GST Annual Reconciliation Statement - GSTR-9C

In this article we will discuss about GST Annual Reconciliation Statement- GSTR-9C. We will discuss only the GSTR -9C PART-1 and PART-II from S.No.5 to S.No.6. Remaining part we will discuss in next article. Basically GSTR-9C is a reconciliation between Annual Return -GSTR-9 and Audited Financial Statement.

Due date of filing GSTR-9C (Annual Reconciliation Statement)

At present due date is 30th June 2019 for filing Annual Reconciliation Statement- GSTR-9C for the period July 2017 to March18.

Who is Required to File GSTR 9C (Annual Reconciliation Statement)

As per Section 35(5) CGST Act -

Every registered person, whose turnover during a F.Y. exceeds the prescribed limit shall get his accounts audited by a chartered accountant or a cost accountant and shall submit a copy of Audited Annual accounts, the Reconciliation Statement u/s 44(2) and such other documents in such form and manner as may be prescribed .

As per Section 44(2) CGST Act

Every registered person, who is required to get his accounts audited in accordance with the provisions of Section 35(5) shall furnish, electronically, annual return under sub-section (1) along with a copy of audited annual accounts and a reconciliation statement, reconciling the value of supplies declared in return furnished for F.Y. with audited annual financial statement, and such other particulars as may be prescribed .

As per Rule 80(3) CGST Rules

Every registered person, whose aggregate turnover during a F.Y. exceeds two crore rupees shall get his accounts audited as specified u/s-35(5) and he shall furnish a copy of audited annual accounts and a reconciliation statement, duly certified, in GSTR 9C, electronically through common portal either directly or through a Facilitation Centre notified by the Commissioner .

Remarks

This is required to be filed by a taxpayer who is having aggregate turnover more than 2 crores.

Consequences of failure to submit the annual return and not getting the accounts audited

As per Section 47(2) CGST Act

Any registered person, who fails to furnish the return required u/s- 44 (i.e. Annual Return) by due date shall be liable to pay a late fee of Rs.100/- for every day during which such failure continues subject to a maximum of an amount calculated at a quarter percent of his turnover in State or Union territory.

However, there is no specific penalty prescribed in GST Law for not getting the accounts audited by a Chartered Accountant or a Cost Accountant.

Therefore, as per Section- 125 CGST Act, he shall be liable to pay a penalty up to Rs.25,000/-. This section deals with General Penalty that gets attracted where any person, who contravenes any of provisions this Act, or any rules made thereunder for which no penalty is separately provided.

In Form- GSTR-9C( as notified in Notification No.74/2018 - Central Tax dt.31.12.18 ) there is two part -

PART-A Reconciliation Statement

Part-I Basic Detail
Part-II Reconciliation of Turnover
Part-III Reconciliation of Tax paid
Part-IV Reconciliation of Tax ITC
Part-V Auditor's recommendation

PART-B Certification

Format GSTR-9C

PART-A

PART-I Basic Details

Sl. No.-1 : Financial Year

In this Sl.No. requires to disclosure of Financial Year to which the Reconciliation Statement in Part A relates to. Generally Financial Year shall mean the year commencing on 1st day of April and closing on 31st day of March.

GST laws came into operation on 1stJuly, 2017 so all intents and purposes, for F.Y. 2017-18, applicable only for Nine months commencing from July 2017 to March 2018. So, in this Sl. No.one may mention 2017-18 (9 month commencing 1st July 2017 and ending on 31st March, 2018).

Sl. No.-2: GSTIN

GSTIN means Goods and Services Tax Identification Number of Tax payer/registered person.

Sl. No.-3A and 3B: Legal Name and Trade Name

Trade name is used by trade and industry to identify their businesses symbolizing their reputation and legal name is full name of company i.e. HUL is the trade name and Hindustan Unilever Limited is legal name.

Some cases, It may be possible that some Registered Persons may not have a trade name. In such situations, Sl.No. 3B of Part A would not be applicable. Therefore, NOT APPLICABLE may be stated in Part A which could be verified from <> data.

Legal name and Trade name to be verified with Certificate of registration as issued by Tax Department in Form GST REG 06. Similarly,

if Registered Person is a Company registered under Companies Act,2013, the legal name/trade name to be verified with Certificate of Incorporation and in case of Partnership Firm to be verified with Certificate issued by Registrar of Firms.

Sl. No.- 4: Are you liable to audit under any Act

It is possible that an entity may be subjected to audit under several statutes. For instance, a Proprietary Concern may be subject to audit under Income tax Act,1961 and a Private Limited Company could be subject to statutory audit under Companies Act, 2013 as well as under Income tax Act. This fact must be specified in Sl. No. 4.

Part II - Reconciliation of turnover declared in audited Annual Financial Statement with turnover declared in Annual Return(GSTR 9)

This Part seeks to reconcile the Gross Turnover in terms of Audited Financial Statements with turnover declared in Annual Return (GSTR-9) .

In the table in Part II, all the streams of income needs to be duly reconciled (reflected appropriately) in each of Sl. Nos.

