Audit in Limbo


It is for the first time, that the Federation is publishing a special issue on topical subject “Audit” in all its varied aspects. This Federation as in the past continues to disseminate the information and developments to its members through articles as well as by arranging conferences, seminars etc., throughout the Country on regular basis. The present issue of the Journal is earmarked for the subject, since we thought that more elucidation is required.

2. While all the registered persons having turnover in excess of rupees two crore as prescribed in Rule 80(3) of the CGST Rules 2017, have to spend their many hours in preparing the data required to be filled up in several columns of Form GSTR-9C and getting the same audited with the help of a Chartered Accountant who in his turn would also be having his hands full with multifarious types of cases.


It is felt by all professionals that they have to forget their family life during the period of six months from 1st July to 31st December every year, so as to meet with and comply with time Schedule prescribed not only under CGST Act, Income-tax Act but also many other statutory provisions like Companies Act and Public Charitable Trusts Act. The efforts put in by each member of the Chartered Accountancy Profession is hardly appreciated by the beneficiaries of their expertise knowledge especially in the context of the general Indian mentality to wake up only at the fag end of the time limit prescribed under the law. Such people hardly realise about the resultant hard work that will entail at the other end of the professional person. We have been always impressing upon the tax payers to have self-introspection and fall in line with the new developments of the law by removing their past habit of remaining outside the tax net by unhealthy actions on their part.


The first question that is required to be clarified by the authorities concerned is in regard to the meaning of the term “aggregate turnover” appearing in Rule 80(3) of CGST Rules. The definition in Section 2(6) for the said term not only includes the taxable supplies but also exempt supplies, exports etc. In our view, a supplier dealing with only exempted supplies to the extent of 95%, may have 5% taxable supplies, still he will be covered by definition of the term ‘taxable person’ u/s. 2(107) of the CGST Act. Considering that aspect of the matter, we recommend that while computing the quantum of turnover of ruppes two crore prescribed under Rule 80(3), should exclude the supplies which are outside the purview of the Act or supplies on which no taxes are payable under CGST Act or under IGST Act. By adopting this wholesome principle revenue would not be adversely affected but at the same time it would release sizable volume of unproductive work at all levels.


The Central Goods and Services Tax Amendment Act, (31 of 2018) added a proviso to section 35(5) whereby a department of Central or State Govt., or a local authority whose books of account were subject to audit under any law for the time being in force, need not get their accounts separately audited under GST, though they would be covered by the definition of the term ‘registered person’. This exception would also grant them freedom from the submission of the annual return as provided in Section 44(2). That provision refers to only registered persons who were required to get their books audited in accordance with Section 35(5), from which the proviso added by the Amendment Act, 31 of 2018 excludes them.

6. GSTR-9

It is also found that various tables of the annual return in Form GSTR-9 inserted by Notification No. 39 of 2018 (Central Tax) dated 4th September, 2018 as a part of 8th Amendment of CGST Rules, contain several parts and tables to be completed by the persons submitting the annual return as provided in Section 44 ending with a solemn affirmation about the correctness and truthfulness in addition to an assurance that nothing was concealed therefrom. The further declaration to the effect that, when there was reduction in rate of tax, the benefit thereof was or will be passed on to the recipient of the supply is also required to be affirmed.


The last part of the declaration referred to above, presupposes due compliance of section 171 providing for anti-profiteering measure. It seems the draftsmen while providing the said measure, did not realise the practical difficulties that would be faced by the suppliers. In case a manufacturer-supplier, though very much intending to comply the said provision by passing on the benefit of reduction in the rate of tax to his customer-recipient of supply when faced with simultaneously the unforeseen rise in the cost of production equivalent to or more than the reduction of the rate will not be able to show due compliance of Section 171. We are afraid this provision will be a tool in the hands of the officers of the department to unnecessarily harass such suppliers. We therefore recommend that the authority to be constituted under Section 171(2) should also include an independent judicial member who could well appreciate the circumstances in which the harsh provision could not be complied with.


The administration of the new law will take its own time to stabilise both in the minds of administrators as well as suppliers but in our opinion both of them as a class are required to change their past attitude inter-se. Non-compliance habit by tax payers as well as treating each supplier to be tax-dodger, by officers of the department should be a matter of history.


P. C. Joshi
Member, Editorial Board

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