By- CA Umesh Sharma - aurangabad-icai.orgaurangabad-icai.org/wp-content/uploads/2019/06/... ·...

By- CA Umesh Sharma

We have to get ready for Audit Planning and Surprises

2

Definition of Audit U/s 2(13) of CGST Act, 2017

“Audit” means the examination of records, returns and other documents maintained or furnished by the Registered Person under this Act or the rules made thereunder or under any other law for the time being in force to verify the correctness of

turnover declared,

taxes paid,

refund claimed and

input tax credit availed, and to assess his compliance with the provisions of this Act or the rules made thereunder:

Audit, Opinion, Certification?Examination of Balance

Sheet, Profit and

Loss Account and Cash

Flow statement

CE

This is part of the overall examination of records, returns and documents

u/s 2(13)

Forming opinion

regarding keeping of

proper books of

account so far as it

appears from the

examination of those

books of accounts.

“Proper Books” books of accounts here indicate to comment upon “true and

correct” account of records and documents specified in section 35(1) and

prescribed in Rule 56.

Obtaining of

Information and

explanation which to

the best of one’s

knowledge and belief

were necessary for the

purpose of audit

Unless necessary information and explanation is obtained, truth and

correctness and not truth and fairness of turnover declared, taxes paid, refund

claimed, and input tax credit availed cannot be commented upon. Part II of

GSTR 9C deals with reconciliation of turnover, Part III deals with reconciliation

of taxes paid and Part IV deals with Input taxes paid . Nothing has been

CONCEALED there from.

Signature and

Stamp/seal of Auditor

Because “Audit” u/s 2(13) is the scope of

Part B of GSTR 9C

Definition of Concealed?

4 June 2019CA UMESH SHARMA. 7

WHY CONCEALED? NEXUS BETWEEN SUPPLIER AND

RECEIPENT?

UDIN?

The above discussion clearly demarcates that “audit” as persection 2(13) is the scope of engagement and not Audit asper the ICAI standards which aim at reasonable assurance.

This however does not exonerate the members of the ICAIfrom responsibility to perform the statutory attestfunction required by Part B of GSTR 9C to be performedwithout following the auditing and assurance standardsand guidance notes on the attest function.

Rather the Auditor in this situation is required to “lookahead” of those standards and not merely to “look beyond”and “look along” those standards.

LET US GET READY FOR GST AUDITS

Comparative view of Form GSTR-9 and GSTR 9C

Sl.

No.

Return in GSTR 9 Statement in GSTR 9C

1 It is the report of a formal or

official character giving

information

Means the formal statement to be

made under the provisions of the Act

the veracity of which needs an enquiry

as to its correctness

2 Prescribed under a Statute Prescribed under a Statute

3 To be filed by all registered

persons

To be filed only if the aggregate

turnover in a financial year exceeds Rs.

2 Crores.

4 No threshold Subject to threshold

Comparative view of Form GSTR-9 and GSTR 9C

Sl.

No.

Return in GSTR 9 Statement in GSTR 9C

5 Not required to be filed by a Casual Taxable

Person, Non-Resident Taxable

Person, Input Service Distributor, Unique

Identification Number Holders, Online

Information and Database Access

Retrieval Service, Composition Dealers,

persons required to deduct taxes under

Section 51 and persons required to collect

taxes under Section 52.

Not required to be filed by a Casual Taxable

Person, Non-Resident Taxable Person, Input

Service Distributor, Unique Identification

Number Holders, Online Information and

Database Access Retrieval Service, Composition

Dealers, persons required to deduct taxes under

Section 51 and persons required to collect taxes

under Section

52.

6 No need to annex financials Financials to be annexed

7. a. A plain reading of the relevant provisions indicate that the said Annual Return in

GSTR 9 and the Reconciliation Statement in GSTR 9C must be filed together. However, if

one were to peruse GSTR 9C there are certain tables which state that “turnover as declared

in annual return” indicating thereby that GSTR 9C is dependent on GSTR 9. This anomaly

can be addressed only on the basis of the finalized annual return initialled and presented to

the GST auditor by the registered person.

Parts

Part A : Reconciliation

Statement

Reconciliation with Returns

Recommendation on

Additional Liability

Part B : Certification

B1 : Financial Auditor and

GST Auditor is Same

B2 : Financial Auditor and

GST Auditor are Different

Form 9C

Reconciliation Statement – GSTR 9C Broad View 5 Parts 16 Tables

Parts

Part I

Basic details

Table 1 - 4

Part II

Turnover Recon

Table 5 - 8

Part III

Recon of Tax paid

Table 9 -11

Part IV

Input Tax credit Recon

Table 12 -16

Part V

Auditor’s Recommendati

on

Table x

Reconciliation Statement – GSTR 9C Broad View 5 Parts 16 Tables

PART – A - Reconciliation StatementPt. 1- Basic Details

Financial Year: The details for the period between July 2017 to March 2018 are to be provided in this statement for the financial year 2017-18. Suitable note may be given in this regards .

GSTIN means Goods and Services Tax Identification Number. It may be noted that reconciliation statement is to be filed for every GSTIN separately.

Legal name and Trade name will be auto populated once GST number is filled in form GSTR 9C on GSTN portal and the same is as given in GST Registration Certificate.

