Certain Important clarification on GST Audit and GST Annual Returns

Certain Important clarification on GST Audit and GST Annual Returns

Post Goods and Service Tax (“GST”) implementation, annual return (Form GSTR-9/ Form GSTR-9A) or Reconciliation statement (Form GSTR-9C) is required to be filed for the first time for F.Y. 2017-18. Originally, due date of filing of annual return and reconciliation statement for F.Y. 2017-18 was 31st December, 2018. However, considering the various technical glitches and lack of clarity on multiple disclosure related issues, due date of annual filing has been extended till 31st August, 2019.

Considering various issues being faced by industry, Central Board of Indirect Taxes and Customs (“CBIC” or Department”) is coming up with various clarifications very frequently on different issues of GSTR-9 & GSTR-9C.

Ministry of Finance has issued a press release dated 3rd July, 2019 clarifying following issues:

1. Payment of any unpaid tax:

  • If there is any short deposition of taxes on account of any reason such as non-payment of taxes, erroneously obtained refund etc, then Section 73 of Central Goods and Service Tax Actm 2017 (CGST Act) provides opportunity for to taxpayer of self-payment of such taxes before serving of any notice.
  • Payment should be made alongwith applicable interest. No penalty shall be leviable on taxpayer.
  • Therefore, if taxpayers fails to furnish any information in GSTR-1 or GSTR-3B, such taxpayers may pay the tax with interest through FORM GST DRC-03 at any time.
  • Annual return also provides an additional facility to disclose such supply.

2. Primary data source for declaration in annual return

One of the major concern bothering while filing of GSTR-9 or GSTR-9C is what should be primary source of data for filing of annual return, i.e., GSTR-1 or GSTR-3B or books of accounts? On this issue, department has clarified following issues:

  • Form GSTR-1 and GSTR-3B serves different purposes. GSTR-1 discloses details of outward supplies whereas GSTR-3B is a summary return.
  • Ideally, values appearing in GSTR-1, GSTR-3B and books of accounts should be in sync with each other.
  • If it doesn’t happens, then there are following two possible consequences:
    • Short/Non payment of tax : Details should be furnished in annual return and differential tax should be paid.
    • Excess payment of tax: All information should be declared in the annual return and refund (if eligible) may be applied through FORM GST RFD-01A.
  • No ITC can be reversed or claimed through Annual return.
  • Reversal of ITC can be made through filing of GST DRC-03 separately.

3. Premise of Table 8D of Annual Return

Table 8D of Annual return discloses following information:

Particulars Amount
 ITC as per GSTR-2A (A) XXX
ITC availed during the financial year in GSTR-3B (B) XXX
ITC on inward supplies (other than imports and inward supplies liable to reverse charge but includes services received from SEZs) received during 2017-18 but availed during April, 2018 to March, 2019 (C) XXX
Difference (D=A-(B+C)) XXX
  • Accordingly, Input Tax Credit (“ITC”) appearing in Table -8D is basically the ITC available to assessee as per GSTR-2A but was not availed by him between July, 2017 to March, 2019.
  • As due date of filing of return of March, 2019 has lapsed, therefore, such remaining ITC can’t be claimed through annual return.
  • Question of lapsing of any such credit doesn’t arises since this credit never entered the electronic credit ledger of any taxpayer.
  • Accordingly, assessee need not to concern about information appearing in such column. This information is to be used by the government for settlement purpose only.

4. Detail of information to be furnished in Table 8A of Annual Return

  • Table-8A reflects “ITC as per GSR-2A”.
  • Please note that figures auto-populating in Table 8A of FORM GSTR-9 pertains to only those FORM GSTR-1 which were furnished by the corresponding suppliers by the due date.
  • Accordingly, ITC on supplies made during the financial year 2017-18, if reported by the supplier beyond the due date then it will not get auto-populated in said Table 8A.
  • However, It may also be noted that same will keep on appearing in FORM GSTR-2A
  • In such cases, there would be a mis-match between ITC appearing in FORM GSTR-2A and ITC auto-populated in Table 8A.
  • It is important to note that Table 8A of the annual returns is auto-populated from FORM GSTR-2A as on 1 May, 2019.

5. Premise of Table 8J of Annual Return

  • Table 8J represents “ITC Available but not availed on imports”
  • All credit of IGST paid at the time of imports between July 2017 to March 2019 may be declared in Table 6E (“Import of goods (including supplies from SEZ)”).
  • If such disclosure is done properly, then Table 8I and 8J shall reflect detail of such ITC which was available to the taxpayer but was not claimed by him.
  • As deadline of availing ITC related to FY 2017-18 has already lapsed, taxpayer cannot avail such credit now.
  • There is no question of lapsing of any such credit arises as it was never entered the electronic credit ledger of any taxpayer.

Therefore, taxpayers need not be concerned about the values reflected in this table. This is information that the Government needs for settlement purposes.

6. Difficulty in reporting of information not reported in regular returns

  • Department has received number of representations regarding disclosure of information in Table16A (“Supplies received from Composition taxpayers, deemed supply by job worker and goods sent on approval basis”) or Table 18 (“HSN wise summary of Inward Supplies “) of Annual return.
  • Department has been observed that smaller taxpayers are facing a lot of challenge in reporting of such information as it was not furnished explicitly while filing regular returns in FORM GSTR-1 and FORM GSTR-3B.
  • Accordingly, department has advised taxpayers to declare all such data/ details (which are not part of their regular statement/returns) to the best of their knowledge and records.
  • This data is to be used only for information purposes.
  • Any reasonable/explainable variations in information reported in these tables will not be viewed adversely.

