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The Goods and Services Tax (GST) law aims to simplify and implement a taxpayer friendly indirect taxes regime in India. The GST law has brought several multi-tiered central and state taxes under its ambit. The GST has reduced the cascading effect on the prices of goods and services.

The GST law has paved for the way for increased levels of transparency in reporting, administration and governance. The GST has its backbone in the form of a widespread Information technology network infrastructure system called the GSTN (Goods and Service Tax Network).

The GSTN is equipped to facilitate the collection, storage, analysis and retrieval of huge influx of taxpayer data filed from time to time and contribute to the Revenue intelligence. The benefits of GST could be tangible, effective and widespread only if the taxpayers facilitated with a hassle-free compliance and reporting process.

The government has realized and has brought in several taxpayer friendly measures from time to time. While the process has kicked off in the right direction, one may have to wait for more time to let the dust settle down.

The GST law requires taxpayers to file periodical returns in order report their business transactions. In addition to the monthly/ quarterly returns filed, there is a requirement to file an Annual return under the GST law.

In this article, let us look at the overview of annual return, who should file annual returns, different annual return forms, due dates for filing, audit compliances under GST law and related legal provisions.

We shall also look through GSTR 9 and familiarise with various parts therein.

Need for GST Audit and meaning
Audit under GST involves examination of records, returns and other documents maintained by a GST registered person. It also ensures correctness of turnover declared, taxes paid, refund claimed, input tax credit availed and assess other such compliances under GST Act to be checked by an authorized expert.

GST is a trust-based taxation regime wherein a taxpayer is required to self-assess his tax liability, pay taxes and file returns. Thus, to ensure whether the taxpayer has correctly self -assessed his tax liability a robust audit mechanism is a must. Various measures are taken by the government for proper implementation of GST and audit is one amongst them.

Types of GST Audit

 

Types Performed By When Initiated
Turnover based Audit Chartered Accountant or Cost Accountant appointed by the taxpayer If the Turnover exceeds 2 crores^ the taxpayer has to get his accounts & records audited
Normal audit/General Audit Commissioner of CGST/SGST or any Officer authorized by him On order of Commissioner by giving 15 days prior notice
Special audit A Chartered Accountant or Cost Accountant, nominated by Commissioner On order of Deputy/Assistant Commissioner with prior approval of Commissioner

1. What is annual return under GST law

Annual return under the GST law is a summary return to be filed once in a year by the registered taxpayers.  

The annual return consists of the details of supplies made and received during the financial year pertaining to all the tax heads – Central Goods and Services Tax (CGST), State Goods and Services tax (SGST) and Integrated Goods and Services tax (IGST).  

The information mentioned in the Annual returns is predominantly a summary of the details furnished in various monthly and quarterly returns. 

The annual return validates the monthly and quarterly returns filed by the taxpayers throughout the year.

As per Section 44(1) of the Central Goods and Services Tax Act, 2017 (‘CGST Act’), “specified taxpayers are required to file an annual return every year”.  

In accordance with the provisions of Rule 80 of the Central Goods and Services tax Rules, 2017 (‘CGST Rules’), the government has notified the forms for filing annual return under the GST law.

3. Who should file annual return under GST law

Annual return under the GST law should be filed by all taxpayers registered under GST, except the following persons:

  1. Casual Taxable Person
  2. Input Service Distributor
  3. Non-Resident Taxable Person
  4. Persons liable to deduct tax at source (TDS)
  5. Persons liable to collect tax at source (TCS)

4. Audit compliance under GST law

Similar to the other laws, there is a requirement for certain categories of taxpayers to undergo annual audit under GST.  As per Section 35(5) of the CGST Act read with rule 80(3) of the CGST Rules, “every registered taxpayer whose turnover exceeds INR 2 crores in a financial year is required to get the accounts audited by a practicing Chartered Accountant and submit a copy of the audited annual accounts and reconciliation statement in Form GSTR 9C.”

