Sample Management Representation Letter - GST Audit

[Pragya Rajpurohit]

The main purpose of Management Representation Letter on various matters is to focus the management’s attention on those matters so that the management can specifically address those matters in more detail than would otherwise be the case. 

However the Auditor needs to understand the limitations of management representations as audit evidence. Getting a Management Representation Letter does not absolve the auditor of its responsibilities. He has to exercise professional care in conducting the audit.

Given below is a sample Management Representation Letter for GST Audit. It is not intended to be a standard letter. Representations by management will vary from one entity to another and from one period to the next.

Date

To Auditor,

Sub: Management Representation Letter

This representation letter is provided in connection with your audit of the financial statements and attest function of GSTR 9C of _________Company for the year ended March 31, 2018 as required under the provisions of section 35(5) and section 44(2) of the Goods And Service Tax Act, 2017 (In short “GST Act”) read with rule 80(3) of the Goods and Service Tax Rules (In short “GST Rules, 2017”)

We acknowledge our responsibility for the fair presentation of the financial statements in accordance with (indicate applicable financial reporting framework).

We confirm, to the best of our knowledge and belief, the following representations:

1. Audited Financial Statements (in case where done by another auditor):

1. We have enclosed a copy of the audited financial statements

2. The accounting policies followed by the company are provided in the notes to accounts to the audited financial statements

2. Branch wise trial balance:

Branch wise attested trail balance is provided in Annexure I

3. Registration:

1. Management has duly registered every place of business within the State and are listed in the registration certificate

2. The following are the list of various place of business within the state:
   • _________
   • _________
   • _________
   • _________

4. Advance Ruling:

1. During the year, three applications have been filed for Advance Ruling in the state and the following is the status of each:

• • Order Received (Annexure II)
  • Order Received and Appeal filed (Annexure III)
  • Pending before the Authority.

2. We confirm that we have duly applied the Advance Ruling received (and not disputed) to all the transactions as envisaged in the order unless appeal is filed.

5. Classification

1. We confirm that we have correctly classified into goods / services as per Schedule II of the CGST Act.

2. We have applied applicable notifications and advance rulings and identified the HSN for the various supplies made by us.

3. A List of the various supplies along with HSN and rate of GST adopted is enclosed in Annexure IV

6. Outward Supply:

1. All the supplies made during the year have been properly recorded in the books of accounts.

2. All supplies made have been valued as per Section 15 of the CGST Act and Rules made there under.

3. We have proper mechanism in place to comply with the provisions of time of supply as provided in Section 12 and Section 13 of the CGST Act.

4. All the supplies made by us have been properly classified in to interstate and intra state; B2B and B2C and properly recorded.

5. GST has been paid on sale of assets if any.

6. We understand the implications of Schedule III of the CGST Act (supply without consideration). We have adequate mechanisms in place to identity and value such deemed supplies as per the Act and Rules made there under.

7. In respect of export of goods, export of services, deemed exports, SEZ supplies we have satisfied the conditions specified in the Act and Notifications.

8. All the supplies have been declared in the returns and taxes are duly collected and paid.

7. Inward Supply:

1. All inward supplies have been properly classified into intra-State, inter-State inward supplies or imports.

2. All inward supplies have been properly classified into Capital goods, Inputs and Input Services.

3. We have declared all the inward supplies in our books of account and duly filed in the GST returns.

4. We have paid GST under reverse charge mechanism as provided on all unregistered inward supplies until 12^th October 2017

5. We have paid GST under reverse charge mechanism as provided in Section 5(3) of the IGST Act and Section 9(3) of the CGST Act and notifications made there under.

6. The HSN details as recorded in the books of accounts are true and correct to our knowledge.

8. Input Tax Credit (ITC):

1. We have satisfied all the conditions of Section 16 of the CGST Act in respect of ITC, i.e.

• • All goods/services are used in the course / furtherance of business.
  • We confirm that we have availed ITC based on all tax invoices / any other eligible document.
  • ITC is availed only on receipt of goods / services
  • We have aid all the vendors within 180 days except those provided in Annexure V
  • In respect of payment of tax by supplier, we do not have sufficient control over it. GSTR 2A also does not provide sufficient assurance as to payment of taxes as it is not linked to GSTR 3B. However we have enclosed the GSTR 2A Reconciliation in Annexure VI prepared as on XX.XX.XX
  • If ITC is claimed on purchase of capital asset, no depreciation is claimed on the same.

2. We have properly classified the ITC into CGST / SGST and IGST. Wherever wrongly classified we have made the corrections.

3. We have done reversals as provided in Section 17 of the CGST Act for the following:

• • In respect of ITC claimed but goods lost or destroyed or disposed of by way of gift, free samples, etc

• • In respect of ITC blocked U/s. 17(5) of the CGST Act.

• • In respect of goods or services commonly used for making both (taxable and zero rated) and exempted supplies as per Rule 37, 42, 43 every month. WE have also verified the reversal at the end of the year.

