Analysis of recent clarification on GST Annual returns and Reconciliation statement

S No.

Clarifications received from Government

Team Hiregange comments

A

Payment of any unpaid tax: Section 73 of the CGST Act provides a unique opportunity of self-correction to all taxpayers i.e. if a taxpayer has not paid, short paid or has erroneously obtained/been granted refund or has wrongly availed or utilized input tax credit then before the service of a notice by any tax authority, the taxpayer may pay the amount of tax with interest. In such cases, no penalty shall be leviable on such tax payer. Therefore, in cases where some information has not been furnished in the statement of outward supplies in FORM GSTR-1 or in the regular returns in FORM GSTR-3B, such taxpayers may pay the tax with interest through FORM  GST DRC-03 at any time. In fact, the annual return provides an additional opportunity for such taxpayers to declare the summary of supply against which payment of tax is made.

1. The clarification is in line with section 73 permitting voluntary payment of tax through Form GST DRC-03.
2. However, wherever amount paid is through DRC-03, there would always be interest liability which is also required to be discharged. Interest would be on net if ITC is eligible.
3. Mere difference in turnover between books of account and details furnished in the GSTR-9 does not result in the tax liability unless it is established that there was taxable supply on which tax was omitted to be paid.
4. While making payment through DRC-03, the instruction to GSTR-9 provides that it has to be paid in cash. There is no such restrictive provision in the law and to this extent the instruction to the Form overrides the statute.
5. While paying tax through DRC-03, the option should be chosen as 'Annual Return'
6. The excess of 'Tax Payable' vis-a-vis 'Tax Paid' as per table 9 of Form GSTR-9 would indicate the requirement of payment of tax through DRC-03. There is no column for disclosure of DRC-03 in the GSTR-9. It has to be declared by the auditor in the GSTR-9C.
7. In case of assesse having aggregate turnover less than 2 crore, the payment of tax through DRC-03 may be voluntarily intimated to department in line with requirement of section 73.
8. The interest paid through DRC-03 should be disclosed in the Table 9 of GSTR-9.

B

Primary data source for declaration in annual return: Time and again taxpayers have been requesting as to what should be the primary source of data for filing of the annual return and the reconciliation statement. There has been some confusion over using FORM GSTR-1, FORM GSTR-3B or books of accounts as the primary source of information. It is important to note that both FORM GSTR-1 and FORM GSTR-3B serve different purposes. While, FORM GSTR-1 is an account of details of outward supplies, FORM GSTR-3B is where the summaries of all transactions are declared and payments are made. Ideally, information in FORM GSTR-1, FORM GSTR-3B and books of accounts should be synchronous and the values should match across different forms and the books of accounts. If the same does not match, there can be broadly two scenarios, either tax was not paid to the Government or tax was paid in excess. In the first case, the same shall be declared in the annual return and tax should be paid and in the latter all information may be declared in the annual return and refund (if eligible) may be applied through FORM GST RFD-01A. Further, no input tax credit can be reversed or availed through the annual return. If taxpayers find themselves liable for reversing any input tax credit, they may do the same through FORM GST DRC-03 separately.

1. The first step to preparing the annual returns should be to reconcile the figures as per Form GSTR-1, Form GSTR-3B and the books of accounts. Ideally the filing of the returns should be in such a way that no difference exists. Although this cannot be done now for FY 2017-18, for FY 2018-19, since the time still exists to make the amendments/additions and availing/reversing credits, efforts should be put in to ensure that the said figures are reconciled and appropriate changes be done during filing of returns up to Sep '19 due date, for ease in filing GSTR-9 for such FY.
2. For FY 17-18, on identification of the reconciliation differences, the disclosure in the various tables in the annual returns will follow as below:

Relating to outward supplies

1. Short payment of tax to be disclosed in table 9 of the annual return i.e. added to 'tax payable' as already clarified in the previous press release dated 4th Jun '19 and payment to be made in Form GSTR DRC -03 as explained above.
2. Excess tax paid in GSTR-3B. Show correct value of supply in table 4 and 'tax payable' under table 9 of annual return to disclose the actual liability (i.e. lesser liability) and the difference between 'tax payable' and 'tax paid' in such table 9  to establish refund eligibility. Refund cannot be claimed through the annual returns but by filing RFD-01A.