PART – A - Reconciliation StatementPt. 1- Basic Details

Sl. No. 1: Financial Year :

For all intents and purposes, for the

financial year 2017-18, the GST Laws stood

applicable only for nine months commencing

from July 2017 to March 2018.

Important Notes To Consider

Sl. No. 2: GSTIN:Additional place of

business has not been declared in the

registration certificate which was ought to be

declared. Such errors can be amended in the manner specified /

prescribed.

Part II:Reconciliation of

turnover declaredin audited AnnualFinancialStatement withturnover declaredin Annual Return(GSTR 9)

Whyreconciliation?

Reconciliation?

Table 5A: Reconciliation of Gross Turnover

GSTIN wise turnover (as per audited financial statement/books of accounts) for April, 2017 to March, 2018 to be mentioned here. Form\PT II(5).xlsx

No need to include transaction of supply which is not forming part of turnover in audited financial statement or books of accounts.

The data of turnover extracted GSTIN wise and ultimately at consolidated level should match with the turnover of audited financial statements/books of accounts.

State wise data needs to be given in case of multiple states.

Form/PT II(5).xlsx

Table 5A: Reconciliation of Gross Turnover

In cases where a registered tax payer has multiple

registrations, information must flow from trial balance of the

respective GSTIN.


The Auditor must only engage himself based on financial statements provided by the

entity and make suitable disclosure.

Notes to reconciliation may contain disclosure regarding certain limitations inherent in this exercise:

• 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.

Table 5B: Unbilled revenue

Unbilled revenue which was recorded in the books of accounts on the basis of accrual system of accounting in the last financial year and was carried forward to the current financial year shall be declared here.

In other words, when GST is payable during the financial year on such revenue (which was recognized earlier), the value of such revenue shall be declared here.

Unbilled revenue, at the beginning of the financial year, is to be reported here, which will be added. Similar unbilled revenue at the end of the financial year is to be reported at Table 5H (refer hereunder) which will be deducted.

For e.g. Service of Rental.

Trans 1: U/s 142(11) transactions. Cross link with corresponding item in FORM GSTR 9 – Part III Sl. No. 6K;

5B Unbilled revenue at the beginning of Financial Year (+)

Table 5B: Unbilled revenue

GSTR FORM 9-C may be drafted for this Sl. No. as to the

manner of its quantification from the books and records and correlated with returns

filed in GSTR Form 3-B


Reliance has been placed on the audited financial

statements for determining the unbilled revenue and no

separate exercise is conducted to validate the same.

Table 5C: Unadjusted advances

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.

Hence, in this column only value of those advances on which GST is paid but supply is not made till 31st March, 2018 is to be included.

Advance received during F.Y 2017-18 on which GST is paid but not recognized as revenue in financial statement for F.Y 2017-18 to be declared here.

5C Unadjusted advances at the end of the Financial Year (+)

(a) All information reported here must flow from GSTR 1. Table 11.

Reporting of Unadjusted Advances is an important aspect of the audit.

The Auditor may have to examine the trial balance and financial statements in order to ascertain such advances.



During the audit/certification, it would be relevant for the Auditor to take note of revenue recognition policy adopted by the Registered Person and

impact of the same while arriving at the values to be disclosed in this heading.


Suitable Management representation letter to be obtained since this information is not apparently available on the face of the financial

statements.

Table 5D: Deemed Supply

Aggregate value of deemed supplies under Schedule I of the CGST Act, 2017 shall be declared here.

Any deemed supply which is already part of the turnover in the audited Annual Financial Statement is not required to be included here.

The term "deemed supply" is not defined under GST Law.

SCHEDULE I to Section 7 of CGST Act, 2017 includes activities to be treated as supply even if made without consideration and the value of same to be included. Which are as follows:

5D Deemed Supply under Schedule I (+)


Permanent transfer or disposal of business assets where ITC has been availed on such assets.

Supply between related persons or between distinct persons as specified in section 25, when made in the course or furtherance of business not exceeding fifty thousand rupees in value in a financial year by an employer to an employee shall not be treated as supply of goods or services or both.

Supply of goods-

(a) by a principal to his agent where the agent undertakes to supply such goods on behalf of the principal; or

(b) by an agent to his principal where the agent undertakes to receive

such goods on behalf of the principal.


Import of services by a taxable person from a related person or from any of his other establishments outside India, in the course or furtherance of business.

Any of the above deemed supply which is already included in turnover of audited Annual Financial Statement is not required to be included here.

The term "related person" is defined under explanation to sec. 15(5) of CGST Act. The term "distinct person" is referred in sec. 25(4) and 25(5) of CGST Act.

When there is no consideration the value of such supply of goods / services is to be determined as provided under rule 27 to 35 of CGST rules.


In cases of existence of deemed supply

transactions, it would be relevant to include suitable

disclosures even in the management

representation letter.


Table 5E: Credit Notes

Aggregate value of credit notes which were issued after 31st of March 2018 for any supply accounted in the current financial year 2017-18 but such credit notes were reflected in the annual return (GSTR-9) shall be declared here.

Credit Note issued after end of the financial year corresponding to supply made during the year and not accounted in financial year is required to be mentioned here.

5E Credit Notes issued after the end of the financial

year but reflected in the annual return

(+)

Table 5F: Trade discounts

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.

Trade discount accounted in books but not eligible for deduction under section 15(3) of CGST Act, 2017 is to be reflected in this Table.

