Checklist for Reconciliation of Turnover in GST Audit


Part II: Reconciliation of turnover declared in audited Annual financial Statement with turnover declared in Annual Return (GSTR 9)

In this part of GST Audit,we reconcile the turnover declared in audited financial statement with turnover declared in the annual return

In Part II of GST Audit all the source of income needs to be reconciled in each serial no. from A to R. While doing audit of this part proper due care is required because auditor may need to consider schedules, groupings, notes, disclosures, qualifications etc. made by the auditor who certifies audited financial statement.

If another person audits financial statement, then GST auditor can consider another person working notes made available to him for GST Audit.

Part II Sl. No. 5A:Turnover (including exports) as per audited financial statements for the State / UT (For multi-GSTIN units under same PAN the turnover shall be derived from the audited Annual Financial Statement)

Turnover as per audited financial statement of a particular GSTIN will be reported here. There could be multiple cases where multiple GSTINs (State-wise) exist for the same PAN. In such case, entity have to calculate their GSTIN wise turnover and provide to auditor for declaring in this serial no.

When registered person have Single GSTIN

Statement of Profit and loss account (or income and expenditure account), balance sheet, notes to account would require for audit under this clause.

When registered person Multiple GSTIN

In such case, Information will be available from Trial balance of that particular GSTIN only and that would form the basis of GST Audit.

Points to be considered regarding Turnover

  • Turnover under this clause must be declared from the audited financial statement even if it includes adjustments/revenue recognition on requirement of accounting standard ( AS 7 in case of construction contract)
  • Turnover will not include “Deemed supplies under schedule I” because separate point is available for this information
  • While calculating turnover, indirect income such as divided, interest, forex fluctuation, profit on sale of asset etc. will also be included
  • Turnover in State/UT will includes all (taxable, Zero-rated or not) supplies
  • There could be a situation where different auditors are doing audit of different- different GSTIN (under same PAN), in such case it is the responsibility of Registered person and Auditor to ensure the turnover declared by different auditor must be reconciled with the total turnover of the entity as per audited financial statement. Auditor needs to follow SA 299 (Responsibility of Joint Auditors) or auditor can ask for management representation regarding turnover confirmation.
  • When multiple registrations are available in same state due to different business vertical  auditors should carefully examine Accounting Standard 17 “Segment Reporting” or Ind-AS 108 on “Operating Segments” as the case may be, which requires companies to disclose various segment, it would be helpful in calculating turnover of the entity among various business verticals
  • Turnover in the state will include export of goods as well as export of services
  • Turnover will not include inward supplies received by the registered person on which tax has been paid under Reverse Charge (RCM)
  • Any amount of return supplies credited to purchase or expenditure account would not be considered for calculation turnover because these adjustment have been separately dealt in another serial number

Checks to validate correctness and completeness of turnover

  • In case of single registration turnover in State/UT must reconcile to the turnover disclosed in audited financial statements;
  • In case of multiple registration turnover in State/UT must reconcile to the turnover recorded in the books of account of each registration
  • One master reconciliation to ensure that the details of turnover declared for different registration with the total turnover of the entity

Things or possible error needs to be kept in mind while declaring turnover details

Ensure the correctness of accounts. In case where multiple registration are taken in same state due to multiple business verticals there could be accounting mismatches or accounting errors.

For example: turnover of one registration is included in turnover of another registration, though financial statement have no impact of such error because it would be mutually set-off however, it will affect the turnover of that particular registration. Such kind of error must be rectified.

Auditor should ensure that inter-unit/branch accounts are reconciled at the end of the year for correctness and completeness, auditor should also ensure that when revenue is transferred from branch to head office or head office to branch same should not be calculated twice while computing turnover of head office.

List of documents required for declaring turnover

Following list of documents could be obtained by auditor for the purpose of declaring details of turnover under this serial no.

  1. Audited financial statements for the FY to calculate the total turnover of Registered person
  2. Registrant-wise Trial balance for furnishing GSTR-9C for each registrant
  3. Communication with other auditor to obtain details of the turnover declared by them to ensure correctness of reconciliation of turnover of the Registered Person
  4. GSTR-9 along with GSTR-3B and GSTR-1 returns to ensure turnover declared in the returns match the turnover mentioned in the audited financial statement
  5. Income tax return (ITR) to ensure turnover details are reconciled with the turnover as per GST

Disclosure

Due to inherent limitations reconciliation may contains following disclosures

  • In line with the ICAI Regulations, the Auditor must suitably disclose the fact that he has relied upon audited financial statements attested by another Auditor
  • In case where the Registered Person is not required to get the accounts audited under any other law, the reasons for the same may be mentioned.

I will prepare Checklist for Part II Serial No. 5B Unbilled revenue at the beginning of Financial Year in next article, follow my articles to read the same.

The author can also be reached at ruchika.tulsyan@gmail.com

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CA Ruchika Tulsyan 
on 20 June 2019
Published in GST
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