Relating to ITC

3. ITC which is ineligible can be reversed through Form DRC-03. However, no clarification has been provided in the Annual Return as to whether such reversal should be disclosed in the annual return. Hence the assessee may choose any of the below 2 options:

• Pay through DRC-03 without making any disclosure in annual return regarding such reversal. To be explained by auditor in GSTR-9C in table 15
• Pay through DRC-03 and disclose such reversal in Table 7 of the annual return. There would be no difference in table 12 and 14 of 9C. Fact of payment through DRC-03 may be disclosed in Part B of GSTR-9C.

4. Any credit missed cannot be claimed in the annual returns.

Note: The clarification should have clearly provided that the ITC reversal may be disclosed in the Table 7 so that the dichotomy in the disclosure could be avoided.

C

Premise of Table 8D of Annual Return: There appears to be some confusion regarding declaration of input tax credit in Table 8 of the annual return. The input tax credit which is declared / computed in Table 8D is basically credit that was available to a taxpayer in his FORM GSTR-2A but was not availed by him between July 2017 to March 2019. The deadline has already passed and the taxpayer cannot avail such credit now. There is no question of lapsing of any such credit, since this credit never entered the electronic credit ledger of any taxpayer. Therefore, taxpayers need not be concerned about the values rejected in this table. This is merely an information that the Government needs for settlement purposes. Figures in Table 8A of FORM GSTR-9 are auto-populated only for those FORM GSTR-1 which were furnished by the corresponding suppliers by the due date. Thus, ITC on supplies made during the financial year 2017-18, if reported beyond the said date by the corresponding supplier, will not get auto-populated in said Table 8A. It may also be noted that FORM GSTR-2A continues to be auto-populated on the basis of the corresponding FORM GSTR-1 furnished by suppliers even after the due date. In such cases there would be a mis-match between the updated FORM GSTR-2A and the auto-populated information in Table 8A. It is important to note that Table 8A of the annual returns is auto- populated from FORM GSTR-2A as on 1st May, 2019.

1. This clarification comes as a big relief to the assesses whereby it is made known that the difference appearing in table 8D of the annual returns is merely an information to the Government and the taxpayers need not be concerned about the same.
2. Further the manner in which the figures of GSTR-2A are picked up has been explained.
3. It has been recently clarified by GSTN that there cannot be amendment to the invoices pertaining to the FY 2017-18 and hence the value of ITC in Table 8A should be as per GSTR-2A as on 1st May 2019.

D

Premise of Table 8J of Annual Return: In the press release on annual return issued earlier on 4th June 2019, it has already been clarified that all credit of IGST paid at the time of imports between July 2017 to March 2019 may be declared in Table 6E. If the same is done properly by a taxpayer, then Table 8I and 8J shall contain information on credit which was available to the taxpayer and the taxpayer chose not to avail the same. The deadline has already passed and the taxpayer cannot avail such credit now. There is no question of lapsing of any such credit, since this credit never entered the electronic credit ledger of any taxpayer. Therefore, taxpayers need not be concerned about the values reflected in this table. This is information that the Government needs for settlement purposes.

1. It has been clarified that the credit relating to import of goods, flowing from the BoE, relating to FY 17-18 and availed in FY 2018-19 can be disclosed in table 8H as was clarified in the earlier press release and which is also in line with the amended instruction to the annual returns (vide notification No. 31/2019-CT dated 28th Jun '19).
2. Further such credit can be disclosed in table 6E also as was earlier clarified in the press release.
3. However, it is stated that the credit relating to import of goods relating to FY 17-18 which was missed to be availed up to 31st Mar '19 cannot be availed now as the time has lapsed.