Non-allowance of the same has to be identified on the basis of the documents maintained by looking into the conditions of allowance as deduction against the supply made as per Section 15(3) of the CGST Act.

Financial Credit Notes wherein tax is not shown separately.

5F Trade Discounts accounted for in the audited Annual

Financial Statement but are not permissible under GST

(+)

Table 5G: Turnover from April 2017 to June 2017

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

Out of the total Turnover for F.Y 2017-18, turnover of period April, 2017 to June, 2017 is required to be deducted since GST is leviable on supply made on or after 1st July, 2017.

The returns filed under the Excise Laws, State Level VAT Laws, and the Finance Act, 1994 (service tax returns) examined with invoices, gate passes, lorry receipts and entries made in the books of accounts are the source documents for procuring this information.

Check Trans1, Last returns/ revised retuns, point of taxation under old laws.

5G Turnover from April 2017 to June 2017 (-)

Table 5G: Turnover from April 2017 to June 2017

The returns filed under the Excise Laws, State Level VAT Laws, and the Finance

Act, 1994 (service tax returns) examined with invoices, gate passes, lorry receipts and entries made in books of accounts are the source documents for procuring

this information.


Table 5H: Unbilled Revenue

Unbilled revenue which was recorded in the books of accounts on the basis of accrual system of accounting during the current financial year but GST was not payable on such revenue in the same financial year shall be declared here.

Unbilled revenue at the end of financial year needs to be declared here.

refer to the discussion in Sl. No. 5B of Part II for more details on this.

5H Unbilled revenue at the end of Financial Year (-)

Table 5I: Unadjusted Advances

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.

Advance received till 30th June, 2017 on which service Tax/excise/VAT was leviable, as applicable and corresponding supply thereto is made on or after 1st July 2017 till 31st March 2018 without payment of GST, the same should be reflected here.

Refer to the discussion in Sl. No. 5C of Part II for more details on this.

5I Unadjusted Advances at the beginning of

the Financial Year

(-)

Table 5J: Credit Notes

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.

This Table should contain the figure that of credit notes issued and accounted for in the audited financial statement of the year but same is not permissible u/s 34 of CGST Act, 2017.

5J Credit notes accounted for in the audited

Annual

Financial Statement but are not permissible

under GST

(-)

Table 5K: Adjustments on account of supply of goods by SEZ units to DTA Units

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.

This Table is applicable only for taxpayers units registered as units/developers of SEZ.

This will contain data related to supply of goods made by SEZ unit to DTA unit for which bill of entry is filed by DTA unit

In view of section 5 the IGST Act, GST on supply of goods by SEZ to DTA unit shall be levied and collected in accordance with Section 3 of Custom Tariff Act from the recipient i.e. DTA unit.

Table 5L: Turnover under composition scheme

There may be cases where registered persons might have opted out of the composition scheme during the current financial year.

Their turnover as per the audited Annual Financial Statement would include turnover both as composition taxpayer as well as normal taxpayer. Therefore, the turnover for which GST was paid under the composition scheme shall be declared here.

A person registered under the composition scheme and who has opted out of the scheme during the year should file both forms GSTR 9 and GSTR 9A.

Therefore, Sl. No. 5L of GSTR 9C should match with the turnover declared in Sl. No. 6C of GSTR 9A, which is the sum of Table 6 and 7 of GSTR-4 of the relevant period.

5L Turnover for the period under composition

scheme

(-)

39



During the course of preparation of Form GSTR 9C, if any outward supply is discovered to have been omitted in

any GSTR-4 pertaining to the financial year 2017-18, as aforesaid, a revision is warranted. Revision in the

information cannot be passed through GSTR-4 as taxable person has opted out of composition scheme and such

revision cannot be passed through GSTR 1 and GSTR 3B because those revisions are related to composition

turnover.


Table 5M: Adjustments in turnover

There may be cases where the taxable value and the invoice value differdue to valuation principles under section 15 of the CGST Act, 2017and rules thereunder.

Therefore, any difference between the turnover reported in theAnnual Return (GSTR 9) and turnover reported in the audited AnnualFinancial Statement due to difference in valuation of supplies shall bedeclared here.

This Table contains the data resulting on account of difference in turnoveras per Invoice raised during the year and valuation thereof as per section15 of CGST Act. Section 15(2) provide for inclusion of various items forpurpose of computing value of Turnover.

Contracts for Pure Agency;

List of Related Parties and details of transactions with them.

Interest on delayed payments?

5M Adjustments in turnover under section 15

and rules thereunder

(+/-

)

Table 5N: Adjustments in turnover due to foreign exchange fluctuations

Any difference between the turnover reported in the Annual Return (GSTR9) and turnover reported in the audited Annual Financial Statement due to foreign exchange fluctuations shall be declared here.

If forex gain/loss is included in turnover as per audited financial statement then corresponding (addition/reduction) effect to be given here.

Table 5N: Adjustments in turnover due to foreign exchange fluctuations

GSTR 9C should contain notes disclosing certain limitations inherent in this exercise.

This would enable the reconciliation relating to foreign exchange differences between the value

adopted for accounting in financials vis-à-vis value adopted for payment of GST.


Table 5O: Adjustments in turnover due to reasons not listed above

Any difference between the turnover reported in the AnnualReturn (GSTR9) and turnover reported in the audited AnnualFinancial Statement due to reasons not listed above shall bedeclared here.