7. Information in Table 5D (Exempted), Table 5E (Nil Rated) and Table 5F (Non-GST Supply)

  • Confusion is arising regarding values should be entered in Table 5D,5E and 5F of FORM GSTR-9 as there is some overlap between supplies that are classifiable as exempted and nil rated.
  • Accordingly, department has clarified that if there is a reasonable/explainable overlap of information reported in these tables, such overlap will not be viewed adversely.
  • The other concern raised by taxpayers is the inclusion of no supply in the category of Non-GST supplies in Table 5F.
  • For this purposes of reporting, non-GST supplies shall include supply of alcoholic liquor for human consumption, motor spirit (commonly known as petrol), high speed diesel, aviation turbine fuel, petroleum crude and natural gas and transactions specified in Schedule III of the CGST Act.

8. Reverse charge in respect of Financial Year 2017-18 paid during Financial Year 2018-19

  • Representation also highlighted the issue that in which table a taxpayer should disclose taxes which were to be paid on reverse charge basis for the FY 2017-18 but was paid during FY 2018-19.
  • Clarification is provided that since the payment was made during FY 2018-19, the ITC against such payment is also availed in FY 2018-19 only.
  • Therefore, such details will not be declared in the annual return for the FY 2017-18 and it will be declared in the annual return for FY 2018-19.
  • However, If there are any variations in the calculation of turnover on account of this adjustment, it may be reported with reasons in the reconciliation statement (FORM GSTR-9C).

9. Role of Chartered Accountant or a cost accountant in certifying reconciliation statement

  • There are apprehensions that the chartered accountant or cost accountant may go beyond the books of account in their recommendations under FORM GSTR-9C.
  • In this regard, CBIC has made it clear that  their role is limited to reconciling the values declared in annual return (FORM GSTR-9) with the audited financial statements.

10. Turnover for eligibility of filing of reconciliation statement

  • It has been clarified that for the purpose of checking applicability of reconciliation statement in form GSTR-9C, aggregate turnover i.e. the turnover of all the registrations having the same Permanent Account Number is to be used .
    • E.g. If  Mr. X is having 2 registrations in 2 different States on the same PAN, say State Delhi (with turnover of Rs. 1.2 Crore) and State Haryana (with turnover of Rs. 1 Crore) they are both required to file reconciliation statements individually for their registrations since their aggregate turnover is greater than Rs. 2 Crore.
  • The aggregate turnover for this purpose shall be reckoned for the period July, 2017 to March, 2018.

11. Treatment of Credit Notes / Debit Notes issued during FY 2018-19 for FY 2017-18

  • Provisions of CGST Act provides that no credit note having tax implication can be issued after the month of September 2018 for any supply pertaining to FY 2017-18;
  • However, a financial/commercial credit note can be issued.
  • Accordingly, If the credit or debit note for any supply was issued and declared in returns of FY 2018-19, however provision for same was made in the books of accounts for FY 2017- 18 then the same shall be declared in Pt. 5 (“Details of Outward supplies made during the financial year on which tax is not payable “) of the annual return.
  • Further, representations were received that there is no provision in Pt. II (“ Reconciliation of turnover declared in the Audited Annual Financial Statement with turnover declared in Annual Return (GSTR-9) “)of the reconciliation statement for adjustment in turnover in lieu of debit notes issued during FY 2018-19 although provision for the same was made in the books of accounts for FY 2017-18.
  • In such cases, they may adjust the same in Table 5O of the reconciliation statement in FORM GSTR-9C.

12. Duplication of information in Table 6B and 6H

  • Information to be furnished in column number B & H of Table 6- “Details of ITC availed during the financial year “ are as follows:
  • Table-6B – Inward supplies (other than imports and inward supplies liable to reverse charge but includes services received from SEZs)
  • Table-6H- Amount of ITC reclaimed (other than B above) under the provisions of the Act
  • Many taxpayers filed represented about duplication of information in Table 6B and 6H of the annual return.
  • Department has clarified that label in Table 6H clearly states that information declared in Table 6H is exclusive of Table 6B.
  • Therefore, information of such input tax credit is to be declared in one of the rows only.

13. Reconciliation of input tax credit availed on expenses

  • Table 14- “Reconciliation of ITC declared in Annual return (GSTR-9) with ITC availed on expenses as per audited financial statement or books of accounts”.
  • Accordingly, Table-15 is reconciliation statement which calls for reconciliation of input tax credit availed on expenses with input tax credit declared in the annual return.
  • It has been clarified that only those expenses are to be reconciled where input tax credit has been availed.
  • Further, the list of expenses given in Table 14 is a representative list of heads under which input tax credit may have been availed. The taxpayer has the option to add any head of expenses.

DISCLAIMER: The views expressed are strictly of the author and VJM & Associates LLP. The contents of this article are solely for informational purpose. It does not constitute professional advice or recommendation of firm. Neither the author nor firm and its affiliates 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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