GSTR – 9C – ENHANCEMENT OF SCOPE FOR PRACTISING PROESSIONALS

[Mr. M. GOVINDARAJAN]

GST Audit

Section 35(5) of the Central Goods and Services Tax Act, 2017 (‘Act’ for short) read with Rule 80(3) of Central Goods and Services Tax Rules, 2017 (‘Rule’ for short)  provides that every registered person whose turnover during a financial year exceeds ₹ 2 crores shall get his accounts audited by a Cost Accountant or a Chartered Accountant.  The registered person shall submit a copy of the audited annual accounts, the reconciliation statement under section 44 (2)  and such other documents in such form and manner as may be prescribed.

This audit is not applicable to any department of the Central Government or a State Government or a local authority whose accounts are subjected to audit by the Comptroller and Auditor-General of India or an auditor appointed for auditing the accounts of local authorities under any law for the time being in force.

Reconciliation Statement

Section 44(2) of the Act read with Rule 85(3) provides that every registered person who is required to get his accounts audited under section 35(5) shall furnish, electronically, the annual return 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.    The reconciliation statement shall in Form GSTR – 9C, which shall be filed electronically.

Form GSTR – 9C

Form GSTR – 9C meant for reconciliation of the value of supplies declared in the return furnished for the respective financial year with the audited financial statement has been introduced vide Notification No. 49/2018-Central Tax, (Central Goods and Services Tax (Tenth Amendment) Rules, 2018)  dated  13.09.2018.  The same form has been substituted by another form by Notification No. 74/2018-Central Tax, (Central Goods and Services Tax (Fourteenth Amendment) Rules, 2018), dated 31.12.2018.

Contents of Form GSTR – 9C

Form GSTR – 9C contains two parts as-

• Part A – Reconciliation Statement;
• Part B – Certification.

Reconciliation Statement

The reconciliation statement in Part A of Form GSTR – 9C has five sub parts as-

• Part I – Basic details of registered person (Table 1 to 4);
• Part II – i. Reconciliation of turnover declared in audited financial statement with turnover declared in Annual Return – Form GSTR 9 (Table 5 – 6);

ii. Reconciliation of taxable turnover (Table 7 – 8);

• Part III – i. Reconciliation of tax paid (Table 9- 10);

               ii.Additional amount payable but not paid (Table 11)

• Part IV – Reconciliation of input tax credit (Table 12  - 16);
• Part V – Auditor’s recommendation on additional liability due to non reconciliation.

Verification

Form GSTR – 9C has two types of verification – one to be given by the Auditor and the other by the registered person who will upload the Form GSTR 9C after duly signed by the Auditor.

Certification

Part B of Form GSTR – 9C is certification.  It can be done by-

• Certification in cases where the reconciliation statement (FORM GSTR-9C) is drawn up by the person who had conducted the audit;
• Certification in cases where the reconciliation statement (FORM GSTR-9C) is drawn up by a person other than the person who had conducted the audit of the accounts.

Some points to be noted

The following are to be considered before filing Form GSTR – 9C-

• It is mandatory to file all your FORM GSTR-1, FORM GSTR-3B and FORM GSTR -9 for the FY 2017-18 before filing this return. The details for the period between July 2017 and March 2018 are to be provided in this statement for the financial year 2017-18.
• The reconciliation statement is to be filed for every GSTIN separately.
• The reference to current financial year in this statement is the financial year for which the reconciliation statement is being filed for.

Part II - Reconciliation of gross turnover

The gross turnover with the audited financial statement is to be reconciled in the following method-

1. The turnover, including exports,  as per the audited financial Statement      =  xxx

ADD

2. Unbilled revenue at the beginning of Financial Year= xxx
3. Unadjusted advances at the end of the Financial Year           = xxx
4. Deemed Supply under Schedule I= xxx
5. Trade Discounts accounted for in the audited Annual