Any other adjustment in the turnover, other than above fromTable 5B to 5N has to be reported here to add or reduce theturnover as per audited financial statements to reconcile withthe turnover as declared in annual return. Hence, this is theresiduary column to reconcile the turnover.

The following TWO broad head of adjustments can be reported under this Sl.No.: -

turnover considered as ‘supply’ under GST but not considered as income in the audited Annual Financial Statements;

turnover discovered as ‘supply’ during the course of audit, but not considered in the books of account and Form GSTR 9

Table 5O: Adjustments in turnover due to reasons not listed above

An illustrative list of transactions which could be reported under this Sl.No. is provided below: -

Sl

No. Particulars Action Amount

1

Samples distributed by the pharmaceutical company to

physician for free (+)

2 Notice pay recovered from employees (+)

3 Gifts given to customers/vendors/distributors (+)

4 Stocks issued to discharge CSR obligation (+)

5

Incentives / Rebate received and considered as supply

under GST(+)

6

Sales promotion / advertisement reimbursement

received and considered as supply(+)

7

Out of pocket expenses considered in the value of

supply (+)

8 value on which GST paid on sale of Capital Goods (+)

Sl

No. Particulars Action Amount

9

Profit on the sale of Capital goods disclosed in the audited Annual

Financial Statements (-)

10

Loss on the sale of Capital goods disclosed in the audited Annual

Financial Statements (+)

11 Inward supply returns considered as Outward supply (+)

12 Outward supply returns considered as Inward supply (-)

13

Income in Profit and Loss account recognized based on special

circumstances (-)

14

value on which GST is liable to be paid in respect of transactions where

income is recognized based on special circumstances (+)

15

Discounts which are not to be excluded from the value of supply as per

Section 15 (+)

16 Any other amount (+) / (-)


Only those adjustments which are permissible under the framework of law should be considered here. In other words, adjustments should not be made under this Sl.No. merely to bring Sl.No. 5R to ‘Nil’.

Rounding offf……


Table 5P/Q: Annual turnover after adjustments as above and Turnover as declared in Annual Return

Annual turnover as declared in the Annual Return (GSTR 9) shall be declared here. This turnover may be derived from Table No. 5N, 10 and 11 of Annual return.

Table 5Q requires a taxable person to disclose his turnover as per the Annual Return i.e., GSTR 9 filed for the relevant financial year.

Therefore, the turnover arrived at Table No. 5N, 10 and 11 as per the Annual Return in GSTR – 9 should be declared under Table No. 5Q. Accordingly, the Annual Return in GSTR – 9 should be filed along with or before filing the reconciliation statement in Form GSTR – 9C.

Table 5R: Un-Reconciled turnover

The un-reconciled turnover at Table No. 5R is the difference between the ‘Annual turnover after adjustments as above’ at Table No. 5P and ‘turnover as declared in the Annual Returns (GSTR 9)’ as declared at Table No. 5Q.

Situation may arise if a taxable person has erroneously declared a higher turnover in the monthly return in GSTR – 3B and the annual return in GSTR – 9.

The statement which would be made available on the GST portal should be checked to verify whether the taxable value at Sl. No. 11 may be declared in the negative so that refund of tax remitted on such turnover can be claimed. Clarification on this issue is awaited.

Table 6: Reasons for Unreconciled difference in Annual Gross Turnover

Reasons for non-reconciliation between the annual turnover declared in the audited Annual Financial Statement and turnover as declared in the Annual Return (GSTR 9) shall be specified here. Form\PT II(6).xlsx

If the gross turnover as per GSTR 9C as compared to the turnover as per GSTR 9 is higher or lower then such un-reconciled turnover has to be specified and explained giving reasons and justification for same.

There may be more than one reasons for such difference which shall be identified separately giving reasons for each such difference.

Due to mis-application of the provisions of the GST Law or any error, there may be such difference(s) which shall be reported giving reasons for same.

Form/PT II(6).xlsx

Table 6: Reasons for Unreconciled difference in Annual Gross Turnover

The Auditor shall make a reference to the basis for reconciliation of the turnover related adjustments called

for on the basis of the information available in the Notes to Accounts and any special adjustments caused by reference

to other statutory requirements.The Auditor need to report on whether the Books and

Returns can be compared and quantify the reasons duly justifiable for the discrepancies reported, if any.


Table 7: Reconciliation of Taxable Turnover

The table provides for reconciliation of taxable turnover from the audited annual turnover after adjustments with the taxable turnover declared in annual return (GSTR-9). Form\PT II(7).xlsx

Annual turnover as derived in Table 5P above would be auto-populated here.

Form/PT II(7).xlsx

Table 7B: Value of Exempted, Nil Rated, Non-GST supplies, No-Supply turnover

Value of exempted, nil rated, non-GST and no-supply turnover shall be declared here. This shall be reported net of credit notes, debit notes and amendments if any.

Table 7B requires reduction of value of Exempted, Nil rated, Non-GST supplies, No-Supply turnover from the Annual turnover after adjustments to arrive at taxable turnover

Table 7B: Value of Exempted, Nil Rated, Non-GST supplies, No-Supply turnover

Nil Rated – Supplies taxable at a ‘NIL’ rate of tax E.g. supply of support Service to agriculture, forestry, fishing, etc.

Non GST Supplies - Supplies that are not taxable under the Act (viz. alcoholic liquor for human consumption) are Non-taxable supplies.

