GST audit: The last milestone in the journey of filing returns for FY 2017-18
It is 18 months since GST was implemented. The journey has been similar to a roller coaster ride, full of excitement and blind spots at times, exactly how the largest tax reform in the country is expected to be! Filing of GST returns has gone through its own share of challenges and the Annual return and GST Audit is the last milestone, in completion of the journey of GST returns for FY 17-18.
This being the first year of GST audit, due date for filing the returns now stands extended, giving taxpayers more time to discover the nitty-gritties of compiling the annual returns and getting their GST audit conducted in a smooth manner. In this article, we would discuss certain key aspects of GST audits, which may be of relevance to the taxpayers.
What is GST audit?
Section 44 of the CGST Act, dealing with the filing of GST Annual returns, requires assessees who are subjected to GST Audit, to submit the GST Audit certificate along with Annual return, due date being 30 June 2019.
The GST Audit provisions are enshrined in Section 35 of the CGST Act, read with Rule 80 of CGST Rules, as per which, every registered person with turnover exceeding INR 2 crores, shall get the GST accounts audited by a Chartered Accountant or a Cost Accountant.
The format of GST Audit is prescribed in GSTR 9C, which needs to be submitted along with the Annual return GSTR 9.
Objective of a GST Audit:
The main objective of a GST Audit is to prepare a reconciliation of the particulars declared in GSTR 9 – Annual return, with the audited financial statements.
Hence, as a first step, the taxpayer should be ready with their audited financial statements. The GST Audit Certificate needs to be obtained for each GSTN number of the taxpayers. Taxpayers would hence need to identify the figures appearing in the audited financial statements, at each GSTIN level. This may be challenging task and even if such data is identified, its correctness needs to be verified with audited financial statements.
As a second step, the tax payer needs to be ready with the draft annual return, which shall form the basis of the reconciliation for the GST Auditor.
Understanding GST Audit form ‘GSTR 9C’:
GSTR – 9C has two parts – Part A is the reconciliation statement alongwith certification by the assessee and Part B is the Certification by the auditor.
Part A – Reconciliation
Once the draft annual return is compiled and GSTIN-wise details of financial statements are made available, various reconciliations need to be done for the purpose of filling the GST audit form.
First being, reconciliation between gross turnover as per annual return and as per audited financial statement. Such gross turnover shall exclude the turnover for the quarter April to June 17. Further, adjustments relating to deemed supplies (like stock transfer), unbilled revenue, unadjusted advance, etc. needs to be done, to arrive at the adjusted gross turnover as per GSTR 9.
Another reconciliation is with respect to the taxable turnover between annual return and financials. Any unreconciled differences in the gross turnover and taxable turnover needs to be reported along with reasons by the GST Auditor in GSTR-9C.
Next reconciliation is with respect to tax payable as per financial statements, and actual tax paid as per GSTR 9. Where tax payable is higher than taxes already paid, the difference would need to be paid in cash along with interest.
Input reconciliation shall be done in two parts:
a) One reconciliation is to be done between the total credit availed as per audited financials and total credit availed as per Annual Return for FY17-18.
b) Secondly, such credit availed as per audited financials needs to be bifurcated under various heads in which such expenses have been booked in the financial statements; and then, the same would need to be reconciled with the credit availed as per annual return.
Un-reconciled ITC would need to be paid in cash. In many cases, input tax credit data at the expense head level may not be directly available from the system, and it could be pretty challenging for the taxpayer to obtain such details.
Based on the above reconciliations, the auditor needs to provide his/her 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.
Further, the assesse is also required to provide a declaration to the effect that reconciliation statement uploaded by him / her as duly signed by the auditor has been uploaded as is, and not been tampered or altered with.
Part B- Certification
GST audit can be certified either by the statutory auditor or any other Chartered Accountant / Cost Accountant (other than internal auditor).
The certification form when reconciliation statements are drawn by statutory auditor is different from certification form when reconciliation statements are drawn by a person other than statutory auditor.
Unlike statutory audit wherein the auditor certifies that the books of accounts are true and fair, in the GST audit certificate, auditor is required to certify that Form 9C is true and correct, thus, casting a much higher responsibility on the auditor in case of GST audit.
A careful reading of GSTR 9 and GSTR 9C clearly indicates that the annual return and GST audit is not a simple task of consolidation of monthly GST returns.
There are new sets of information that need to be extracted by the tax payer – be it the need for arriving at the HSN wise summary of inward and outward supplies; or classifying the input tax credit into inputs, capital goods and input services; or identifying the adjustments required for unbilled revenue; or separate disclosure of deemed supplies in the GSTR 9C; or expense head wise bifurcation of ITC availed and so on and so forth.
As it is said – ‘All is well that ends well’ – and for the GST return journey for FY 17-18 to end well, one only hopes that the Government realizes the challenges around the same and announces some relief for the taxpayers, perhaps in terms of relaxing the requirement and doing away with such new set of information, some of which may take lot of time to be compiled.
Source- Economic Times.,/ol>
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