E

Difficulty in reporting of information not reported in regular returns: There have been a number of representations regarding non-availability of information in Table16A or 18 of Annual return in FORM GSTR-9. It has been observed that smaller taxpayers are facing a lot of challenge in reporting information that was not being explicitly reported in their regular statement/ returns (FORM GSTR-1 and FORM GSTR-3B). Therefore, taxpayers are advised to declare all such data / details (which are not part of their regular statement/returns) to the best of their knowledge and records. This data is only for information purposes and reasonable/ explainable variations in the information reported in these tables will not be viewed adversely.

1. This clarification comes as a big relief to the extent that the information relating to procurements from composition taxpayers and HSN details relating to inward supplies, can be declared to the best of the taxpayers' knowledge and records as this data is only for information purposes.
2. Hence, the taxpayers can disclose such information to the extent data is available in the records maintained i.e. accounting books and invoices provided by the vendors. So, if no HSN details are mentioned in the vendor invoices it is not expected that the taxpayer is required to ascertain the HSN and then disclose it in the annual returns.
3. However, what would be the case where the vendor has disclosed only 2 digits whereas the annual return requires disclosure of 6 digits of HSN. In that case also the taxpayer may not be expected to ascertain, but can disclose to the extent data is available only.
4. Although, while Government has clarified that the difference will not be viewed seriously, however, we hope that the clarification would be honored by the field officers.

F

Information  in  Table  5D  (Exempted),  Table  5E   (Nil   Rated)   and   Table   5F (Non-GST Supply): It has been represented by various  trade  bodies/associations  that  there appears to be some confusion over what values are to be entered in Table 5D, 5E and 5F of FORM GSTR-9. Since, there is some overlap between supplies that are classifiable as exempted and nil rated and since there is no tax payable on such supplies, if there is a reasonable/explainable overlap of information reported across these tables, such overlap will not be viewed adversely. The other concern raised by taxpayers is the inclusion of no supply in the category of Non-GST supplies in Table 5F. For the purposes of reporting,  non-GST  supplies  includes  supply  of  alcoholic  liquor  for  human  consumption,  motor  spirit  (commonly  known  as  petrol), high speed diesel, aviation turbine fuel, petroleum crude and natural gas and transactions specified in Schedule III of the CGST Act.

1. Disclosure of figures relating to exempted, nil rated and non-GST supply can be done on a reasonable basis as there is a certain overlap between such descriptions. Any such flaw in disclosure i.e. exempted supply shown as nil rated, etc. will not be viewed adversely.
2. Further, non-GST supply is said to include the goods which are out of the purview of GST i.e. alcoholic  liquor  for  human  consumption,  motor  spirit  (commonly  known  as  petrol),  high speed diesel, aviation turbine fuel, petroleum crude and natural gas, and transactions specified in Schedule III of the CGST Act being the one that would be covered in 'No Suppy' i.e. Neither a supply of goods nor services.
3. Therefore, transactions which are in the nature of financial income i.e. duty drawback, dividend, profit on sale of mutual funds etc, Ind AS entries etc. are not required to be disclosed in GSTR-9.

G

Reverse charge in respect of Financial Year 2017-18 paid during Financial Year 2018-19: Many taxpayers have requested for clarification on the appropriate column or table in which tax which was to be paid on reverse charge basis for the FY 2017-18 but was paid during FY 2018-19. It may be noted that since the payment was made during FY 2018-19, the input tax credit on such payment of tax would have been availed in FY 2018-19 only. Therefore, such details will not be declared in the annual return for the FY 2017-18 and will be declared in the annual return for FY 2018-19. If there are any variations in the calculation of turnover on account of this adjustment, the same may be reported with reasons in the reconciliation statement (FORM GSTR-9C).

1. It has been clarified that the liability under RCM relating to FY 2017-18 but which was paid in FY 18-19 and credit also being claimed in FY 2018-19, then in such cases the details of the payment of tax and the credit need not be disclosed in the annual return of FY 2017-18 and since the credit is eligible in FY 2018-19 only. Thereby the same will have to be disclosed in table 4 of annual return of FY 2018-19 and the difference to be explained in GSTR-9C.
2. This clarification does not seem to be in line with the basic premise/ structure in which the information is demanded in the forms. In case of RCM, even though the entry of expenditure relating is recorded in the FY 17-18, still it states that the details of taxes paid under RCM in FY 18-19 needs to be disclosed in the Annual returns to be filed in FY 18-19 even though the transaction pertains to FY 17-18.
3. One must note that exactly opposite stand is taken for disclosure of details of outward supplies, wherein the details of taxes paid in FY 18-19 are reported in table 10 of Part V of the same annual return.
4. This revised understanding of the disclosure mechanism would lead to unnecessary reconciliation differences, although it is clarified to report the differences in GSTR 9C with reasons.