Exempted - Supplies that are wholly or partially exempted from CGST, SGST or IGST, by way of a notification; E.g.: Education service, health care services, etc.,

No Supply - No supplies include the activities covered under Schedule III which are neither a supply of goods nor a supply of services. Examples- Sale of land or completed building, actionable claims other than lottery, betting and gambling.

Table 7C: Zero rated supplies without payment of tax

Table 7C of GSTR 9C requires disclosure of value of zero-rated supplies without the payment of tax which forms part of the ‘Annual turnover after adjustments (from 5P above)’ at Table No. 5P.

This shall be reported net of credit notes, debit notes and amendments if any.

The source of information for zero-rated supplies shall be obtained from the outward supply statement in GSTR – 1 and revenue register forming part of books of accounts. adjustment.

The export transactions effected without the payment of IGST (Under Bond/Letter of undertaking (LUT) are reported on Invoice basis:

Table 6A and 6B and Table 9 A and 9C of GSTR 1. ,Table 5A and 5B and for Amendments in Table 5J and Table 5K in Form 9 ,Table 7C of Form

9C

TABLE 7D: Supplies on which tax is to be paid by the recipient on reverse charge

basis

Value of reverse charge supplies on which tax is to be paid by the recipient shall be declared here. This shall be reported net of credit notes, debit notes and amendments if any.

Section 2(98) defines reverse charge to mean a case where liability to pay tax is on recipient of supply of goods or service instead of supplier u/s 9(3) and 9(4) of CGST/ SGST Act or S.5(3) or 5(4) of IGST Act.

Notes to GSTR 9C: In case the invoice does not contain the declaration required under Rule 46

or credit has not been reversed under Rule 39, 42 or 43 or tax has been wrongly collected by the supplier on services liable for reverse charge (and retained by the supplier), then such infractions should be reported in the Audit Report because the Audit Report has to have disclosures regarding non-maintenance of records and documents/ observations and inconsistencies relating to reversals of credit.

TABLE 7D: Supplies on which tax is to be paid by the recipient on reverse charge basis

In case the invoice does not contain the declaration as required under Rule 46 or credit has not been reversed

under Rule 39, 42 or 43 or tax has been wrongly collected by supplier on services liable for reverse charge (and

retained by supplier), then such infractions ought to be reported in Audit Report since the Audit Report requires

disclosures regarding nonmaintenance of records and documents/ observations and inconsistencies relating to

reversals of credit.


Table 7E/F: Taxable turnover as per adjustments/Taxable turnover

as per liability declared in Annual Return (GSTR9)

The taxable turnover is derived as the difference between the annual turnover after adjustments declared in Table 7A above and the sum of all supplies (exempted, non-GST, reverse charge etc.) declared in Table 7B, 7C and 7D above.

Taxable turnover as declared in Table (4N-4G) + (10-11) of the Annual Return (GSTR9) shall be declared here.

Table 7F of GSTR 9C requires that the taxable turnover as per the liability should be declared in the Annual Return (GSTR 9).

Taxable turnover as declared in Table (4N-4G) + (10-11) of the Annual Return (GSTR 9) shall be declared here

Table 7E: Taxable turnover as per adjustments

Auditor may consider to put a disclosure that

due to lack of availability of rate wise tax liability from the

books of accounts, the Auditor is not in a position to punch details in the given

table.


One should give separate disclosure that rate wise tax liability has not been

maintained in the books of accounts.

The issues that may arise on account of classification have not been dealt with in detail and only those as noticed during

the course of audit have been duly considered and have been reported.


Due to nature of business of Registered Person, types of supply, complexities of transactions and size of operations, the Auditor is unable to identify or comment upon each and every classification of outward and inward supplies. How should Auditor approach to punch data in Table 9?


The Auditor may in such case, may put in his comment in the main Certificate under opinion paragraph (4 or 5, as the case maybe) that the classification aspect has been considered as noticed during the course of

audit and subject to the information and declaration or management representation as received by the Registered Person. It should be specified

that all aspects of classification have not been considered.


In case the rate wise details of Outward and Inward Supply have not been maintained, and reliance cannot be placed on internal control of

organisation in relation to recording of transactions, then Auditor should give a disclaimer that information entered in Table 9 has been provided by management which has not been disclosed in books of accounts rate wise

separately.


For Identification of tax Liability on RCM, in case the Time of Supply for same has been followed in accordance with proviso to Section 12(3) or

13(3) of the CGST Act 2017 and respective SGST Acts 2017, then it should be reported that it was not possible to identify Time of Supply in

accordance with normal sub-Sl.No.s of Section 12 and 13.

Table 8: Reasons; Unreconciled taxable turnover

Reasons for non-reconciliation between adjusted annual taxable turnover as derived from Table 7E above and the taxable turnover declared in Table 7F shall be specified here. Form\PT II(8).xlsx

This part of GSTR 9C identifies the taxable turnover differences to be placed on record for explaining the differences between the GST Annual Return and the Audited Financials.

Form/PT II(8).xlsx

Table 9. Reconciliation of tax paid

The table provides for reconciliation of tax paid as per reconciliation statement and amount of tax paid as declared in Annual Return (GSTR 9).

Under the head labelled ―RC, supplies where tax was paid on reverse charge basis by the recipient (i.e. the person for whom reconciliation statement has been prepared ) shall be declared. Form\PT II(9).xlsx

The total amount to be paid as per liability declared in Table 9A to 9O is auto populated here.