Sl. No. 5A: Turnover (including exports) as per audited financial statements for the State/UT (For multi-GSTIN units under same PAN the turnover shall be derived from the audited Annual Financial Statement

This Sl.No. requires to declare Turnover as per Audited Annual Financial Statement. There may be cases where multiple GSTINs (State-wise) registrations exist on same PAN. Such persons would have to internally derive their GSTIN wise turnover and declare the same here.

Turnover in State/UT to be disclosed includes all (whether taxable, zero rated or not) supplies effected by Registered Person from State/UT (GSTIN wise).

Also required to include indirect income in the form of dividend, interest, forex fluctuation, profit on sale of assets, etc.

Inward supplies received by Registered Person on which tax has been paid under Reverse Charge (RCM) not to be included. Tax paid under RCM cannot become output tax, inward supplies on which tax is paid under RCM cannot become outward supplies viz. turnover.

Sl. No. 5B. Unbilled revenue at the beginning of Financial Year

First to understand the concept of Unbilled revenue . In simple terms, Unbilled Revenue is the revenue recognized in Books of Accounts before the issue of an invoice at the end of a particular period.

Unbilled revenue which was recorded in Books of Accounts on the basis of accrual system of accounting in last F.Y. and was carried forward to current F.Y. shall be declared here.

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

Example:-

Rs. 5 Lakhs of unbilled revenue existed for F.Y 2016-17, and during current F.Y., GST was paid on Rs.2 Lakhs of such revenue, then value of Rs.2 Lakhs shall be declared here.

Sl. No. 5C: Unadjusted advances at the end of the Financial Year

It is a business practice to collect advances from customers before effecting supplies. When an advance is received, since goods/services would not have been delivered/rendered, the revenue is not yet earned, whereby this advance would be recorded as a liability (either as current liability or long-term liability) in balance sheet as at the end of F.Y.

Value of all advances for which GST has been paid but the same has not been recognized as revenue in Audited Annual Financial Statement shall be declared here.

Note:-

1. Value of all advances for which GST has been paid but the same has not been recognized as revenue in audited Annual Financial Statement shall be declared here.
2. Even if not considered in GSTR 1 and GSTR 9, the same shall be added as turnover here .

Sl. No. 5D. Deemed Supply under Schedule-I

This Sl. No. is to report the transactions which were not reported in Financial Statements, though the same are reported in returns filed since they are treated as deemed supplies under the GST law. Details regarding this have to be extracted from books/records.

Aggregate value of deemed supplies under Schedule-I of CGST Act, 2017 shall be declared here. Any deemed supply which is already part of turnover in Audited Annual Financial Statement is not required to be included here.

As per Schedule-1 following supply will be deemed supply-

1. Permanent Transfer or disposal of business assets , where ITC has been availed on such assets.
2. Supply of goods/services or both between related persons or between distinct persons as specified in Section 25, when made in the course or furtherance of business.
3. Supply of goods-

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

(b) by an agent to his principal, where agent undertakes to receive such goods on behalf of principal.

4. 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.

Sl. No. 5E. Credit notes issued after the end of the financial year but reflected in the annual return .

This Sl. No. mandates reporting of aggregate value of Credit Notes which were issued after 31^st Mar 2018 in respect of any supply accounted in current F.Y. (2018-19) but for credit notes were reflected in annual return (GSTR 9 for F.Y. 2017-18).

But, it is uncommon, although not impossible, for credit notes dated after 1^st Apr 2018 to be given effect in financial accounts of 2017-18.

This Sl. No. applies only in such rare cases. For the most part, this Sl. No. may well be Nil .

Sl. No. 5F. Trade discounts accounted for in the audited Annual Financial Statement but are not permissible under GST

This Sl. No. requires disclosure of Trade Discounts , which have been given effect to, in Audited Financial Statements but which are not permissible as part of deductions from the value of supply under GST Laws.

It is also a business practice that trade discounts would be netted off against the turnover of outward supplies.

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

Following points to be checked for Trade discounts -

1. Valuation of Trade Discounts which disclosed under this head, has to be clearly documented.
2. ITC reflected in GSTR-2A attributable to such trade discounts has to be maintained.
3. Trade discount has to be demarcated between supplies made in the erstwhile law and GST regime.
4. Agreement with Customer should be scrutinized to determine the quantum of non-allowable discounts.

Illustration

(a) Turnover discount of Rs.21,000/ issued by way of Credit Notes by supplier during September 2017 wherein supplier has not reduced the tax rates.

(b) Quantity discounts of Rs.51000/- issued by way of Credit Notes without tax impact.

Solution-

Yes, both above discounts shall form part of reporting under Sl. No. 5F to table GSTR-9C because discounts have been provided by way of Credit Notes issued by supplier without any impact on tax.

Sl. No. 5G: Turnover from April 2017 to June 2017

In this Sl. No, turnover included in Audited Financial Statement for the period April 2017 to June 2017 shall be declared and deducted from annual turnover to arrive at the turnover as per GST Laws.

