- The reconciliation is to be accompanied with certification from the auditor.
- Taxpayers should note that it appears that the said amount is to be paid in cash (and not credit).
- The Government has prescribed 2 different certifications as part of GST Audit Format.
Under GST, annual return is to be furnished in GSTR-9 (recently notified on September 4, 2018). In addition, as per Section 35 of CGST Act, 2017, every tax payer whose turnover exceeds Rs 2 crore during a financial year, is required to submit audited annual accounts and a reconciliation statement in GSTR-9C.
The Government on Thursday through the notification No. 49/ 2018 – Central tax dated September 13, 2018 has notified the format for GSTR-9C.
GSTR-9C – Design
A look at GSTR-9C makes it clear that it is essentially a reconciliation statement for reconciling turnover, input tax credits and tax payments reported in GST returns (annual return) vis-a-vis annual books of accounts.
GSTR-9C is broadly segregated into the following:
a) Gross turnover (including taxable and non-taxable turnovers)
b) Taxable turnover
c) Tax liability and payments (rate-wise)
d) Input tax credit availment
The reconciliation is to be accompanied with certification from the auditor (can be statutory auditor as well). Further, there is a separate table for auditor’s recommendation on additional liability to be discharged on account of non-reconciliation of turnover and input tax credit. The auditor may also recommend on erroneous refunds, outstanding demands etc.
There is a separate table for disclosing additional amount payable on account of un-reconciled amount as per Sr. No. 1, 2, 3 and 4. Taxpayers should note that it appears that the said amount is to be paid in cash (and not credit).
“While the final Audit format appears less labyrinthine, undertaking five different reconciliations, providing recommendations on the additional liability and certifying whether correct books of accounts have been maintained is still going to be an arduous task for the GTS Auditor.” says Harpreet Singh, Partner, Indirect taxes, KPMG.
Some points for consideration
The format prescribes indicative sub-heads under which the expenses are generally booked in the financials (like freight, purchases, imports, employee cost, repair & maintenance, capital goods etc.). Tax payer may add/ delete the sub-head as per relevancy and against these sub-heads, the amount of input tax credit as reported in financials is to be reconciled with annual return. However, this is a new requirement and could be challenging for most taxpayers.
Fortunately, the Government has prescribed 2 different certifications as part of GST Audit Format – one where reconciliation statement is drawn and audited by statutory audit and the other wherein it is drawn and audited by a person other than statutory auditor.
“With the Audit format being released and 31st December 2018 deadline, it would be prudent on part of the dealers to quickly appoint their GST Auditor and initiate the pre-audit process by collating information and documents required for the purpose of Audit.” adds Singh
It would, however, be interesting to see if the auditors would be comfortable with the prescribed language for certifications and if any changes in the language would be allowed while certifying the reconciliation statement. At the moment, Part B provides the format of the certification.