The amount payable as declared in Table 9 of the Annual Return (GSTR9) shall be declared here. It should also contain any differential tax paid on Table 10 or 11 of the Annual Return (GSTR9).

Taxable value ;This a manual punching of data, needs proper reconciliation with unreconciled data of table 6 and 8.

Form/PT II(9).xlsx

Table 9. Reconciliation of tax paid

After reconciling the turnover declared and reportedin the Audited Financial Statement with turnoverdeclared in Annual Return along with reasons forreconciliation if any,

The relevant Part III of Form 9C requires an Auditorto reconcile the rate-wise liability of tax, total amountpayable thereon with tax actually paid as declared inthe Annual Return and recommendation of additionaltax payable due to non-reconciliation of the taxablevalue.

The details of any liability of Interest underSection 50 of the GST Act accounted for in thebooks of accounts or any Late Fees for Late filingof GSTR 3B or penalty leviable under any relevantsections of the Act needs to be reported here.

Table 10: Reasons for un-reconciled payment of amount

Reasons for non-reconciliation between payable / liability declared in Table 9P above and the amount payable in Table 9Q shall be specified here. Form\PT III(10).xlsx

Form/PT III(10).xlsx

Table 11: Additional amount payable but not paid

Any amount which is payable due to reasons specified under Table 6, 8 and 10 above shall be declared here. Form\PT III(11).xlsx

In the Table 11 under Part III of the GSTR 9C, the amount of tax, interest, penalty, late fees and other dues which are payable in accordance with the non-reconciliation reported under Table 6, 8 and 10 but not actually paid as declared in Annual Return in GSTR 9 are to be reported with rate-wise bifurcation.

Form/PT III(11).xlsx

Flow of Reconciliation on outward suppliers in Form 9C

Table 12A: ITC availed as per audited Annual Financial Statement


In cases of persons having multiple GST Numbers, the total ITC Availed (after reversals) will have to be determined from the consolidated financial statements and a reconciliation will have to be maintained in order to ensure that the ITC figures availed in all the GSTR 9C reconciliations total up to the consolidated financial statements. Form\PT IV(12).xlsx

The practical way out could be checking in the books of accounts of entity (qua GST No) of which he is conducting the audit vis a vis the data available on the GSTN site of that entity to double check the figures derived from Multi GSTIN.

Persons following cash system of accounting will have to take the availment figure on cash basis only and Bill of FY 17-18 received and settled in the new FY, will have to be treated as availment of the said new year.

Form/PT IV(12).xlsx


The basic conditions for availment of credit by a registered person of Input /Input service/capital goods, used or intended to be used in the course or furtherance of business being :

In possession of a Tax Invoice and/or other relevant documents

Have received the goods or services or both

Tax charged has been actually paid to the Government

Return has been furnished as per section 39

Further, whether the reversals are done as per the law as required u/s 17(5) and rules 42 & 43 have to be verified

It is only after doing the above exercise that the figure becomes comparable with Table 7J of the Annual Return qua the GSTIN entity .

Table 12B: ITC booked in earlier Financial Years claimed in current Financial Year

This shall include transitional credit which was booked in earlier years but availed during Financial Year 2017-18.

For the FY 2017-18, being first year of GST, the ITC in respect of or pertaining to the previous year would not arise. However, such reporting may be relevant for the audit periods starting from 2018-19 onwards, wherein ITC of the previous period could have been claimed in the current year.

For the period 17-18, the law has provided carry forward of ITC from the old regime by filing of the form Trans 1 and Trans 2.

The auditor needs to verify the claims made in trans 1 and trans 2 from the books of accounts visa-vis the conditions laid down under law for the claim of the same. Again the same needs to be verified online from the system to ascertain that the claim made in the books have been registered on the site for its availment.

Table 12B: ITC booked in earlier Financial Years claimed in current Financial Year

The verification of documentation vis a vis the conditions like invoice not later than one year , excise duty levied on the face of the invoice or excise duty claimed in respect of goods which have already borne the burden of duty as a percentage of rate of tax charged on the outward supply with one to one correlation and its supply happening on or before December 2017 have to be done.

The verification with respect to state law has also to be undertaken separately considering the law of the state as it existed prior to GST and the transitional provisions made under the state law. For e.g. In Maharashtra the trans 1 shall include credit of tax of stock of mobiles lying in stock in view of the erstwhile section 52A of MVAT Act. Similarly, the claim of ITC being restricted in proportion of pending

declarations in form-C.

Table 12C: ITC booked in current Financial Year to be claimed in subsequent Financial Years

There can be various situations like goods in transit. In such a situation the invoice would be recorded in the books as on the date of balance sheet. The ITC however will not be allowed since the goods have not been received and hence the condition of ITC not being satisfied, the credit of the same is not to be allowed in the period of booking.

On the basis of the exercise as above, the amount arrived at is the ITC which is availed as per Books of Accounts. This amount can now be compared with the figure of ITC available for utilisation in the GST returns for the period July 2017 to March 2018.

The ITC which was booked in the FY 2017-18 in the books but was disallowed in the returns in the FY 2017-18 on account of Reversal of Rule 42,43 or 37, but the same was retaken in the returns during the FY 2018-19 upto September 2018 (March 2019), these credits also need to be reduced in clause 12C.