Financial Statement but are not permissible under GST        = xxx

6. Credit notes accounted for in the audited Annual

 Financial Statement but are not permissible under GST       = xxx

7. Adjustments in turnover under section 15 and rules

There under= xxx

8. Adjustments in turnover due to foreign exchange

Fluctuations= xxx

1. Adjustments in turnover due to reasons not listed above       = xxx

Total    = xxx

LESS

10. Credit Notes issued after the end of the financial year but

 reflected in the annual return= xxx

11. Turnover from April 2017 to June 2017         = xxx

50. Unbilled revenue at the end of Financial Year= xxx

1000. Unadjusted Advances at the beginning of the Financial Year= xxx
14. Adjustments on account of supply of goods by SEZ units to

DTA Units      = xxx

• Turnover for the period under composition scheme= xxx
• Adjustments in turnover under section 15 and rules

There under     = xxx

17. Adjustments in turnover due to foreign exchange

Fluctuations    = xxx

18. Adjustments in turnover due to reasons not listed above       = xxx

Total    = xxx

Annual turnover after adjustments= xxx

19. Turnover declared as in Form GSTR – 9       = xxx
20. Un reconciled turnover (S-T)  = xxx

Reasons for unreconciled annual turnover are to be given in Table 6 of the Form.

Reconciliation of taxable turnover

The reconciliation of taxable turnover is to be done as per the following method-

1. Annual turnover after adjustments             = xxx

LESS

2. Value of Exempted, Nil Rated, Non-GST supplies,

No-Supply turnover= xxx

3. Zero rated payment of tax      = xxx
4. Supplies on which tax is to be paid by the recipient on reverse

charge basis     = xxx

Total= xxx

5. Taxable turnover as per adjustment= xxx

6. Taxable turnover as per liability declared in Annual Return-Form GSTR9  = xxx

Unreconciled taxable turnover (E-F)= xxx

Reasons for unreconciled taxable turnover are to be given in Table 8 of the Form.

Part III - Reconciliation of tax paid

Table No. 9 gives various tax rates for which tax is payable.  The rates are 5%; 5% (RC); 12%; 12% (RC); 18%; 18% (RC); 28%; 28% (RC); 3%; 0.25%; 0.10%.  In addition the details of interest, late fee, penalty and others are to be furnished.  For each item the following values are to be given-

• Taxable value;
• Tax payable on taxable value-

• Central tax;
• State tax/Union Territory Tax;
• IGST;
• Cess, if applicable.

(The above details are auto populated)

1. The tax payable shall be arrived at by the above method= xxx
2. Total amount paid as declared in the Annual return   = xxx

3. Unreconciled payment of tax (A-B)   = xxx

Reasons for unreconciled payment should be given in Table 10.

In Table No.11, the additional amount payable but not paid due to reasons specified in the Tables 6,8 and 10.

Part IV - Reconciliation of ITC

The following is the work sheet for reconciliation of ITC-

1. ITC availed as per audited Annual Financial Statement for the State/ UT

(For multi-GSTIN units under same PAN this should be derived from

books of accounts)      = xxx

ADD

2. ITC booked in earlier Financial Years claimed in current

Financial Year= xxx

LESS

3. ITC booked in current Financial Year to be claimed in subsequent

 Financial Years          = xxx

4. ITC availed as per audited financial statements or books of

Account= xxx

5. ITC claimed in Annual Return (GSTR9)= xxx
6. Unreconciled ITC       = xxx  ITC 1

Reasons for un-reconciled difference in ITC are to be specified in Table No. 13.

Reconciliation of ITC declared in Annual Return (GSTR9) with ITC availed on expenses as per audited Annual Financial Statement or books of account

This Table No.14 contains  4 columns-

• Description;
• Value;
• Amount of Total ITC;
• Amount of eligible ITC availed.

The following are the descriptions for which the value, amount of total ITC and the amount of eligible ITC availed are to be furnished-

1. Purchases;
2. Freight/Carriage;
3. Power and fuel;
4. Imported goods (Including received from SEZs);
5. Rent and Insurance;
6. Goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples;
7. Royalties;
8. Employees' Cost (Salaries, wages, Bonus etc.);
1. Conveyance charges;
10. Bank Charges;
11. Entertainment charges;
50. Stationery Expenses (including postage etc.);
1000. Repair and Maintenance;
14. Other Miscellaneous expenses;
15. Capital goods;
16. Any other expense 1;
17. Any other expense 2;
18. Total amount of eligible ITC availed

19. Total ITC claimed in Annual Return (GSTR 9)

20. Un-reconciled ITC= ITC 2

Reasons for un-reconciled difference in ITC are to be specified in Table No. 15.

