WIRC Bulletin - November 2018

GST-Annual Return GSTR 9 And Reconciliation Statement GSTR 9C

GST-Annual Return GSTR 9 And Reconciliation Statement GSTR 9C

CMA Arun S. Karnik
Contact : 90040 35754 • E-mail: [email protected]

  1. 35(5) of the CGST Act, 2017 (the Act) requires all taxable persons with a turnover exceeding rupees 2 crore to get the GST records audited by a Cost Accountant or a Chartered Accountant in practice  and  furnish a copy of audited annual accounts and a Reconciliation Statement, duly certified by the auditor, in Form GSTR-9C while filing the Annual Return in Form GSTR 9.

That is, the Annual Return for the year ended March 31, 2018 (the period from July 1, 2017 to March 31, 2018), which is to be filed by December 31, 2018 cannot be filed by such taxable person without the Reconciliation Statement GSTR 9C, duly certified by the auditor  

 

The Central Board of Indirect Taxes and Customs (CBIC) has notified the format of the Reconciliation Statement to be signed by the GST Auditor appointed to conduct audit under S. 35(5) of the Act.

A perusal of Form GSTR 9C would reveal that the Reconciliation Statement involves reconciliation of the information furnished in the Annual Return GSTR 9 and the financial records of the registered person.

It is to be noted that both the Forms GSTR 9 and GSTR 9C are to be filed for each one of the Goods and Services Tax Identification Number (GSTIN).  Thus, where a registered person has operations in more than one state or has opted for multiple registrations in a state, such registered person would  posses more than one GSTINs against his PAN no. In such cases, the GSTIN-wise data will have to be extracted from the financial books of the entity.

The Annual Return essentially involves compilation of the data furnished in the GSTR 1 and GSTR 3B Returns filed during the year. An attempt is made to consider individual line-wise requirements of GSTR 9C, its connection with the relevant details in the Annual Return GSTR 9 and the audited financial statements.

  1. Section 5 of the GSTR 9C deals with reconciliation of gross turnover.

The figure of turnover as reported in the audited financial statements may

differ from that reported in the GST Returns during the year on account of the

following factors:

  1. Revenue included in the previous year on accrual basis but actually billed

during the audit year. GST would be payable on such accrued revenue of

the earlier year if billed during the audit year and accordingly the GSTR 1

and GSTR 3B Returns will have reported such revenue during the audit

year. Thus,  the revenue figure reported in the audited financial

statements will be lower than that reported in the GST Returns. Similarly,

the audited financial statements may include revenue accounted on

accrual basis but which is actually billed in the subsequent year. Since

GSTR 9 Return will include turnover only on the basis of billing such

revenue included in the audited financial statements on accrual basis will

have to be reduced to reconcile with the Annual Return.

 

b.On the other hand, advances might have been received from customers

against pending orders. These advances, if received before October 12,

2017 (in the case of persons having turnover less than rupees 1.50 crore) or

before November 15, 2017 (in the case of persons having turnover more

than rupees 1.50 crore), would be liable for payment of GST. Thus, such

advances would get reported in the GSTR 1 and GSTR 3B Returns. However,

the financial statements will not recognize unbilled advances as income.

Similarly, unbilled advances carried forward from the previous year, billing

in respect of which was done during the audit year would be recognized as

revenue in the audited financial statements, whereas the GST Returns will

not reflect such carried forward unbilled advance as turnover during the

audit year.

 

  1. c. Schedule I of the CGST Act lists certain supplies as ‘deemed supplies’ even

if these supplies are made without consideration. Value of such deemed

supplies will be reported in the GST Returns whereas these supplies will not

be reflected as revenue in the audited financial statements.

 

 

  1. d. Where credit notes have been issued after the end of the audit year in

respect of invoices raised during the audit year, such credit notes will get

reflected in the GSTR 1 and GSTR 3B Returns of the following year,

however such credit notes will get included in the Annual Return. Since

such credit notes will not be included while reporting revenue figures in the

audited financial statements, these will appear as a reconciliation item in the

GSTR 9C.

 

e. Audited financial statements will reflect revenue figures

net of any trade discounts. Where such trade discounts are

not recognized and hence GST has been charged on such

price before reducing such trade discount, the

turnover figures as per audited financial statements and

that reported in the  Annual Return will need to be

reconciled.

 

f. The auditd financial statements are prepared for the period

April, 2017 to March, 2018. Since GST Annual Return is

for the period July 2017 to march 2018, turnover for the

period April-June 2017 included in the turnover as per the

audited financial statements will have to be reduced to

reconcile with the GSTR 9 Return.

