Currently, the topic concerning most of the businesses under the goods and service tax (GST) regime is filing of the GST Annual Return (Form GSTR -9) and GST Audit (Form GSTR -9C) due date being 31st December’ 2018 for the Financial Year 17-18. We all have recently faced the portal glitches while filing of the Form GSTR-1 on 31st October’18, where the portal was continuously reflecting a screen message stating that, ‘1,50,000 taxpayers are filing there return, kindly wait for your turn’. With less than 2 months in hand, and considering the portal issues it is always wise not to wait until last minute to file the tax returns.
Further, considering the various detailed reconciliations required under the Form GSTR-9C & details to be furnished under GSTR-9, lot of efforts would be required on part of both GST Auditor & GST Auditee to prepare and accumulate details for these returns. Hence, in the ensuing paragraphs, we proceed to discuss in brief a few points which would require attention and help the business to be GST Audit ready and not wait until the GST Auditor instructs us to do so. This will also help businesses file the required returns in time or even well before time.
1. Ascertaining Turnover, ITC GSTIN wise:
Form GSTR-9 & GSTR-9C time and again requires details GSTIN wise. There may be cases where multiple GSTINs (State-wise) registrations exist on the same PAN. This is common for persons/entities with presence over multiple States. Such persons/entities, will have to internally derive their GSTIN wise turnover, ITC and declare the same here. It is very common that businesses are spread across the country, however, have a central accounting system located in one State. Therefore, for such businesses, it is very important that even before they proceed to prepare data for the filing of these returns, their books of accounts should be bifurcated GSTIN wise. As this is a time-consuming activity to be carried out by the GST Auditee, it should be planned and executed well in advance, so as to avoid last minute rush.
Further, it is important to note that the above process has to be carried out even for company’s having multiple registrations within the state as it has to submit the reconciliation statement separately for each registration even though covered within the same state.
2. Internal matching of GST returns ( GSTR-1, GSRT-3B & GSTR-2A)
On minute analysis of the Form GSTR-9 & Form-9C, it can be seen that these forms work on an assumption that GSTR-1 & GSTR-3B are in reconciliation with each other and likewise GSTR-2A & GSTR-3B are in reconciliation. The data input required or the reconciliation as asked for in the annual return and the annual audit is considering ONLY Financial Statements (books of accounts) vis-à-vis returns filed i.e. figures can be picked up from either GSTR -3B or GSTR -1. If there is any difference between GSTR-3B or GSTR-1, these forms GSTR 9 & 9C do not provide for any mechanism to add these or deduct these differences. Hence, it is very much important on the part of the GST Auditee to make sure that his GSTR -1 & GSTR -3B for all the months are in reconciliation with each other and only then the annual return would be accurate and easy to file.
3. Accounting/ capturing all the GST transactions
There are many transactions which even without an accounting entry are liable to GST such as deemed supply between distinct persons, cross charge for inter-company services like annual audit expenditure incurred at head office (HO) for the audit of all branches spread across the country, advertisement expenditure incurred at HO fthe or company as a whole. Identification and valuation of such transactions under GST is a key aspect before GST audit. Reconciliation of such transactions with books of accounts will be a time-consuming activity and hence needs to be planned and executed well before the GST audit.
4.Amendments/ Revisions for the year made during the period April’18 to Sept’18
Being the first year of implementation of this new GST tax, mistakes had become a part and parcel of the returns filed during this span. As clarity emerged, various steps have been taken by the taxpayer to rectify his mistakes in the following months returns and made according to adjustments. Many of us must have rectified their errors in the returns filed after the year-end i.e. after March’18. These revisions must have been considered during the returns filed during the period April’18 to Sept’18. It is very much important for the GST Auditee to prepare a proper record of all the amendments/revisions made to transactions after the year-end. Even if rectification of even one transaction is not captured and reported properly in Form GSTR -9 & GSTR -9C it will become a reason for your difference and if one is not able to track reasons for these differences, the auditee will end up paying tax on these un-reconciled differences.
Above are a few points which can help the auditee be prepared well in advance for the upcoming GST Audit and avoid any last minute rush. This preparedness can also thereby help reduce any future liability arising due to non-reconciliation and also would help limit observations in the audit report. Further, being first year of GST audit all the transactions would be audited in detail and hence it would be crucial to take precautionary steps well before the audit begins.