Complete Analysis of Annual Return And GST Audit Under GST Law

[Sandeep Rawat]

Government has announced for annual return to be filed under Goods & Service tax Act. However a Lot of difficulties are being faced by taxpayers and professionals while filing GST returns due to technical glitches and ambiguous law. After filing monthly returns, a regular person has to even file an Annual Return which is quite detailed. it’s critical to start focusing on various compliances such as input and output reconciliations, preparation and filing of annual return and GST audit certification.

Annual Return and GST Audit

GSTR-9 ANNUAL RETURN

GSTR 9 form is an annual return to be filed once in a year by the registered taxpayers under GST including those registered under composition levy scheme. It consists of details regarding the supplies made and received during the year under different tax heads i.e. CGST, SGST and IGST. It consolidates the information furnished in the monthly/quarterly returns during the year.

PERSONS ARE NOT REQUIRED TO FILE

All the registered taxable persons under GST must file GSTR 9 form. However, the following persons are not required to file GSTR 9

• Casual Taxable Person
• Input service distributors
• Non-resident taxable persons
• Persons paying TDS under section 51 of GST Act.

DIFFERENT TYPES OF RETURN UNDER GSTR-9 FORM

Annual return consolidates the information furnished in the monthly/quarterly returns during the financial year. Four types of annual returns has been notified under GST namely- GSTR-9, GSTR-9A, GSTR-9B and GSTR-9C.:

1. GSTR 9:

 GSTR 9 should be filed by the regular taxpayers filing GSTR 1, GSTR 2, GSTR 3. GSTR 3B during the financial year. The GST annual return form- GSTR 9 for normal taxpayers is divided into 6 parts with 19 tables

• Part-I

Basic details of the taxpayer. This detail will be auto-populated.

• Part-II

Details of Outward and Inward supplies declared during the financial year(FY). This detail must be picked up by consolidating summary from all GST returns filed in previous FY.

• Part-III

Details of ITC declared in returns filed during the FY. This will be summarised values picked up from all the GST returns filed in previous FY.

• Part-IV

Details of tax paid as declared in returns filed during the FY.

• Part-V

Particulars of the transactions for the previous FY declared in returns of April to September of current FY or up to the date of filing of annual returns of previous FY whichever is earlier. Usually, the summary of amendment or omission entries belonging to previous FY but reported in Current FY would be segregated and declared here.

• Part-VI

Other Information comprising details of:

• -GST Demands and refunds,
• HSN wise summary information of the quantity of goods supplied and received with its corresponding Tax details against each HSN code,
• Late fees payable and paid details and
• Segregation of inward supplies received from different categories of taxpayers like Composition dealers, deemed supply and goods supplied on approval basis.

2. GSTR-9A: 

GSTR 9A should be filed by the persons registered under composition scheme filing GSTR 4A during the financial year.

A simplified format for annual return to be filed by composition taxpayers has been notified as Form GSTR-9A as per rule 80. This form is divided into 5 parts with 17 tables which include basic details, details of outward and inward supplies declared, Details of tax paid and other information about particulars of demands and refunds etc.

3. GSTR 9B:

GSTR 9B should be filed by the e-commerce operators who have filed GSTR 8 during the financial year.

4. GSTR 9C: 

GSTR 9C should be filed by the taxpayers whose annual turnover exceeds Rs  2 crores during the financial year  as per rule 80(3) vide notification no. 49/2018 dated 13 September 2018.. All such taxpayers are also required to get their accounts audited and file a copy of audited annual accounts and reconciliation statement of tax already paid and tax payable as per audited accounts along with GSTR 9C.

This form is to be prepared and audited by a chartered accountant or cost accountant. This statement is to be filled for every GSTIN separately and therefore there-can be several reports of GSTR-9C for same PAN.

This form is divided into mainly 2 parts-

PART-A: RECONCILIATION STATEMENT

The figures in the audited financial statements are at PAN level. Hence, the turnover, Tax paid and ITC earned on a particular GSTIN( or State/UT) must be pulled out from the audited accounts of the organisation as a whole.

The Reconciliation Statement is divided into five parts as follows:

Part-I: Basic details:

 Consists of FY, GSTIN, Legal Name and Trade Name. The taxpayer must also mention  if he is subject to audit under any other law

Part-II: 

Reconciliation of turnover declared in the Audited Annual Financial Statement with turnover declared in Annual Return (GSTR 9)-
This involves reporting the gross and taxable turnover declared in the Annual return with the Audited Financial Statements. One must note that mostly the Audited Financial statement is at a PAN level. This might require the breakup of the audited financial statement at GSTIN level for reporting in GSTR-9C.

