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Introduction

Ever since GST came into prominence with effect from 1st July, 2017, there were several anticipations for the GST audit and its reconciliation with the annual return, including linkage of the same with the erstwhile VAT regime or the Income Tax Return/Tax Audit Report. Some of the additions in the Tax Audit Reportwerealso opined and notified by the Government,so that the payments made under GST regime commensurate with the Income Tax& Account Books such as reconciliations in respect of turnover, expenditures incurred, ITC availed, etc., however the same has been kept in abeyance till 31st March, 2019 for the very reason of it being burdensome for the companies to compile the enhanced requirements for tax audit post the close of the accounting period and statutory audits. However amidst all such skepticism, the Government has recently introduced and notified the much-awaited GST twin-compliance forms viz, GST Annual Return (Form GSTR-9) and GST Audit/Reconciliation and Certification (Form GSTR-9C) for the Financial Year 2017-18, both of which stands due on December 31st, 2018. Alike the erstwhile taxation regime, the backdrop of GST also focuses on better tax governance and as a result, the concept of GST audit by professionals is in picture in addition to other recurring and routine audits, as required by the statute. The GST audit in itself is more comprehensive and peculiar in nature with a number of compliances which are required to be adhered to. Therefore, the professionals have to deal with caution while undergoing the GST audit and at the same time, the taxpayers are expected to comprehend the peculiarity of the new compliances for the success of the contemporary regime. However, for the purpose of GST Audit, it is of utmost importance that the annual return is filed with due diligence and prudence.

In the present article, we will analyze the Annual Return in depth to ensure better compliance and understand the essence of the Form as notified by the Council by virtue of Notification No. 39/2018-CT dated 04.09.2018.

Annual Return

As per section 44(1) of the CGST Act, 2018, every registered person, other than an Input Service Distributor, a person paying tax under section 51 or section 52, a casual taxable person and a non-resident taxable person, shall furnish an annual return for every financial year electronically in such form and manner as may be prescribed on or before the thirty-first day of December following the end of such financial year.

From this it can reasonably be implied that barring the following persons/taxpayers, all the taxpayers are required to file the Annual Return:

  • Input Service Distributor
  • Person paying tax u/s 51 (TDS) and u/s 52 (TCS)
  • Casual Taxable Person
  • Non-Resident Taxable Person

The forms w.r.t Annual Return as notified by the Council is based on certain category of the taxpayers which is denoted as under:


Category of Taxpayer

Form prescribed

Regular Taxpayer paying taxes under Normal Scheme

GSTR-9

Taxpayer paying taxes under Composition Scheme

GSTR-9A

E-Commerce Operator (ECO)

GSTR-9B


As envisaged above, the Annual Return under GST stands due on or before December, 31st of the subsequent Financial Year. For the current Financial Year, the due date for filing the Annual Return is 31st December, 2018. However, in case the deadline is not met due to any exigencies, the law has prescribed the penalty for late filing in such scenario.  The late fees is Rs. 100 per day per act up to a maximum of an amount calculated at a quarter percent of the taxpayer turnover in the state or union territory.  However, IGST Act does not prescribe any late fees or penalty, therefore as per the general understanding and interpretation of law, it can be stated that the late fees shall be equal to Rs. 200 in total i.e. Rs. 100 under CGST Act and Rs. 100 under SGST Act for each day of default that prevails in not adhering to the deadline. Further, it is pertinent to note that the maximum fees that can be levied shall not exceed 0.25% of the total turnover in the respective state or union territory.

As per the functionality of other returns prescribed under the Act, the Annual Return also, does not come with the option to revise, and hence, to connote, the Annual Return is a one-shot summarized return of consolidated figures for a particular Financial Year, with no recourse for revision. Therefore, the Annual Return is required to be dealt with utmost skepticism for the very reason that the same is the consolidated return based on the figures already stated in the erstwhile returns filed under this Act and will be cited by various stakeholders including auditors-both external and internal, tax authorities, etc. for taking reference in their dealings in matters relating to tax governance.

The part-wise analysis of some of the important contents which has to be carefully dealt with along with peculiarities involved as prescribed in GSTR-9 (Annual Return) are tabulated as under:


S. No.

Important parts/sub-parts of GSTR-9

Details to be specified/ Remarks

Peculiarity(ies) Involved (if any)

1.

Part-I Basic Details

Basic Details

The basic details of the taxpayer is required to be provided.

2.

Part-II Details of outward and inward supplies declared during the Financial Year

Supplies made to un-registered persons (B2C)

(Table No. 4A)

It shall include supplies on which tax has been paid and made to:

  1. Consumers, or
  2. Unregistered persons, or
  3.  Routed through ECO

B2C Supplies- xx
(+) Dr. Notes- xx
(-) Cr. Notes - xx
XX

Further, the amendments made in this respect and reported in the returns shall also form part of this table.

Supplies made to registered persons (B2B)

(Table No. 4B)

It shall include supplies on which tax has been paid and made to:

  1.  Registered Persons (including UINs), or
  2.  Routed through ECO

but will not include supplies attracting reverse charge mechanism (RCM)

It is pertinent to note that B2B supplies unlike B2C supplies shall not be netted by Dr. / Cr. notes as the same is dealt separately under Table 4I and 4J. Further, the amendments made in this respect and reported in the returns shall not form part of this table and will be separately reported under Table 4K & 4L.

Unadjusted Advances

(Table No. 4F)

It shall include all such advances on which tax has been paid in the current Financial Year but invoice has not been issued yet.

Note that:

  1. the un-adjusted advances shall not be a part of Table 4A to 4E
  2. only those advances for which invoice is not been issued i.e. which remains unadjusted as at the end of the Financial Year are to be included.

