SynopsisThis will bring relief to SMEs that are struggling with the requirement for audits under numerous laws.
As in the cases of Companies Act, Income Tax Act and the erstwhile VAT laws, the GST Law also mandated the concept of an audit of annual accounts for a specified class of taxpayers by a professional.
Under Section 35(5) of the Central Goods & Services Tax Act, 2017 (CGST act), taxpayers with an aggregate turnover greater than the prescribed threshold (Rs 5 crore for FY 2019-20) were required to get their annual accounts audited by a Chartered Accountant or Cost Accountant and furnish the audited statement in Form GSTR-9C.
Further, Section 44 of the CGST Act required every person registered under GST Law (except identified persons) to furnish an Annual Return for every Financial Year in GSTR-9 along with furnishing their audited accounts and reconciliation statement of returns and books.
Now, vide Clause 101 of the Finance Bill 2021, the Government has entirely dispensed with the requirement for GST Audit under Section 35(5) of the CGST Act. Further, vide Clause 102, the Finance Bill has substituted the requirement to furnish the audited accounts and a reconciliation statement by the taxpayers with only the filing of annual return and reconciliation statement on self-certification basis.
There is a lack of clarity on the effective date of the amendments which has led to confusion among the taxpayers. (Pic: Nirmala Sitharaman)This proposal is seen as a great relief by many small and medium concerns who were struggling with the requirement for the audits under numerous laws. However, this imposes an added responsibility on the taxpayers to ensure the accuracy and completeness of their GST returns. With increased powers of scrutiny at the disposal of the taxmen, it is important that taxpayers do not take this relaxation lightly.
Although these proposals have abolished the requirement for GST Audit by a Chartered Accountant or Cost Accountant, the Finance Bill states that these amendments shall come into force only from the date which the Central Government may appoint, by notification in the Official Gazette.
This lack of clarity on the effective date of the amendments has led to widespread confusion and concerns, among both taxpayers and professionals regarding the GST Audit for the Financial Years 2019-20 and 2020-21. GST Audit for Financial Year 2019-20 has already been completed for many taxpayers and is under progress for many more. Currently, the Government has extended the due date for this audit until 28 February 2021, consequent to representations from industries and professionals.
At the time of writing this article, in the absence of official notifications or press releases on this issue, it is widely believed that the GST Audit for Financial Year 2019-20 would be required to be completed under the present norms. However, there are contrary views on whether the Government would enforce this provision prospectively from Financial Year 2021-22 to which the budget pertains or whether they may abolish the requirement right from the current Financial Year 2020-21 making the waiver available for annual return for FY 2019-20 as well.
In view of these issues, one can only hope that the Government will soon clarify the applicability of these amendments and address the concerns of the taxpayers at the earliest.
(The writer is Partner & Leader – Indirect Tax, BDO India)
( Originally published on Feb 04, 2021 )