 

g. If any advances have been received from customers after

12th October or 15th November, 2017 (as the case may be),

on which GST has not been charged and in respect of

which invoice has not been raised until March 31, 2018,

and if such advances have been included as revenue in the

audited financial statements, the value of these advances

will have to be reduced from the revenue as per the

audited financial statements to reconcile with the GSTR 9

Return.

 

h. S. 15 of the CGST Act prescribes the method of valuation to

be adopted to arrive at the taxable value. There can be

cases where the taxable value for a supply as determined

as per S.15 may be different from the value actually billed

for a supply. Thus, whereas the audited financial statements

will include the amount actually billed, the turnover

declared in the GST Returns will be different  from the

 

amount actually billed. In such cases the difference in billed

amount and taxable amount will have to be reconciled

suitably.

 

   i. The turnover as reported in the audited accounts might have

been adjusted to give effect to foreign exchange

fluctuations. Thus, there will be a difference between the

amount of turnover as per audited accounts and that as

reported in the GST Returns. Such differences arising on

account of foreign exchange fluctuations will have to be

reconciled appropriately.

 

2. Section 6-Despite identifying the items that lead to difference

in the turnover as reported in the audited financial

statements and the Annual Return GSTR 9 there could be in

existence certainissues that are not covered in the various

items included in section 5 of the GSTR 9C statement. Section

6 of the GSTR 9C seeks  reasons for such un-reconciled

amount.

 

3. In the section 7 of the GSTR 9C is to be shown the net taxable turnover subject to GST. That is, the amount of turnover as arrived at in section 5 minus :

i. Nil-rated supplies;

ii. Non GST supplies;

iii. Supplies that are not deemed to be a ‘supply’ under

any of the provisions of the Act;

iv. Zero-rated supplies (exports and supplies to SEZs) made

without payment of tax;

v. Supplies that attract reverse charge mechanism under

S. 9(3) of the Act;

vi. Un-reconciled turnover after making adjustments for

items i to v above, and reasons for such differences.

 

4. Section 9 of the GSTR 9C requires reconciliation of taxes

payable and actually paid.

 

 5. Section 12 of the GSTR 9C relates to account of the input tax

credit (ITC) availed during the year as per in the audited

financial statements and its reconciliation with the

corresponding figures of ITC reflected in the Annual Return

GSTR 9. Difference between the ITC figures reported in the

audited financial statements and that reported in the GSTR 9

could arise on account of the following factors:

i. Input tax credits booked in the financial books of the

earlier year but actually availed during the audit year. A

typical example of this is ITC carried forward from the

earlier year under the transitional provisions (TRAN I,

etc.).

ii. There can be cases where ITC, though booked in the

financial books, could become available only in the

following financial year. For example, if the supplier has

omitted to declare the supply in his GSTR 1, such ITC

claimed will not get reflected in the GSTR 2A for the time

being. Such ITC will be available for availment in the

subsequent  financial year after the supplier corrects the

omission.

 

     Check points for the auditor:

a. The auditor should prepare details of eligible and

ineligible credit pertaining to Inputs, Input Services and

Capital goods for filing annual return in Form GSTR -9.

           b. Check ITC register maintained by the company to

ensure that no ineligible credits have been taken

erroneously  in monthly return Form GSTR-3B.

           c. Check if GST paid under reverse charge in under Section

9(3)  and Section 9(4) (as applicable) of the CGST Act

has been  correctly availed as ITC to the extent eligible.

 

d. Ensure that the ITC in respect of the invoices for inward

supplies  which were not paid within 180 days from

date of invoice was duly reversed. Similarly, ensure that

such reversed ITC has been duly reinstated when

payment is subsequently made to the supplier.

 

 

e. As per Rule 42(2) of the CGST Rules, 2017,  reversal in

respect ITC availed on common  inputs and input

services used for making both taxable and exempted

supplies, is to be done  for the financial year before

the due date for furnishing of the return for the

month of September (October 20, 2018). Ensure that

the reversals, where applicable, are duly carried out.

 

6. Section 13 of the GSTR 9C is for explain the reasons for

Un reconciled difference, if any, in ITC claimed in the Annual

Return and the adjusted figure of ITC as worked out in

Section. 12 above.

 

7. Section 14 is to provide break-up of ITC claimed according to

expense heads in the audited financial statements. In case the

total of expense-head wise ITC availed does not match with

the ITC claimed in the Annual Return, reasons will have to be

provided for such un-reconciled differences under section 15.

 

8. If on account of un reconciled differences, if any, GST

becomes payable, such tax liability and interest/penalty, as

applicable, is to be shown in section 16 of the GSTR 9C.

 

9. Part V is for the GST auditor’s recommendation regarding

additional tax liability/penalty on account of un-reconciled

items.

 

DISCLAIMER: The contents of this article are solely for informational purpose. The author does not accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon.

 

 

 

 

 
   

 

 

 

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