Part-III: Reconciliation of tax paid-
This section requires GST rate-wise reporting of the tax liability that arose in FY 2017-18 as per the accounts and paid as reported in the GSTR 9 respectively with the differences thereof. Further, it requires the taxpayers to state the additional liability due to unreconciled differences noticed upon reconciliation.

Part-IV: Reconciliation of Input Tax Credit (ITC)-
This part consists the reconciliation of input tax credit availed and utilised by taxpayers as reported in GSTR 9 and as reported in the Audited Financial Statement. Further, it needs a reporting of Expenses booked as per the Audited Accounts, with a breakup of eligible and ineligible ITC and reconciliation of the eligible ITC with that amount claimed as per GSTR 9. This declaration will be after considering the reversals of ITC claimed, if any.

Part-V: Auditor’s recommendation on additional Liability due to non-reconciliation-
Here, the Auditor must report any tax liability identified through the reconciliation exercise and GST audit, pending for payment by the taxpayer. This can be non-reconciliation of turnover or ITC on account of :

• Amount paid for supplies not included in the Annual Returns(GSTR 9)
• Erroneous Refund to be paid back
• Other Outstanding demands to be settled

Lastly, the instructions to the format of GSTR-9C specify that an option will be given to taxpayers to settle taxes as recommended by the auditor at the end of the reconciliation statement.

PART-B: CERTIFICATION.

The GSTR-9C can be certified by the same CA who conducted the GST audit or it can be also certified by any other CA who did not conduct the GST Audit for that particular GSTIN.

The difference between both is that in case the CA certifying the GSTR-9C did not conduct the GST audit, he must have based an opinion on the Books of Accounts audited by another CA in the reconciliation statement. The format for certification report will vary depending on who the certifier is.

DUE DATE

GSTR 9 due date is on or before 31st December of the subsequent financial year.

For instance, for FY 2017-18, the due date for filing GSTR 9 is 31st December 2018.

CONSEQUENCE OF FAILURE TO SUBMIT THE ANNUAL RETURN

Late fees for not filing the GSTR 9 within the due date is ₹ 100 per day per act up to a maximum of an amount calculated at a quarter percent of the taxpayer turnover in the state or union territory. Thus it is ₹ 100 under CGST & 100 under SGST, the total penalty is ₹ 200 per day of default. There is no late fee on IGST.

This return can only be filed once for a financial year. There is no option to revise this return.

However, this fee cannot be more than 0.25% of total turnover in the respective state/union territory

There is no specific penalty prescribed in the GST Law for not getting the accounts audited by a Chartered Accountant or a Cost Accountant. Therefore, in terms of Section 125 of CGST Act, 2017, he shall be subjected to penalty up to ₹ 25,000/-.

MAJOR PROBLEM/ISSUE WHILE CARRRING OUT GST AUDIT

Major problem faced while carrying out GST audit for the financial year 2017-18

• HSN of inward supplies is required in the annual return GSTR 9 which was not needed while filing monthly GSTR 3B.
• Multiple audits under indirect tax laws: VAT audits and Service Tax audit may be required to be carried out for the first quarter and GST audit for the next three quarters;

• The difference in the annual return as per the books of accounts and GST data filed during the financial year.
• Segregated details of ITC availed are required as Inputs/Input services/ Capital Goods

• Reporting of the amended transactions relevant to the FY 2017-18 filed in the returns of April to September of current FY or up to the filing of annual return of FY 2017-18 i.e. 31 Dec 2018, whichever is earlier.
• Complex procedural compliance under GST
• Lack of clarity in the GST law, frequent changes in the law, issuance of more than 300+ notifications;
• Failure of the matching concept – whether it would be possible to identify if the supplier has failed to remit taxes to determine eligibility of credits;
• Reliability of the audit software is not tested;
• Absence of/incomplete mandatory records;
• High volume of procedural lapses and non compliances by the assesses, incorrect documents/documentation procedures;
• Transitional issues (law does address all types of transactions).

GST Auditors should not take up the audits where he is not confident of being updated and be able to conduct his audit adequately.

For further clarification and professional assistance, feel free to contact at [email protected]

(Mr. Sandeep Rawat has vast experience & knowledge in dealing with Direct and Indirect Taxation. He is providing his expertise service as Managing Partner at SRT Consultancy & Service. He can be reached at  [email protected])

Discussions to this article

[SIDHARTH JAIN]

If gst has not been paid by the provider of services or supplier of goods then how could gst credit is available as gst if not paid then credit is not available to receiver of service or receiver of goods.

[Adarsh Sharma]

Cost Accountants also can certify the GSTR-9C which is missing in the article.