PART I: GST AUDIT REPORT COMMENTARY

[AttnVivek Jalan]

Part I: Commentary on Features of Audit Report under GST – Form 9C

Form GSTR – 9C has been divided into 2 parts:

Part – A: Reconciliation statement;

Part – B: Certification by auditor;

We hereby analyse Pt II as under –

Part A : Pt II : Reconciliation of turnover declared in audited annual financial statement with turnover declared in annual return (GSTR – 9)

5A: Entities having multiple GSTIN’s will have to derive their GSTIN wise turnover which has been reported in the financial statements for its reconciliation with the annual return. For Eg: an entity having Registrations in West Bengal (WB), Haryana (HY), Maharashtra(MH) and Karnataka(KT) and it is preparing the report for MH, then it has to deduct the turnovers of other states to arrive ah MH’s turnover. It is specifically mentioned that reference to audited Annual Financial Statement includes reference to books of accounts in case of persons / entities having presence over multiple States. Hence the Trial Balance of the respective states should be drawn up.

5B: GSTIN wise bifurcation of unbilled revenue at the beginning and the end of financial year needs to be identified; Eg. For those entities like construction, mining, Infra, etc, where biling is done on Percentage completion basis, yet the revenue is recognised as per Accounting Standards as per accrual basis. For example, if rupees Ten Crores of unbilled revenue existed for the financial year 2016-17, and during the current financial year, GST was paid on rupees Four Crores of such revenue, then value of rupees Four Crores rupees shall be declared here

5C: Value of all advances for which GST has been paid but the same has not been recognized as revenue in the audited Annual Financial Statement shall be declared here. For Eg: on Goods, if any advances have been received before 15^th November 2017 and not been invoiced in 17-18, then GST has been paid on such advances and in Accounts it has not been taken in turnover; the same needs to be disclosed here.

5D: Details of supplies falling under Schedule I of the CGST Act, 2017 on which tax has been paid but not included in turnover reported in annual audited financial statements. For example, inter-branch transfers of goods, Principle to Agent Supply, Free Issues taxable under GST, etc. It is important to note that incase any transaction has been skipped but it is liable to tax, it also needs to be reported here.

5E: Identification of invoices issued in the relevant financial year for which credit notes have been issued in the subsequent financial year. The same is also required to be collated for table no. 11 of annual return (GSTR 9). For Eg: It is to be noted that only those Credit Notes which result in a difference between books and Annual return needs to be disclosed here.

5F: Trade discounts which are accounted for in the audited Annual Financial Statement but on which GST was leviable (being not permissible) shall be declared here.

5G: Turnover included in the audited Annual Financial Statement for April 2017 to June 2017 shall be declared here.

5I: Value of all advances for which GST has not been paid but the same has been recognized as revenue in the audited Annual Financial Statement shall be declared here.

5J: Aggregate value of credit notes which have been accounted for in the audited Annual Financial Statement but were not admissible under Section 34 of the CGST Act shall be declared here. Eg: by Commercial/Accounting Credit Notes

5K: Aggregate value of all goods supplied by SEZs to DTA units for which the DTA units have filed bill of entry shall be declared here.

5M: There may be cases where the taxable value and the invoice value differ due to valuation principles under section 15 of the CGST Act, 2017 and rules thereunder. Therefore, any difference between the turnover reported in the Annual Return (GSTR 9) and turnover reported in the audited Annual Financial Statement due to difference in valuation of supplies shall be declared here. Eg: incase of Forex dealers, Race Courses, sellers of Lottery tickets, etc where special valuation methods are adopted.

5N: Any difference between the turnover reported in the Annual Return (GSTR 9) and turnover reported in the audited Annual Financial Statement due to foreign exchange fluctuations shall be declared here. The difference due to Forex fluctuations do not effect GST turnover as under Rule 34 GST is paid at specific Forex rates.

5O: Any difference between the turnover reported in the Annual Return (GSTR9) and turnover reported in the audited Annual Financial Statement due to reasons not listed above shall be declared here. Eg: On sale of Capital Goods, only profit/loss is recognized in Financial Statements, although under GST, Tax is paid on full amount.

The final turnover derived post addition / deletion of above details should match with the turnover disclosed in the annual returns. In case there is a difference between the turnover reported in the annual return and the turnover derived post above adjustments in audited financial statements then reasons for such differences needs to be provided; Post reconciliation of total turnover, adjustments of non-GST supplies, zero rated supplies without tax etc. would be made in order to derive the taxable turnover which shall be reconciled with the taxable turnover reported in the annual return. In case of any difference, reasons would be required to be provided

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Vivek Jalan

[FCA, LL.B, B.Com(H)]

Contact: vivek.jalan@taxconnect.co.in