Table 12D/E: ITC booked in current Financial Year to be claimed in subsequent Financial Years/ITC claimed in Annual Return

The auditor needs to check this figure with the claim in the books and the difference if any, needs to be reconciled.

Net ITC available for utilization as declared in Table 7J of Annual Return (GSTR 9) shall be declared here.

Ideally , the ITC as per Annual Return and books should match and in the event of difference the same needs to reconciled, with reasons as below.

Table 12F: Unreconciled ITC

There can be various reasons for differences. The most obvious being ITC taken in return and then realizing the same is not allowable.

It is possible that reversal of not allowable ITC has not been done in the books of accounts as on 31-3-2018 as the ratio workings may have been undertaken post 31-3-2018.

There can be a situation that in the returns the ITC when reversed in march 18 becomes a negative figure and hence the liability is paid of the short reversal.

In such cases, on the GSTN Portal to the extent of amount paid it shall be shown as normal liability whereas in the books, ITC reversed figured may not match with the portal figure.

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Table 13:Reasons for un-reconciled difference in ITC

The reasons for non-reconciliation of ITC as per audited Annual financial Statement or books of account (Table 12D) and the net ITC (Table 12E) availed in the Annual Return (GSTR 9) shall be specified in Clauses 13A, 13B and 13C. Form\PT IV(13).xlsx

Line items wise reasons may be granted for each of the difference, however it may not possible to always give specific reasons in all situations. Mere mistake adjustments or wrong adjustments may also have caused the difference.

Form/PT IV(13).xlsx

Table14: Reconciliation of ITC declared in Annual Return with ITC availed on expenses as per audited Annual Financial Statement

The Act does not specifically require the taxpayer to bifurcate the ITC in to various accounting heads. Even though the bifurcation is asked head wise, the auditor will have to extract the data from the Books as per the Acts i.e IGST,CGST,SGST also. Form\PT IV(14).xlsx

The total ITC availed during the year has to be bifurcated on the basis of heads as above. The ITC availed, but the auditor feels not allowable shall not be included in column 4. In all other cases the total amount ITC and ITC availed would be same.

Form/PT IV(14).xlsx

Table14: Reconciliation of ITC declared in Annual Return with ITC availed on expenses as per audited Annual Financial Statement

The purpose of above classification seems, to identify the disallowable ITC from the nature of expense head.

For e.g. the ITC pertaining to Entertainment charges may be verified in depth to ascertain if the ITC is in furtherance of business or is of a personal nature. Similarly , for business promotion etc.

The entire credit available to the entity needs to be segregated. This amount shall obviously be post reversal and hence exact amount relatable to exact head of expense may be an issue.

Common Credit reversal may have a ratio on the basis of which reversal is done and hence from each head of common expenditure the auditor may not be able bifurcate.

Table 15: Reasons for unreconciled difference in ITC

The ITC claimed in annual return and that as claimed as per clause 14 will be matched and the difference shall be treated as unreconciled leading to payment in case of excess claim and lapse of credit in case of excess . The reasons for the difference needs to be explained. Form\PT IV(15).xlsx

In the event the difference is not explainable , there shall be a liability to pay the tax and the same shall be reported as above, being the nature of tax payable i.e. CGST/SGST or IGST or Cessand consequential interest and penalty.

Form/PT IV(15).xlsx

Table 16: Reconciliation of ITC

In the event the difference is not explainable , there shall be a liability to pay the tax and the same shall be reported as above, being the nature of tax payable i.e. CGST/SGST or IGST or Cess and consequential interest and penalty. Form\PT IV(16).xlsx

Pt.V: Auditor's recommendation on due to non-reconciliation

Auditor has to certify and recommend on dues arising due to non-reconciliation. Form\PT V.xlsx

Form/PT IV(16).xlsx

Form/PT V.xlsx

Part B Certification in cases

where the reconciliation statement (FORM GSTR-9C) is drawn up by the person who had conducted the audit:

I. Certification in cases where the reconciliation statement (FORM GSTR-9C) is drawn up by the person who had conducted the audit:

In case where the Audit of the financial Accounts and the GSTR 9C certification [GST Audit] is done by the same person, the GST Auditors also certifies the Financial Accounts which he has otherwise also issued report under some other statute. Form\Part B (i).xlsx

Therefore, certification as per (1) above will not cause any difficulties. However, in case of small enterprises, the ‘cash flow statement’ may not have been certified. Attaching the same may pose challenge.

The reporting in respect of examination and maintenance of accounts/records/documents as required by the IGST/CGST/SGST/UTGST Act, 2017 and the rules/notifications made/issued thereunder; may need careful consideration.

Form/Part B (i).xlsx

I. Certification in cases where the reconciliation statement (FORM GSTR-9C) is drawn up by the person

who had conducted the audit:

Finally, the GST Auditor is called upon to report about the observations/ comments / discrepancies / inconsistencies; if any. This calls for the reporting in respect of not only observations and comments but in respect of discrepancies and inconsistences regarding claim of exemption, classification, valuation, ITC etc.

It may be noted that the cases, where the registered person/auditee has accepted the auditors findings or recommendations, such issues would have been part of the reconciliation and the reasons for the same would have been given in Part A of the Report at the respective places only.

However, the issues, where the auditee do not accept the GST Auditor’s stand may get reported here by way of qualification or inconsistency. Please note that the observations/ comments / discrepancies / inconsistencies which impact the opinion of the GST Auditor need only be reported here. Other issues may not be reported.