Tax payable on un-reconciled difference in ITC (due to reasons specified in 13 and 15 above)

In Table No. 16 the amount payable in respect of the following is to be furnished-

• Central Tax;
• State Tax/Union Territory Tax;
• Integrated Tax;
• Cess;
• Interest;
• Penalty.

Part  V - Auditor's recommendation on additional Liability due to non-reconciliation

This table contains the following columns-

• Description;
• Value;
• Central Tax;
• State Tax/Union Territory Tax;
• Cess, if applicable.

The following are tax rates and other payments made for the above categories-

• 5%;
• 12%
• 18%;
• 28%
• 3%;
• 0.25%;
• 0.10%
• Input tax credit;
• Interest;
• Late fee;
• Penalty;
• Any other amount paid for supplies not included in Annual Return (GSTR 9);
• Erroneous refund to be paid back;
• Outstanding demands to be settled;
• Others

Part V consists of the auditor’s recommendation on the additional liability to be discharged by the taxpayer due to non-reconciliation of turnover or non-reconciliation of input tax credit. The auditor shall also recommend if there is any other amount to be paid for supplies not included in the Annual Return. Any refund which has been erroneously taken and shall be paid back to the Government shall also be declared in this table. Lastly, any other outstanding demands which are recommended to be settled by the auditor shall be declared in this Table.

Payment of additional liability

Towards the end of the return, taxpayers shall be given an option to pay any additional liability declared in this form, through FORM DRC-03. Taxpayers shall select “Reconciliation Statement‖ in the drop down provided in FORM DRC-03. It may be noted that such liability shall be paid through electronic cash ledger only.

Enhancing scope for practicing professionals

In the service tax regime returns were filed half yearly but there is no requirement for reconciliation between the service tax return and the financial statement.  However the Revenue during the Audit wanted to reconcile the service tax return with the financial statement.  But the same has not been stressed mostly since there is no legal background for this cause.

The Revenue, in the GST regime, legally makes it obligation for the registered person to have a reconciliation statement with the audited financial accounts and also with the Annual Return in certain matters.

The preparation of annual return and the reconciliation statement is not an easy job but it is a heavy challenge one to the practicing professionals.  The GST auditor should be well versed in the entire provisions of the Act and the rules made there under.  The CBIC came with many notifications now and then and also issued so many circulars, clarifications, orders now and then.  The professionals are to accustom with these changes.  The forms have also been changed.  The Government is also proposed to introduce new forms in the next year.  The glitches of GSTN portal is also a hindrance to do the job effectively.  Because of this the last dates for filing the annual return and the reconciliation statement have been postponed.  Now the last date is fixed as 31.08.2019.  It is hoped that this would not be further extended.  It is also hoped that the GSTN portal will be worked without any interruption.

The practicing professionals have to collect all information from their client without any hesitation and get required information to their best satisfaction so that the entire work will be the successful one and the clients also will be happy. 

Therefore, there is no doubt that this work will be definitely a challengeable job and enhancing the scope of the practicing professionals.

Discussions to this article

[Ganeshan Kalyani]

Auditor have to know about accounting method that is practised by his client's company. The reconciliation that is required between tax availed with the ledgers in the profit and loss account can be verified by the auditor only if he has thorough knowledge. I have observed auditors are doing very hard work to understand the new form and its complexity. Clients and auditor both are burning the mid night oil. Really tough time.

[Ganeshan Kalyani]

Just like Income tax has set a different due date to file the income tax return based on certain criteria like individual income tax return, corporate income tax return having no transfer pricing, different date for corporate company having transfer pricing, different date should be prescribed by the government to ease the auditor .

[DR.MARIAPPAN GOVINDARAJAN]

Very tough time and it is a challenging task to the GST Auditors.

[Ganeshan Kalyani]

Yes, Sir.