Accordingly, every taxpayer having turnover exceeding INR 2 crores is required to submit GSTR 9C duly certified by a practicing Chartered Accountant or a Cost Accountant along with GSTR 9.  This certification is required once for every financial year.

In addition to the above, the GST law also has provisions for a department audit/ special audit by a practicing Chartered Accountant or Cost Accountant on a need basis.

5. Due dates for filing Annual return of GSTR 9

The annual returns under GST law for the financial year are due for filing on or before 31st December every year.

6. Revision of annual return

There are no specific provisions in the GST law to revise annual returns.  Accordingly, based upon the current version of the law, it appears that the annual return once filed the cannot be revised.

7. Penalties and late fees for non-filing of GST Annual Return

There is no specific penalty prescribed for non-filing/ belated filing of Annual return under the GST law.  However, late fees for delay in filing annual returns have been prescribed.

The late fees for not filing annual return within the due date is INR 100 per day for CGST and INR 100 per day SGST.  Hence, any delay results in late fees of INR 200 per day of default.  There is no late fee on IGST.  The late fees is subject to a maximum cap of 0.25% of the turnover.

8. GSTR 9 – Annual return for Regular Taxpayers

All regular taxpayers filing monthly/ quarterly GST returns should file the Annual return in GSTR 9.  The GSTR 9 has 6 parts for reporting various details.

This part contains the basic details of the taxpayer like GSTIN, Legal and trade names.  These details are auto populated.

 

8.1 Part – I (Basic Details)

This part contains the basic details of the taxpayer like GSTIN, Legal and trade names.  These details are auto populated.

GSTR-9

 

8.2 Part – II (Details of Outward and Inward supplies made declared during the financial year)

The details of all outward and inward supplies made during the year are reported in this part.  These details should be collated by consolidating the data of the monthly/ quarterly returns filed thus far during the financial year.

 8.2.1   Point 4 requires disclosure of aggregate supplies to B2C, B2B, exports/ SEZ sales on payment of taxes, deemed exports, advances liable to tax, inward supplies subject to reverse charge adjusted with the aggregate of debit/ credit notes and amendments, if any.

PartB Form9

8.2.2   Point 5 requires disclosure of details pertaining to exports/ SEZ sales without payment of tax and Exempted/ nil rated/ non-GST supplies. The data needs to be adjusted with the aggregate of debit/ credit notes and amendments, if any.

PartC Form9

 

8.3 Part – III (Details of ITC declared in returns during the financial year)

This part contains details pertaining to Input Tax Credit (‘ITC’) and under two points.

8.3.1 Point 6 contains details of ITC received from various sources segregated under Inputs, Capital Goods and Input Services.  Any transitional credit from the pre-GST regime in Forms TRAN I and TRAN II also needs to be reported.

PartC Form9

8.3.2 Point 7 contains details of Input Tax credit reversed and otherwise ineligible, adjusted with reversals in the transitional credit from the pre-GST regime in Forms TRAN I and TRAN II.

PartE Form9

8.3.3 Point 8 predominantly contains details of reconciliation and differences between ITC auto populated from GSTR 2A with ITC disclosed in Point 6 above and attempts to compute the ITC to be lapsed during the year.

PartF Form9

 

8.4 Part – IV (Details of tax paid as declared in returnsfiled during the financial year)

This part contains details of taxes paid under IGST, CGST, SGST and Cess along with Interest, late fees and penalties.

PartH Form9

 

8.5 Part – V (Particulars of the transactions for the previous FY declared inreturns of April to September of current FY or up to date of filing of annualreturn of previous FY whichever is earlier)

This part contains the summary of all amendments/ omissions pertaining to the previous FY but reported in the subsequent FY.  Any reconciliation to the details reported in the returns filed thus far in points 10 to 13 needs to be provided.

PartI Form9

Any differential tax is payable/ paid on account of the reconciliation above needs to be disclosed under point 14.

