The budget presented on 1st Feb 2021 has brought apparently some good news for the assesses but adverse news for professionals like CMAs and CAs on GST front with regard to the discontinuance of GST audit as the professionals had put in a lot of labour to streamline the GST mechanisms in the organisations during GST audits with a hope that they will be at ease in conducting the GST audits at later stages and will be able to earn more by devoting less time for the GST audits/related activities.
However, the hopes of the professionals have taken a backseat with the government coming up with a budget proposal to remove GST audits by CA/CMA. The government has tried to provide the interim relief from GST audits to assesses. Discontinuance of GST audits by CMA/CA can be considered as interim relief only as the other GST audits are intact like audits by department officials and special audits.
Maybe the government wants to showcase that it is doing a lot with regard to 'Ease of Doing Business' and is relying on the self-certifications but what will happen at later stages when the issues in GST compliances are identified by the departmental officials after few years. It will be much more problematic for the assesses at that point of time as the government has not discontinued any other audit under GST provisions.
Now, the detection with regard to the short/nonpayment of GST will be done by the departmental officers at the very first instance which will invite hefty penalties. Now the assesses will be at the mercy of the departmental officials only and the department may invoke section 73or section 74 in most of the cases for the imposition of penalties as the middle layer of checks which was there by way of audits by professionals has been removed.
Section 73. Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for any reason other than fraud or any willful-misstatement or suppression of facts
Section 74. Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised by reason of fraud or any willful- misstatement or suppression of facts
Considering the stringent provisions under GST, it is advisable for the companies to continue with the GST audits though now as part of internal GST audit exercise.
The relevant provisions are given below
35 (5) Every registered person whose turnover during a financial year exceeds the prescribed limit shall get his accounts audited by a chartered accountant or a cost accountant and shall submit a copy of the audited annual accounts, the reconciliation statement under sub-section (2) of section 44 and such other documents in such form and manner as may be prescribed: [Provided that nothing contained in this sub-section shall apply to any department of the Central Government or a State Government or a local authority, whose books of account are subject to audit by the Comptroller and Auditor-General of India or an auditor appointed for auditing the accounts of local authorities under any law for the time being in force.]
Though the government has provided relief to the Industry, it may result into a much complicated issue later, as now the industry will face the audits by the GST department officials which are conducted once in many years and the issues which used to be identified during GST audit u/s 35(5) may remain unnoticed and assesses may have to face much more adverse situations later.
Our experience while conducting various GST audits have proved undoubtedly that industry needs handholding by CMAs or CAs with regard to the proposed reconciliation statements and internal GST audits for management purposes
44. Annual return.- (1) 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: [Provided that the Commissioner may, on the recommendations of the Council and for reasons to be recorded in writing, by notification, extend the time limit for furnishing the annual return for such class of registered persons as may be specified therein: Provided further that any extension of time limit notified by the Commissioner of State tax or the Commissioner of Union territory tax shall be deemed to be notified by the Commissioner. (2) Every registered person who is required to get his accounts audited in accordance with the provisions of sub-section (5) of section 35 shall furnish, electronically, the annual return under sub-section (1) along with a copy of the audited annual accounts and a reconciliation statement, reconciling the value of supplies declared in the return furnished for the financial year with the audited annual financial statement, and such other particulars as may be prescribed.
44. 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 which may include a self-certified reconciliation statement, reconciling the value of supplies declared in the return furnished for the financial year, with the audited annual financial statement for every financial year electronically, within such time and in such form and in such manner as may be prescribed: Provided that the Commissioner may, on the recommendations of the Council, by notification, exempt any class of registered persons from filing annual return under this section: Provided further that nothing contained in this section shall apply to any department of the Central Government or a State Government or a local authority, whose books of account are subject to audit by the Comptroller and Auditor General of India or an auditor appointed for auditing the accounts of local authorities under any law for the time being in force.'.
Self-certification of reconciliation statements without having external review may invite unwarranted situations for the assesses at later stages at the time of audits by departmental officials.
The assesses having strong control mechanisms in GST arena can straightway file the self-certified reconciliation statements without the involvement of external GST professionals and can save the costs
Clause 101 of the Bill seeks to omit sub-section (5) of section 35 of the Central Goods and Services Tax Act so as to remove the mandatory requirement of getting annual accounts audited and the reconciliation statement submitted by specified professional.
Clause 102 of the Bill seeks to substitute a new section for section 44 of the Central Goods and Services Tax Act so as to remove the mandatory requirement of furnishing a reconciliation statement duly audited by a specified professional and to provide for filing of the annual return on self-certification basis. It further empowers the Commissioner to exempt a class of taxpayers from the requirement of filing the annual return.
We really hope that the companies do not go into relax mode considering that GST audit is not applicable rather more vigil needs to be exercised now as the persons handling GST may take it for granted and start presenting the data in a manner that might not be good for the assesses.
We need to wait for a further few years to see the actual impact of the change with regard to the discontinuance of GST Audit brought in by the government.
The author can also be reached at email@example.com
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