AUDIT REPORT IN FORM GSTR - 9C R. P. MODY, FCA

STATUTORY PROVISIONS : Section 35(5) - Every registered person whose turnover during a financial year exceeds the prescribed limit shall get his accounts audited by a chartered accountant or a cost accountant and shall submit a copy of the audited annual accounts, the reconciliation statement under sub-section (2) of section 44 and such other documents in such form and manner as may be prescribed. Section 44(2) – Every registered person who is required to get his accounts audited in accordance with the Provisions of Sub-section (5) of Section 35 shall furnish, electronically, the annual return under Sub –section(1) along with a copy of the audited annual accounts and a reconciliation statement, reconciling the value of supplies declared in the return furnished for the financial year with the audited annual financial statement and such other particulars as may be prescribed. Rule 80(3) - Every registered person whose aggregate turnover during a financial year exceeds two crore rupees shall get his accounts audited as specified under sub-section (5) of section 35 and he shall furnish a copy of audited annual accounts and a reconciliation statement, duly certified, in FORM GSTR-9C, electronically through the common portal either directly or through a Facilitation Centre notified by the Commissioner. Section 2 (6) “aggregate turnover” means the aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable by a person on reverse charge basis), exempt supplies, exports of goods or services or both and inter-State supplies of persons having the same Permanent Account Number, to be computed on all India basis but excludes central tax, State tax, Union territory tax, integrated tax and cess;

STATUTORY PROVISIONS - Analysis As per Section 35(5) of GST Act read with Rule 80(3) of GST Rules, every registered person whose aggregate turnover exceeds Rs. 2 Crore is required to get his account audited and shall furnish copy of audited annual and reconciliation statement duly certified in from GSTR – 9C. The aggregate turnover has been defined in Section 2(6) of GST Act and it means turnover of all the registration and not of individual registrations. Thus, in my view unless the Government clarify it otherwise, turnover of all States will be considered for computing the amount of Rs. 2 Crore for entire year and not proportionately for part year. As per Section 44(2) every person who is required to get his accounts audited shall furnish electronically annual return with copy of annual accounts and reconciliation statement reconciling the value of supply declared in the return for the financial year with audited annual financial statement and such other particulars as may be prescribed. Specified Government Establishment are not required to carry out this audit as per Amendment Act.

FORM GSTR - 9C As per Provisions of Section 35(5), Applicable to Registered Person only, URP is not required to submit, RP whose turnover during a FY exceeds the turnover limit of Rs. 2 Cr., Turnover implies – supply / receipt side only, To get accounts audited by C. A. or Cost Accountant, and Submit electronically – 1) Annual Return in Form GSTR – 9, 2) Copy of audited financial statements, 3) the reconciliation statement, and 4) other documents as may be prescribed Auditor also require to certify about the examination of cash flow statement

Reconciliation of Annual Financial Statement (AFS) with Annual Return GSTR 9 and uploading thereof – The amount of output supply is required to be declared in GSTR – 1 and subsequently also required to be filled in GSTR – 3B. The consolidated amount of GSTR – 1 as well as that of GSTR – 3B uploaded during any financial year, shall be uploaded in the Annual Return GSTR – 9 after taking into consideration the subsequent adjustments made in returns of April 18 to September, 18. Thereafter the figures disclosed in GSTR – 9 shall be reconciled with the Audited Financial Statement and disclosed in the Audit Report i. e. GSTR - 9C along with the recommendations of the Auditor. This GSTR – 9C shall be electronically uploaded on web-site along with the audited annual financial accounts. Any other particulars as may be prescribed are also to be uploaded on web-site.

FOCUS ON RECONCILIATION – There are various reasons for differences between the value of supply declared in GSTR – 3B/ GSTR – 1 and the value shown in the annual financial statement (AFS) . It can be on account of – Value of stock transfer invoices declared in GSTR – R1, Barter Transactions, Related parties transactions, including cross-charge, Preparation of invoices for providing samples or gift items, Interest received from Sundry Debtors, Deemed Supplies as per Schedule I of GST Act, High Seas sales, Bonded Warehouse sales and Out and Out sales, Recovery made from Employees on which tax is paid under GST, Business Assets written off on which ITC was claimed earlier, Purchases returned by preparing invoice,

11. Sales returns shown as purchases under GST returns, 12. Reimbursement of expenses received shown as receipt in GST return 13. Advances received for supplies to be made, 14. Tax liability discharged under margin Scheme, 15. Unbilled Revenue, 16. Difference in accounting system followed in preparing financial accounts like in case of construction company on account of various accounting standards, 17. Sales of goods not covered by GST mainly in case of residential hotels, restaurants cum bars or in respect of sales of petroleum and petroleum goods etc. Amount of deemed supply as per Provisions of Section 143(3) and (4) Supplies made on Approval & not received back within six months. and so on……..

