Unbilled Revenue at the beginning of financial year

Checklist for 5B of Part II of GST Audit- Unbilled Revenue at the beginning of the financial year

Before understanding the scope of this point, one need to understand what is unbilled revenue.

Unbilled revenue means the revenue, which is recognized in the books of accounts before issue of an invoice at the end of a particular period.

According to Accounting Standard 9/ IND AS 115 one can recognize revenue on full completion/partial completion of the services however, due date for issuing invoice as per the contract would be on a later date

Unbilled revenue, which was recorded in the books of accounts in the earlier financial year on the basis of the accrual system of accounting for which invoice is issued in GST law, is required to be declared here.

In other words, when GST is payable during the financial year on such revenue, value of such revenue will be declared here.

Detailed Analysis

Unbilled revenue would appear in Profit and loss account of the previous year. For Information of unbilled revenue at the beginning of financial year, previous year audited financial statement can be used.

GST was implemented from 1^stof July 2017 hence, the invoice issued between 1st April 2017 to 30th June 2017 must be excluded for calculation.

When entities have multiple GSTIN, a separate statement is to be obtained for each GSTIN reconciling the total with the amount disclosed in the financials.

As per sec. 9 of the CGST Act liability to pay tax arise on supply of services, further sec. 13 defines time of supply of service. As per section 13 time of supply of service will be

1. The date of issue of invoice by the supplier or date of receipt of payment, whichever is earlier.
2. The date of provision of service or the date of receipt of payment, whichever is earlier.
3. The date on which the recipient shows the receipt of service in his books of account, when above two provision do not apply

As per Section 31(2) an invoice for supply of services needs to be issued before or after the Provision of service but not later than thirty days from the date of provision of service. From the above it is clear that, if the supplier does not receive money in advance, he gets 30 days’ time from the date of provision of service to raise invoice and collect tax on the same. Therefore, there would be a timing difference in the recognition of revenue in the books of accounts and the GST provisions.

Because of this, Sl. No. 5B is necessary to reconcile the revenue between the books and the GST returns

Another aspect to note in the opening unbilled revenue for the year 2017-18 is to reconcile the

Same with the transition declaration filed under Section 142(11) in GSTR Form TRAN 01

Examples

1. Representation services provided on 25th of March for which invoice is raised on 5th April would be recognized as unbilled revenue. However, this would not be part ofClause 5B as this transaction is of the period April 2017 to June 2017
2. IT/ITES services provided for the month of March 2017 for which invoice is raised on 1stof July 2017 as per the terms of contract would be recognized as unbilled revenue.
3. Rental contract for which billing is on 20th of every month, unbilled revenue would be recognized in the books of accounts as on 31st March to the extent of 11 days of services provided in March.
4. Maintenance contract for which billing is on 5th of the subsequent month, unbilled revenue would be recognized in the books of accounts as on 31st March.

Notes to consider/control checks

Following checks need to be performed for correct calculation of amount to be reported under this head

1. Reconcile with declaration made under 142(11) in GSTR TRAN 01
2. Must be vouched / checked with notes to accounts in the Balance Sheet (PY and CY);
3. Notes to 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 3-B;
4. Cross-link with the corresponding item in GSTR 9 - Part III Sl. No. 6K;
5. Invoices raised during April 01, 2017 to June 30, 2017 to be excluded and reconciled with GSTR TRAN 01;
6. Adequate attention of the reader must be drawn to 'Notes on accounts' and 'Significant Accounting policies' in cases of entities which need to adhere to Statutory Audit provisions under the allied laws.

Disclosure

Reliance has been placed on the audited financial statements for determining the unbilled revenue and no separate exercise is conducted to validate the same.

The author can also be reached at ruchika.tulsyan@gmail.com