4. In respect of Transitional Credits availed by us, we provide the below:

• • We have satisfied all the conditions of transitional credits as provided in Section 140, 141, 142 of the CGST Act.

• • We have complied with all the procedural requirements as provided in the rules and properly filed Tran-1 / Trans-2 forms.

• • In respect of benefits arising due to additional credits we have complied with the provisions of Anti-profiteering.

9. Refund:

1. A list of the refund applications made and their status is provided in Annexure VII

2. We confirm that we have filed refund application only for claims that are eligible and upon satisfaction of the conditions of Chapter XI of the CGST Act.

10. Job Work:

1. In respect of job work we have satisfied all the conditions of Section 19, Section 143 of the CGST Act.

2. We have filed form ITC 04.

3. As at the year end the stock lying with job worker and their status as on date are provided in Annexure VIII

4. If goods are not received within time specified in the Act, GST has been paid.

11. Filing of GST Returns:

1. We have filed all the returns (GSTR 1, GSTR 3B, GSTR 9, ITC 04, ITC 01..........) as applicable to us within due date except the delays as reported in Annexure IX

2. On filing of returns after due dates, we have paid the applicable interest as provided in Annexure X

3. We are aware of the decision by the Telangana High Court that interest is to be remitted on gross tax liability before adjustment of ITC, however we have paid interest on ­­­­­­­­­­­____________tax liability  (Gross / net).

12. Accounts and Records:

1. We have issued the Tax Invoices / Bill of Supply / E-way bill /Delivery note as per the provisions of the CGST Act.

2. We have raised self invoice in case of payment of tax under reverse charge mechanism.

3. We have maintained proper accounts and records as provided in Chapter VIII of the Act , viz., records of

• production or manufacture of goods;
• inward and outward supply of goods or services or both;
• stock of goods;
• input tax credit availed;
• output tax payable and paid;
• Records required to be maintained by job worker
• Records required to be maintained by owner of warehouse

4. We have maintained the records in hard copy / soft copy at every place of business.

13. Reconciliation Statement in Form 9C

1. We have adequate procedures for reconciliation of GST returns with books of accounts periodically.

2. We have enclosed the reconciliation statement in form 9C for your reference.

 

For ……..
Partner / Proprietor / Director / Authorized Signatory

Discussions to this article

[KASTURI SETHI]

Letter is comprehensive and convey the message properly. Very useful for all.

Para No.11 (C) of the above letter

Regarding the payment of interest, "it is legally and logically incorrect to pay interest on net liability. An assessee may have crores of Rupees in its Electronic Ledger Account, until and unless liability is debited from the account to the Govt. account, it cannot be said that tax has been paid.Without debit, ITC is lying in the account of the assessee and that ITC belongs to assessee and not to Govt.

[RAJENDRA KHANDELWAL]

If Shri Sethi is correct and justifiable then I request to provide the way to withdraw the amount of challan which an assessee had wrongly deposit due overlook without approaching to Govt.. In my opinion such an assessee has to go to the Govt. and submit request with all relevant documents and satisfy/prove them that the assessee is eligible for refund. This clearly indicates that there is no control of the assessee on such amount instead the entire amount is in control of Govt. Then how we can interpret that the amount is belongs to assesse.

[KASTURI SETHI]

Dear Sir, I have regards for your views. Now ball is in Supreme Court. It is my hunch that the issue is most likely to be decided in favour of the Department. I have examined this issue deeply and thoroughly.

[Ganeshan Kalyani]

The tax charged on outward tax invoice is to be paid to the government by 20th of subsequent month. If the consideration is received from the customer in the same month then the taxpayer get that tax money to use till the same is deposited to the exchequer. If the consideration from the customer is received after two months as per the agreed credit terms then the supplier has to be pay the tax from his pocket. On the other side if taxpayer buys goods from the supplier and has two months credit period to settle the bills then he is benefitted of the input tax credit without making payment to his supplier.

[Ganeshan Kalyani]

Government is also asking interest on gross liability even though there is balance in electronic ledger. In case a person is having credit card and saving account in the same bank and if there is outstanding amount to be paid and the delay happens then the interest is charged. Even though there is balance in saving account the interest is charged on default credit card payment.

[Ganeshan Kalyani]

There is chance that account holder may use the money in saving account to meet other need. So both saving and credit card account is considered separately. There is logic. If one says that amount in credit ledger belongs to the taxpayer and he can only offset against the liability in electronic liability ledger then it seems logical for the government to ask interest on gross tax and not on net .

[KASTURI SETHI]

Sh.Ganeshan Kalyani Ji,

Regarding interest on net cash liability/gross amount, full relief has not been granted by Govt. in the Budget, 2019. Still interest is to be charged on gross amount, if SCN is issued under Sections 73 and 74 to the defaulter. This is a well planned strategy by Govt. Major interest is recovered through SCNs issued under Sections 73 and 74 of CGST Act.

It is just like that if you pay bill of electricity or telephone, no surcharge (late fee here interest ) is payable. Anyhow it is incentive for not delaying Govt. dues.