H

Role of chartered accountant or a cost accountant in certifying reconciliation statement: There are apprehensions that the chartered accountant or cost accountant may go beyond the books of account in their recommendations under FORM GSTR-9C. The GST Act is clear in this regard. With respect to the reconciliation statement, their role is limited to reconciling the values declared in annual return (FORM GSTR-9) with the audited annual accounts of the taxpayer.

1. Post issue of this press release, there has been tremendous confusion as to the scope of the scope of auditor w.r.t to the submission of the reconciliation statement and certification of the same. In order to understand the scope, following possible situations to be considered:

• Possibility 1: Whether scope of auditor is to merely reconcile the number as per audited financial statement with the annual return?
• Possibility 2: Whether auditor has to legally validate the transactions contained in the books of account i.e. taxability, ITC eligibility, rate of tax etc. or merely proceed based on the tax treatment as per books of account?
• Possibility 3: Whether auditor is required to look beyond the books of account also i.e. to identify the transactions of deemed supply, cross charge, clandestine removal, bogus billings etc.?

2. It has been clarified that the scope of auditor is to reconcile the value declared in the books of account with the GSTR-9. This indicates that the scope of auditor is as per possibility 1 explained above.
3. However, in view of the authors, the scope of auditor cannot be confined to merely reconciliation as the term 'Audit' has a wide connotation under GST Act and while signing auditor is expected to acknowledge the declaration of details to be 'true and correct'. Therefore, if any non-compliance comes to the knowledge of the auditor in the course of performance of the reconciliation and the auditor come across any instances where ITC has been taken wrongly or tax has not been charged on the transactions appearing in the books of account, then it should report the same in GSTR-9C.
4. Further, the press release does not specifically state to restrict or limit the scope of the auditors to be merely a reconciliation exercise, it however provides a major relief in as much as auditor is not required to look beyond books of account to identify and report the instances of non-compliance by auditee.

I

Turnover for eligibility of filing of reconciliation statement: It may be noted that the aggregate turnover i.e. the turnover of all the registrations having the same Permanent Account Number is to be used for determining the requirement of filing of reconciliation statement. Therefore, if there are two registrations in two different States on the same PAN, say State A (with turnover of Rs. 1.2 Crore) and State B (with turnover of Rs. 1 Crore) they are both required to file reconciliation statements individually for their registrations since their aggregate turnover is greater than Rs. 2 Crore. The aggregate turnover for this purpose shall be reckoned for the period July, 2017 to March, 2018.

1. This was a much needed clarification whereby only the turnover from Jul '17 to Mar '18 would have to be considered for ascertaining whether the taxpayer has crossed the Rs. 2 crore aggregate turnover limit, requiring him to file GSTR-9C along with the audited financial statements.
2. However, an exactly opposite view was taken by GSTN in a recently issued FAQ's wherein it was stated that the period of full financial year Apr'17 to Mar'18 must be considered for calculating the turnover limit of Rs. 2 Crore.
3. However, in view of authors, since now the same is being clarified otherwise by the policy wing i.e. CBIC, therefore one may restrict the period of only Jul'17 to Mar'18 for computing the limit of Rs. 2 Crores.
4. Further, aggregate turnover has to be seen at the PAN level.