PartJ Form9

 

8.6 Part – VI (Other Information)

8.6.1 Point 15 contains particulars of refunds claimed, sanctioned, rejected and pending along with any demands paid/ outstanding in relation to the refunds claimed.  The data needs to be disclosed separately for CGST, SGST, IGST and Cess.

PartK Form9

8.6.2 Point 16 contains details of other supplies received from composition dealers, deemed supplies and goods sent on approval basis

Partl Form9

8.6.3 Points 17 and 18 contain details of HSN wise summary of outward and inward supplies.

Partm Form9

8.6.3 Points 17 and 18 contain details of HSN wise summary of outward and inward supplies.

Turnover-based Audit under Section 35(5) of CGST Act

If the annual turnover of a registered taxpayer is more than Rs. 2 crores^ in a financial year , he is required to get his accounts audited by a Chartered Accountant or Cost Accountant every year.

A financial year covers the 12-month period beginning from April of a calendar year to March of the next calendar year.

Special Note: For the purpose of finding out the turnover limit for Financial Year 2017-18, it has been clarified in the government’s press release dated 3rd July 2019. It shall cover the period 1st July 2017 to 31st March 2018 and excludes the first quarter of FY 2017-18.

^For businesses with an annual turnover of less than Rs 5 crore, filing of GSTR-9C for FY 2018-19 is waived off.

 

Aggregate turnover is calculated as follows:

Aggregate turnover = Value of all taxable (inter-state and intra-state) supplies + exempt supplies + export supplies of all goods and services

 

The total turnover calculation must be PAN-based, which means that once the turnover under the PAN is more than Rs. 2 crores^ all business entities registered under GST for that PAN will be liable for GST audit for a financial year.

^For businesses with an annual turnover of less than Rs 5 crore, filing of GSTR-9C for FY 2018-19 is waived off.

 

Items included while calculating turnover:

  • All taxable (inter-state and intra-state) supplies other than supplies on which reverse charge is applicable
  • Supplies between separate business verticals.
  • Goods supplied to/received from job worker on principal to principal basis.
  • Value of all export/zero-rated supplies.
  • Supplies of agents/ job worker on behalf of the principal.
  • All exempt supplies. E.g. Agricultural produce supplied along with branded ready-to-eat food.
  • All taxes other than those covered under GST Eg: Entertainment Tax paid on the sale of movie tickets.

 

Items excluded while calculating turnover:

Inward supplies on which tax is paid under reverse charge.
All taxes and cess charged under Goods and Service Tax like CGST, SGST or IGST, Compensation Cess.
Goods supplied to or received back from a Job Worker.
Activities which are neither supply of goods nor service under schedule III of CGST Act.

 

Compliances for GST Audit:

Qualification of GST Auditor & Eligibility 

Only a Chartered Accountant or a Cost Accountant can perform a GST Audit u/s 35.

Points to Note:

  1. An internal auditor cannot parallelly be appointed as a GST Auditor.
  2. The GST Act does not allow a GST practitioner to perform the audit. The power to audit is granted only to a Chartered Accountant or Cost Accountant who is in practice or is an employee of a firm of Chartered Accountants or Cost Accountants. Therefore, a Chartered Accountant must not be registered as a GST practitioner for the purpose of issuing the Audit Report.
  3. Where an organisation or an entity has multiple branches registered under GST in different states/UTs, the total aggregate turnover of all such branches is considered while calculating the threshold limit of Rs. 2 crores^.So, if the cumulative turnover of all the branches exceeds Rs. 2 crores^, then the GST audit is applicable to each of these branches, irrespective of whether the turnover of a particular branch is less than the threshold.In such cases, one can appoint either one dedicated auditor for all branches or separate auditor for each branch. Where multiple branches have different auditors, the Standards on Auditing: SA 299 — Responsibility of the Joint Auditors may apply for the purpose of reporting GST Audit observations & Reporting.

^For businesses with an annual turnover of less than Rs 5 crore, filing of GSTR-9C for FY 2018-19 is waived off..

