looked into while classifying the capital goods and other inputs/input services.

Segregation of capital goods is essential since some of them find place in the negative list. For example, motor vehicles. In clause (d) of section 17(5), all goods and services going into the construction of immovable property meant for own use, excluding plant and machinery, are not eligible for set off. The question crops up here whether all these goods and services should be treated as capital goods and services on which set off is not admissible?

Clarification on these issues ought to be given by the Board.

Transitional credit: So far as transitional credit is concerned, there are many issues therein. For example, form TRAN-1 is filed to show refund of higher amount which is actually not shown in the last return filed before the appointed day. Even if such last return is revised to claim the higher refund, it cannot be considered in view of section 142(9)(b) which prohibits such additional refund to be carried forward. Since TRAN-1 does not auto-check the refund amount filed in the last return under existing law, it allows the higher amount of refund to be carried forward. However, such transition being unlawful, has to be repaid with interest and penalty if utilized to discharge the GST liability. Therefore, transitional credit if improperly availed/utilized, must be repaid with consequential penal burden. But Annual Return expects reporting of the actual amount of such credit carried forward, whether right or wrong. But the GST auditor will have to report such discrepancy.

As one proceeds to conduct the GST audit and file annual return, we will face many more ambiguities and differences in the interpretations.

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.

1 Financial Year
2 GSTIN
3 Legal Name
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

  1. Supplies made to unregistered Persons (B2C)

  2. Supplies made to Registered Persons (B2B)

  3. 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-

  1. 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.

  2. 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.

7. Conclusion

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.

 

Work and worship are necessary to take away the veil, to lift off the bondage and illusion.

Swami Vivekananda