J

Treatment of Credit Notes / Debit Notes issued during FY 2018-19 for FY 2017-18: It  may    be noted that no credit note which has a tax implication can be issued after the month of September 2018 for any supply pertaining to FY 2017-18; a financial/commercial credit note can, however, be issued. If the credit or debit note for any supply was issued and declared in returns of FY 2018-19 and the provision for the same has been made in the books of accounts for FY 2017-18, the same shall be declared in Pt. V of the annual return. Many taxpayers have also represented that there is no provision in Pt. II of the reconciliation statement for adjustment in turnover in lieu of debit notes issued during FY 2018-19 although provision for the same was made in the books of accounts for FY 2017-18. In such cases, they may adjust the same in Table 5O of the reconciliation statement in FORM GSTR-9C.

1. There were confusions as to the treatment of credit notes in the GSTR-9 and GSTR-9C. The clarification is a welcome to remove the ambiguity. For ease of reference and understanding, various scenarios of credit notes and debit notes are being explained in the tabular form below.

K

Duplication of information in Table 6B and 6H: Many taxpayers have represented about duplication of information in Table 6B and 6H of the annual return. It may be noted that the label in Table 6H clearly states that information declared in Table 6H is exclusive of Table 6B. Therefore, information of such input tax credit is to be declared in one of the rows only.

1. It has been clarified that the reclaim of credit reversed due to non-payment within 180 days will appear only once, either in table 6B or 6H.

L

Reconciliation of input tax credit availed on expenses: Table 14 of the reconciliation statement calls for reconciliation of input tax credit availed on expenses with input tax credit declared in the annual return. It may be noted that only those expenses are to be reconciled where input tax credit has been availed. Further, the list of expenses given in Table 14 is a representative list of heads under which input tax credit may have been availed. The taxpayer has the option to add any head of expenses.

1. It stated that reconciliation is required only w.r.t. expenses where ITC has been availed. Though there is lack of clarity whether the ITC has to be reconciled or the value of expense as per books and ITC ledger has to be reconciled.
2. In our considered view it seems logical to reconcile the ITC, as reconciliation of the expense will not serve any purpose and will lead to no meaningful conclusions.
3. Thereby, the auditor can reconcile the ITC availed as per books and that as per the annual return and disclose the expense figure as appearing in the ITC ledger as per the BoA.

S.No

Document type

Document dated

Reported in GSTR1/3B

To be Reported in GSTR 9 at

To be Reported in GSTR 9C at

1

CN

 F.Y. 2017-18

 F.Y. 2017-18

B2C- Table 4A

B2B- Table 4I

2

F.Y. 2017-18

F.Y. 2018-19

Table 11

3

F.Y. 2018-19 pertaining to supplies  of F.Y. 2017-18

(Provision made in BoA in 2017-18)

F.Y. 2018-19

Table 11

FY 17-18 - Table 5E if impact not considered in Table 5A.

4

F.Y. 2018-19 pertaining to supplies  of F.Y. 2017-18 (Accounted in BoA in 2018-19)

F.Y. 2018-19

Will not appear in GSTR-9 of FY 2017-18.

Will become part of GSTR-9 of F.Y 2018-19 in Table 4I.

Will not appear in GSTR-9C of FY 2017-18.

Will become part of table 5A in GSTR-9C of F.Y. 2018-19.

5

Financial CN

F.Y. 2017-18

 NA

 NA

Table 5J - if impact not considered in Table 5A.

6

F.Y. 2018-19 but provision made in F.Y.2017-18

 NA

 NA

Table 5J - if impact not considered in Table 5A.

7

F.Y. 2018-19 but booked in F.Y.2018-19

 NA

 NA

Table 5J of GSTR-9C 2018-19

8

DN

F.Y. 2017-18

 F.Y. 2017-18

B2C- Table 4A

B2B- Table 4J

9

F.Y. 2017-18

F.Y. 2018-19

Table 10

10

F.Y. 2018-19 relating to supply of F.Y.2017-18 and provisioned in BoA in F.Y.2017-18

F.Y. 2018-19

Table 10

Table 5O if impact not considered in Table 5A.

11

F.Y. 2018-19 relating to supply of F.Y.2017-18 and  accounted in BoA in 2018-19

F.Y. 2018-19

Will become part of GSTR-9 of F.Y.2018-19 table 4J.

Will become part of GSTR-9C of  F.Y. 2018-19 in table 5A