II. Certification in cases where the reconciliation statement (FORM GSTR-9C) is drawn up by a person

other than the person who had conducted the audit of the accounts

In this case, the GST Auditor is not the same person who has audited the Financial Accounts of the Auditee. Some other Chartered Accountant has audited the Financial Accounts. Hence, the GST Auditor relies on the audited accounted furnished/provided to him by the auditee for the purposes of the conduct of the GST Audit. Form\Part b (ii).xlsx

In the circumstances, the GST Auditor simply annexes the audited Balance sheet, the profit and loss account and the Cash Flow Statement and other documents which are part of the Profit and loss account and the balance Sheet, as the case may be.

Form/Part b (ii).xlsx

II. Certification in cases where the reconciliation statement (FORM GSTR-9C) is drawn up by a person other than the person who had conducted the audit of the accounts

In view of the above, the GST Auditor is called upon to give audit report only in respect of the maintenance of accounts, records and documents under the GST laws and the rules/notifications made/issued thereunder.

Finally, in Para 4, the GST Auditor expresses his opinion and states that the particulars given in the said Form No. GSTR-9C are true and correctsubject to following observations/qualifications, if any.

Part B- GSTR 9C

• It is important to bear in mind that where an Auditor is expressing an ‘opinion’, it involves exercise of professional judgement.

• It covers a range of responsibilities with necessary limitations too. While it covers the duty to report omission of essential matters, it also excludes the doubt whether an investigation needs to be undertaken.

• The whole of GSTR 9C is issued under the Auditor’s authority. It is not merely the numerical data but the description of various categories that come within his scope.

• Accordingly, an Auditor’s seal of approval covers all aspects in GSTR 9C. It is for this reason that qualifications alone are not sufficient to be mentioned in the ‘opinion’ but every other aspect to which attention of revenue authorities needs to be drawn to, would be required.


Illustrative list of issues that may warrant reporting in 9C Subject to the Notes annexed to GSTR 9, Audit

Methodology – the ICAI has published ….. regardingsampling …….and the same has been followed (EXACTWORDING TO BE INSERTED)

Subject to para 1 above, information reported in Part II ofGSTR 9C: Audited financial statements of the Legal Entity have been used to

derive the information; Deemed supply transactions and transactions for non-monetary

consideration do not appear in the books of accounts generallymaintained due to the GAAP basis of its preparation. Thesetransactions have been compiled separately and reported during theyear / at the end of the year / after the end of the year;

turnover from April 2017 to June 2017 have been extracted on reasonable basis from the audited financial statements as year-end closing procedures prescribed by SAS…… is not applicable for this period;

Credit notes are issued as permitted under GAAP and compliance with requirements of section 34 of CGST Act are monitored based on year-end review of such transactions;

Credit notes in respect of original supplies during the financial year but issued in the subsequent financial have been / have not been included within the financial year itself as an event occurring after the date of the Balance Sheet;

Refer Annexure or details of adjustments under 5-O along with notes therein;

Refer Annexure….for details of reasons stated in 6; 3. Subject to para 1 above, information reported in Part II of GSTR 9C:

Illustrative list of issues that may warrant reporting in 9C

Subject to para 1 above, information reported in Pt. IV of GSTR 9C: Information in respect of the total GST paid on each

item of inward supply as required in column (3) in Sr.no.14 has not been maintained. As such, only to the extent information is available has been reported;

Total of information in column (2) in Sr.no.14 matches / does not match with information pertaining to the Registered Person extracted from the audited financial statements of the Legal Entity;


Subject to para 1 above, information reported in Pt. IV of GSTR 9C:

Condition linked to rate of tax has / has not been violated /Advance Ruling has / has not been applied by this Registered Person and the same has / has not been ruled as on this date;

GST on reverse charge under section 9(4) and 5(4) are / are not paid from Jul 1, 2017 up to Oct 13, 2017;


Credit notes received by the Registered Person have / have not been reported as outward supplies;

Input tax credit reversed of Rs…….. includes:

Rs……. on ………..after revising credit reversal required under rule 42 (b) Rs……. on ………..after revising credit reversal required under rule 43

(c) Rs……. on ………..towards refund claimed (Rs…….. refund sanctioned and Rs……. refund rejected which has / has not been restored);


Closing balance of input tax credit for the year does not include: Amount liable to be reversed under Rule 37 which has been regularly

reviewed for reversal and has been reversed monthly / quarterly / annually / after audit

Amount ineligible under Section 17(5) but details of the same are unknown as it is not maintained

Amount ineligible due to conditional exemption applicable to outward supplies but details of the same are unknown as it is not maintained;

An amount of Rs…….. but not appearing in GSTR 2A has been claimed as credit based on confirmation of payment of such tax obtained by the Registered Person;

An amount of Rs……. towards input tax credit availed and liable to be reversed has / has not been reversed (Rs……. totally reversed and Rs………. restored for the year)


Take Care of: Management Representation.

Books of Accounts as per GST Acts.

All returns of VAT, Excise, Service tax, etc.

GSTN reports.

E-way bill reports.

ICEGATE reports for I/E.

GSTR 2A.

AAR

Amendments to Rates in 17-18.

Issues of Information Technology?

Issues of Information technology

Audit Fees,

Risk V/s Reward?

Take Care of:

Be yourself, inside and outside.., happy

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