Turnovers forming part of tax periods 1^st April 2017 to 30^thJune 2017, which were liable to tax under erstwhile laws as per the provisions relating to the point of taxation rules should be deducted from turnover.

Illustration: Services were provided on 1.6. 2017. The service was completed on 20.6.2017, but invoice for the service was raised only on 1.8.2017.

Solution:

Invoice was raised after a period of 30 days, service tax is liable to be paid for the period ending June 2017 as per the proviso to Rule 3(a) of Clause of Taxation Rules.

Transaction is liable to service tax, it is not liable to GST as per Section 142(11)(b) of CGST Act, though the invoice is raised during GST regime.

Therefore, the said value of invoice must be deducted for the period April 17 to June 2017

Sl. No. 5H. Unbilled revenue at the end of Financial Year

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

Sl. No. 5I: Unadjusted Advances at the beginning of the Financial Year

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.

Sl. No. 5J. Credit notes accounted for in the audited Annual Financial Statement but are not permissible under GST

Aggregate value of credit notes which have been accounted for in Audited Annual Financial Statement but were not admissible u/s-34 CGST Act shall be declared here.

Sl. No. 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.

Such outward supplies are not required to be reported by SEZ units in their GST Returns and hence the data cannot be retrieved from the returns filed by such SEZ units.

SEZ units are required to maintain records of assets/goods admitted into SEZ unit and also the details of disposal of such goods. Such records can assist an Auditor in identifying the outward supply made by SEZ unit. Additionally, disposal of capital goods would be disclosed as deletion in Fixed Asset Registers.

Sl. No. 5L. Turnover for the period under composition scheme

There may be cases where Registered Persons might have opted out of composition scheme during the year. Their turnover as per 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 composition scheme shall be declared under this Sl. No.

A person registered under composition scheme, who has opted out of scheme should file both GSTR 9 and GSTR 9A.

An Auditor may note that even a person violating the conditions stipulated in Section 10 CGST Act or Rule 5 CGST Rules or Notification CT 8/2017 dated 27/06/2017 would stand to exit the scheme. In such cases, the composition person should file Form COMP-4 and opt out of the scheme.

Sl. No. 5M. Adjustments in turnover under section 15 and rules thereunder

There may be cases where taxable value and invoice value differ due to valuation principles u/s-15 of CGST Act, 2017 and rules thereunder.

Therefore, any difference between Turnover reported in Annual Return (GSTR 9) and turnover reported in Audited Annual Financial Statement due to difference in valuation of supplies shall be declared here.

Sl. No. 5N. Adjustments in turnover due to foreign exchange fluctuations

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

Sl. No. 5O. Adjustments in turnover due to reasons not listed above

Any difference between turnover reported in Annual Return(GSTR9) and turnover reported in Audited Annual Financial Statement due to reasons not listed above shall be declared here.

This is a residuary clause , which requires disclosure of reconciliation details relating to adjustments for which specific column is not provided under any other Sl.No.s under Item No. 5.

This Sl.No. may contain an option to insert multiple line items to add/reduce the amount from Gross Turnover declared in Audited Annual Financial Statements so as to reconcile the same with Turnover declared in Annual Return(GSTR-9).

Following adjustments can be reported under this Sl.No. -

(a) Turnover considered as supply under GST but not considered as income in Audited Annual Financial Statements;

(b) Turnover discovered as supply during the course of audit, but not considered in books of account and Annual Return (GSTR-9)

Sl. No. 5P: Annual turnover after adjustments as above

This Sl.No. is auto-populated and based on the values declared against Sl. Nos. 5B to 5O.

Notified format provides for various adjustments to the revenue declared in Audited Financial Statements to arrive at the turnover under the provisions of GST law. Result of all such adjustments to the revenue as per audited annual financial statements is termed Annual turnover after adjustments as above , which would be auto-populated in accordance with pre-determined formula viz., revenue as per audited annual financial statements add/less various adjustments to be declared against Sl.No.s 5B to 5O.

Sl. No.5Q: Turnover as declared in Annual Return (GSTR 9)

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

Sl. No. 5R: Un-reconciled turnover (Q-P)

This Sl. No. is difference between Annual turnover after adjustments as above as declared at Sl.No. 5P & Turnover as declared in Annual Returns(GSTR-9) as declared at Sl.No. 5Q. Difference would be auto generated.

This may be to any one of the following two situations:

(i) Annual turnover after adjustments as above at Sl.No. 5P is higher than turnover as declared in Annual Return (GSTR-9) at Sl.No. 5Q

(ii) Annual turnover after adjustments as above at Sl.No. 5P is lower than turnover as declared in Annual Return (GSTR 9) at Sl.No. 5Q:

Note - Reasons for such un-reconciled turnover should be given under Part II Sl. No. 6 of reconciliation statement in GSTR 9C.

Sl. No. 6- Reasons for Un-Reconciled difference in Annual Gross turnover

Reasons for non-reconciliation between the Annual Turnover declared in Audited Annual Financial Statement and Turnover as declared in Annual Return(GSTR- 9) shall be specified here.

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