Audit Report – GSTR 9C - Broad view Mainly two Parts - A and B, Part A - Reconciliation Statement Part B - Certification

Part A - Reconciliation Statement Part A has 5 sub-parts and 17 tables to be filled, & Verification – Solemn affirmation cum declaration of GST Auditor Various instructions to fill this Audit Report – Whether these instructions are provided as guidance notes or mandatory? Compare - Instructions of Form 704 and a Certificate to be given by VAT Auditor, Part B is – Certification from GST Audit – two declarations are given, Issue – What if there is no audit of Financial Statement?

Five Sub- Parts of Part – A Part I Basic Details Part II Reconciliation of turnover declared in audited Annual Financial Statement (AFS) with turnover declared in Annual Return (GSTR9) Part III Reconciliation of tax paid Part IV Reconciliation of Input Tax Credit (ITC) and Pt. V Auditor's recommendation on additional Liability (not about refund or other benefit) after due reconciliation. At the end of this Part auditor has to provide a verification Certificate and declaration.

Sub - Part I of Part A Read instructions minutely Basic Details Sr. Nos. 1 ) Financial Year 2) GSTIN : It implies audit is necessary for each GSTIN 3A) Legal Name < Auto> 3B) Trade Name (if any) <Auto> 4) Are you liable to audit under any Act? <<Please specify>> Significance? Read instructions minutely

Sub - Part II of Part A Reconciliation of Turnover Sr. No.5) Reconciliation of turnover declared in audited Annual Financial Statement with turnover declared in Annual Return Sr. Nos. 5 Reconciliation of Gross Turnover 6 Reasons for Un - Reconciled difference in Annual Gross Turnover 7 Reconciliation of Taxable Turnover 8 Reasons for Un - Reconciled difference in taxable turnover. Reconciliation of - “TURNOVER” declared in AFS - What exactly does it mean/cover? Declared in Audited financial Statement – What if audit is not applicable? In case of Multi-state audits – reference is books of accounts, trial balance With the Annual Return in GSTR – 9

Reconciliation of tax paid Sub - Part III of Part A Reconciliation of tax paid Sr. Nos. 9 Reconciliation of rate wise liability and amount payable thereon 10 Reasons for un-reconciled payment of amount 11 Additional amount payable but not paid (due to reasons specified under Tables 6,8 and 10 above)

Reconciliation of Input Tax Credit (ITC) Sub - Part IV of Part A Reconciliation of Input Tax Credit (ITC) Sr. Nos. 12 Reconciliation of Net Input Tax Credit (ITC) 13 Reasons for un-reconciled difference in ITC 14 Reconciliation of ITC declared in Annual Return (GSTR9) with ITC availed on expenses as per audited AFS or books of accounts – Here, details are to be provided according to expenses head wise as well as that of Capital goods.

Sub - Part IV of Part A Reconciliation of Input Tax Credit (ITC) 15 Reasons for un - reconciled difference in ITC 16 Tax payable on un-reconciled difference in ITC (due to reasons specified in 13 and 15 above)

Sub - Part V of Part A Auditor's recommendation on additional Liability due to non-reconciliation Auditor can recommend only for additional Liability due to non- reconciliation. If Audit results into refund etc. then what???

Verification: I hereby solemnly affirm and declare that the information given herein above is true and correct to the best of my knowledge and belief and nothing has been concealed there from. 1. Solemnly affirm and declare, 2. information given herein above is true and correct, 3. to the best of my knowledge and belief, and 4. nothing has been concealed there from. Very dangerous in case of self prepared details and giving such type of reports.

Instructions: – Instruction Nos. : Part I’s Instructions – 1. Terms used: (a) GSTIN: Goods and Services Tax Identification Number 2. The details for the period between July 2017 to March 2018 are to be provided in this statement for the financial year 2017-18. The reconciliation statement is to be filed for every GSTIN separately. 3. The reference to current financial year in this statement is the financial year for which the reconciliation statement is being filed for. 4. Part II consists of reconciliation of the annual turnover declared in the audited Annual Financial Statement with the turnover as declared in the Annual Return furnished in FORM GSTR-9 for this GSTIN. Various instructions are provided for filling Part II. 5. Part III consists of reconciliation of the tax payable as per declaration in the reconciliation statement and the actual tax paid as declared in Annual Return (GSTR9). Various instructions are provided to fill Part III and tables thereof.

Instructions: – Instruction Nos. : 6. Part IV consists of reconciliation of Input Tax Credit (ITC). Various instructions are provided to fill Part III and tables thereof. 7. Part V consists of the auditor’s recommendation on the additional liability to be discharged by the taxpayer due to non-reconciliation of turnover or non-reconciliation of input tax credit. The auditor shall also recommend if there is any other amount to be paid for supplies not included in the Annual Return. Any refund which has been erroneously taken and shall be paid back to the Government shall also be declared in this table. Lastly, any other outstanding demands which is recommended to be settled by the auditor shall be declared in this Table. 8. Towards, the end of the reconciliation statement taxpayers shall be given an option to pay their taxes as recommended by the auditor.

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