Inward Supplies liable to reverse charge mechanism (RCM)

(Table No. 4G)

It shall include all inward supplies (including advances and import of services, if any) received from registered/unregistered persons on which tax is paid by the recipient on reverse charge basis.

Inward Supplies -xx
(liable to RCM)
(+) Dr. Notes - xx
(-) Cr. Notes - xx
XX

Note that it shall also include supplies liable to RCM covered in section 9(4) i.e. all such supplies received from unregistered persons and for which payments above Rs. 5,000 is made till 12.10.2017.

Debit/Credit Notes

(Table No. 4I to 4L)

The original debit/credit notes in respect of supplies related toB2B, exports, SEZs and deemed exports shall be stated in Table 4I and 4J. However, any debit or credit note which was subject to any amendment(s) i.e. Amended Debit/Credit Note, shall form part of Table 4K/4L.

Exempted/ Nil Rated/ Non-GST Supplies

(Table No. 5D to 5F)

It shall include:

  1. Exempted Supplies
  2. Nil-Rated Supplies
  3. Non-GST Supplies

Note that the instructions prescribed in the Notification No. 39/2018-CT dated 04.09.2018 specifically states that the said table shall also include the value of “No Supply”. From this it can be reasonably implied that it shall include the value for those activities which are not considered as supply i.e. items which are specified under Schedule III of the CGST Act, 2018 like sale of land, etc. However, there is no specific table in the annual return to include such cases and is absolutely absurd to include the value of such activities in Table 5D to 5F. Therefore, ambiguity arises as to whether such transactions need to be inculcate in the stated tables or not which requires clarification by the Council.

Total Turnover (including advances)

(Table No. 5N)

It shall include the sum total of:

  1. all the supplies on which tax has been paid or not including amendments, if any
  2. advances on which tax is paid but invoice is not issued in the current Financial Year

but shall not include the value of inward supplies on which tax has been paid under RCM.

3.

Part-III Details of ITC as declared in returns filed during the Financial Year

Inward Supplies

(Table No. 6B to 6D)

Table 6B shall include:

  1. All inward supplies other than RCM
  2. Supply of services received from SEZs

Table 6C shall include:

  1. All inward supplies received from unregistered persons on which tax is paid under RCM excluding import of services

Further, Table 6D shall include all inward supplies received from registered persons on which tax is payable under RCM.

Note that the data for ITC shall be classified based on the nature of credit i.e. inputs/input services/ capital goods.

Other ITC availed

(Table No. 6M)

It shall include:

  1. All such credit which is not specified in any other Table
  2. ITC availed as per Forms ITC-01 and ITC-02 in the Financial Year (not relevant for migration cases)

It is important to note that the ITC which was available but not availed or was available but ineligible shall be lapsed as at the end of the Financial Year. From this it can be implied that, the reconciliation of GSTR-2A with GSTR-3B to ascertain the correct amount of credit was required to be done at the time of filing the return for the month of September. The remaining credit which was not taken in the month of September would now be lapsed and have to be booked as an expense resulting in loss of credit and profitability at the same time. Contrary to the said situation, it is not clear, whether a taxpayer can avail the eligible credit in excess of the credit specified in GSTR-2A or not as the difference in Table 8 would be shown as negative in such case. This is owing to the fact that the taxpayer may have availed the correct amount of credit based on the invoice but the invoice may not appear in the GSTR-2A. The matter requires clarity as the taxpayer cannot be made deprived of the eligible ITC.

4.

Part- IV Details of tax paid as declared in returns filed during the financial year

The details of tax payable and paid bifurcated into cash/credit utilization is required to be provided as is stated in the returns filed for the financial year.

5.

Part- V Particulars of the transactions for the previous Financial Year declared in returns of April to September of current Financial Year or up to the date of filing of annual return of previous Financial Year whichever is earlier

Amendments

(Table No. 10 & 11)

The details in relation to any amendments (addition/deletion) made in the returns filed for the current Financial Year which was pertaining to any supplies declared in the returns of the earlier Financial Year is required to be shown here. However, the same should be shown net of any debit or credit notes.

ITC availed for previous Financial Year

(Table No. 13)

The details of ITC pertaining to goods/services received in the previous Financial Year but which has been taken in the returns filed for the current Financial Year shall be declared here.

6.

Part-VI Other Information

Others

(Table No. 15)

The said table No. 15 includes the details in relation to the refund claimed (which inter alia shall include the aggregate amount of refund filed during the Financial Year viz, sanctioned/ rejected/ pending for processing excluding provisional and non-GST refund claims).

HSN Summary

(Table No. 17 & 18)

It shall include the rate-wise HSN summary of all inward and outward supplies during the Financial Year.

It is pertinent to note that the HSN wise summary of outward supplies was required to be stated in GSTR-1, but the same was not segregated by the taxpayers in accordance with the GST rate. Further, the rate-wise HSN summary of inward supplies was never required to be stated in the monthly returns. Thus, it becomes all the more cumbersome to have such records prepared, update and reported in the Annual Return at the same time.

             

From the aforesaid analysis, it is evident that GSTR-9 format i.e. Annual Return has ambiguities and interpretational issues which requires an overall insight before stating the same in the said return simply because, the format mandates new and vivid details which are not reasonably maintained by a common taxpayer and thus the compilation of the same is a time-consuming exercise. Further, it also clarifies the fact that any additional liability arising out of error/omission in GSTR-1 and GSTR-3B cannot be corrected/ rectified in the Annual Return and the same ought to have been corrected in the return for the month of September 2018. Thus, all the details which are required to be incorporated in the Annual Return would have its origin from GSTR-1 and GSTR-3B and hence, there remains no scope to compensate any inadvertent error that might have occur at the time of filing of returns.

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