Conducting GST Audit & Issue of GST Audit report
Appointment of GST Auditor:

 

A proprietor, partner or Board of Directors in case of a Company should appoint a GST Auditor at the beginning of the financial year.

 

Accounts to be to be reviewed by GST Auditor:

Following are important accounts or records for review:

    • Sales Register
    • Stock Register
    • Purchase Register and Expenses ledgers
    • Input tax credit availed and utilized
    • Output tax payable and paid
    • E-way bills generated during the period under Audit, if in compliance with rules.
    • Any documents that record communications from the GST department relating to the year.

Forms for Annual return and GST Audit:

 

Type of taxpayer Form to be filed
Whether or not applicable to GST Audit
A Regular taxpayer filing GSTR 1 and GSTR 3B GSTR-9
A Taxpayer under Composition Scheme GSTR-9A
E-commerce operator GSTR-9B
Applicable for GST Audit
Taxpayers whose turnover exceeds Rs. 2 crores^ in FY GSTR-9C

 

Review of comments by GST Auditor:

The Auditor must report any tax liability pending for payment by the taxpayer, identified through the reconciliation exercise and observations made on GST audit. Taxpayers can settle taxes as recommended by the auditor in Form DRC-03.

 

Submission of GST Audit report & Annual return:

The finalized GSTR-9C can be certified by the same CA who conducted the GST audit or it can also be certified by any other CA who did not conduct the GST Audit for that particular GSTIN.

The following must be reported and certified by the GST Auditor or the certifier:

      • Whether or not all the requisite accounts or records are maintained.
      • Whether or not the Financial Statements are prepared as per the books of accounts maintained at the principal place of business or additional place of business of the taxpayer.
      • Certify the accuracy of information in GSTR-9C.
      • To list down the audit observations or reservations or comments, if any.

^For businesses with an annual turnover of less than Rs 5 crore, filing of GSTR-9C for FY 2018-19 is waived off.

 

 

 

Documents to be furnished by the taxpayer:

 

Audited financial statements (which is PAN-based)
Annual return in form GSTR-9 (for every GSTIN)
Certified reconciliation statement in Form GSTR-9C, reflecting reconciled values of supplies and tax amounts declared in GSTR-9 compared to audited financials in Part-A, along with the Audit report in Part-B.
Due dates for submission of GST Audit report:
GSTR-9 and GSTR-9C are due on or before 31st December* of the subsequent fiscal year.

Special Note: *GSTR-9 filing for businesses with turnover up to Rs 2 crore^ made optional for FY 2017-18 and FY 2018-19.

Penalty for not submitting GST Audit report:
There is no specific provision. Hence, it is subject to a general penalty of Rs.25,000.

^For businesses with an annual turnover of less than Rs 5 crore, filing of GSTR-9C for FY 2018-19 is waived off.

 

Conclusion
The GST annual return forms have had their own share of controversies since being notified. The annual returns forms still require disclosure of several data points. While the disclosure is just a summary, these require significant data backup for each clause separately. These details may not have been captured by all taxpayers at the time of recording transactions in the books of accounts.

For example:

Details of amendments/ debit notes/ credit notes for exempt sales are sought in Point 5 of GSTR 9. However, there is no such requirement in GSTR 1.
Details of ITC classified under Inputs, Capital Goods and Input Services are sought in Point 6 of GSTR 9. These details are being sought despite GSTR 2 not made available for filing.
HSN wise summaries of outward and inward supplies are being sought in Points 17 and 18 of GSTR 9. The details of inward supplies are being sought even though the same cannot be extracted from GSTR 2A.
These requirements are being viewed as increased compliance burden on taxpayers. This adds to the significant delay in releasing the annual return filing utilities as on date. In doing so, the government would really be taking the representations of the taxpayers, consultants and industry at large into consideration. That is definitely one step in the direction to making GST a hassle-free and compliance-friendly regime for the taxpayers.