1. IMC CHAMBER OF COMMERCE AND INDUSTRY
GST Annual Return and Audit
12th October, 2018

2. Contents All India VAT – Challenges GST Audit – Legal Provisions
Contents of Form 9 and 9C
GST Audit – Approach
GST Audit – Reconciliations
GST Audit – Major Challenges

3. All India VAT – Challenges

4. Value Propositions All India VAT – Challenges
Varying provisions in respective state VAT laws
Local consultants – quality & efficiency
State wise Trading and Profit and Loss account – Not available in most cases
Overall reconciliation with financials
Decentralised function, systems and approach to tax management
State VAT Audits – relevance during VAT assessments
State VAT departments

5. GST Audit – Legal Provisions

6. GST Audit – Legal Provisions
Section 2(13)- 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 into tax credit availed, to assess his compliance with the provisions of this Act or the rules made thereunder
Section 35(5) read with Section 44(2) of the CGST Act
Following documents to be furnished electronically by the assessee upon conclusion of the audit-
1) Annual Return
2) Copy of audited annual accounts
3) Reconciliation statement, reconciling the value of supplies declared in the return furnished for
the financial year with the audited financial statements in Form GSTR 9C, duly certified
4) Such other particulars, as may be prescribed
GST was implemented in India from 1st July 17.
Prior to 1st July – the effective rate of tax on this activity for ~12% and ITC was allowed on the food element.
Prior to 15th November, 2017 – the activity of supplying food and beverages for human consumption was taxed at the rate of 18% and full Input Tax Credit was allowed to such businesses. An increase in tax slowed down the demand for eating out and hurt the overall economy of the sector.
In an attempt to spur public demand for restaurants, the laws were amended and the new rate of tax for this activity is 5% ( albeit without allowing any ITC to the business ). Although it beneficial for the customers

7. GST Audit – Legal Provisions
Rule 80 of CGST rules amended in Sep 2018 to prescribe format of Annual Return and Audit Report. Every registered person whose aggregate turnover during financial year exceeds 2 Crores shall get his accounts audited.
Every registered person other than (Even if not covered under audit)
1) An ISD
2) Person required to deduct tax at source (TDS)
3) Person required to collect tax at source (TCS)
4) Casual taxable person (CTP) and
5) Non resident taxable person
Shall furnish an annual return for the F Y electronically in form GSTR 9
Separate Annual returns for
a) Composition supplies – GSTR 9A
b) E-Commerce operators – GSTR 9B
GST was implemented in India from 1st July 17.
Prior to 1st July – the effective rate of tax on this activity for ~12% and ITC was allowed on the food element.
Prior to 15th November, 2017 – the activity of supplying food and beverages for human consumption was taxed at the rate of 18% and full Input Tax Credit was allowed to such businesses. An increase in tax slowed down the demand for eating out and hurt the overall economy of the sector.
In an attempt to spur public demand for restaurants, the laws were amended and the new rate of tax for this activity is 5% ( albeit without allowing any ITC to the business ). Although it beneficial for the customers

8. GST Annual Return and Audit – Form 9 and 9C

9. Contents of Form 9 Form 9 Consists of VI parts -
Part I – Basic Details
Part II- Details of all outward supplies and advances received for which annual return is filed
Part III – Details of all ITC availed and reversed in the financial year for which the annual return is filed
Part IV – Actual tax paid during the financial year
Part V – Transactions for the previous financial year but declared in the returns of April to September of current FY or date of filing annual return whichever is earlier
Part VI – Other information
Form 9C - Reconciliation of Outward supplies, ITC, Tax paid and Refund claimed as per returns with Financial statements
GST was implemented in India from 1st July 17.
Prior to 1st July – the effective rate of tax on this activity for ~12% and ITC was allowed on the food element.
Prior to 15th November, 2017 – the activity of supplying food and beverages for human consumption was taxed at the rate of 18% and full Input Tax Credit was allowed to such businesses. An increase in tax slowed down the demand for eating out and hurt the overall economy of the sector.
In an attempt to spur public demand for restaurants, the laws were amended and the new rate of tax for this activity is 5% ( albeit without allowing any ITC to the business ). Although it beneficial for the customers

10. Contents of Form 9
Aggregate value of supplies made to consumers and unregistered persons net of debit and credit note
Aggregate value of supplies made to registered persons to be reported separately. Details of Debit and Credit notes to be reflected separately
Similarly value of exports, sales to SEZ’s, details of amendments, exempted, NIL rated and Non GST supplies to be declared separately
Total ITC is to be classified ass ITC on inputs, capital goods and input services
ITC availed, reversed and then reclaimed in ITC ledger to be separately declared in 6H
ITC availed on inward supplies attracting reverse charge to be disclosed separately for Registered and Unregistered Vendors
GST was implemented in India from 1st July 17.
Prior to 1st July – the effective rate of tax on this activity for ~12% and ITC was allowed on the food element.
Prior to 15th November, 2017 – the activity of supplying food and beverages for human consumption was taxed at the rate of 18% and full Input Tax Credit was allowed to such businesses. An increase in tax slowed down the demand for eating out and hurt the overall economy of the sector.
In an attempt to spur public demand for restaurants, the laws were amended and the new rate of tax for this activity is 5% ( albeit without allowing any ITC to the business ). Although it beneficial for the customers

11. Contents of Form 9
None of the fields is auto populated in Part II i.e Outward supplies
Few fields are auto populated in part III i.e Inward supplies
Complete post mortem of the transactions and details – Is this required ?
Sanctity of auto populated details i.e ITC as per GSTR 2A, ITC on imports etc – What happens if there is a error in the auto populated details
GST was implemented in India from 1st July 17.
Prior to 1st July – the effective rate of tax on this activity for ~12% and ITC was allowed on the food element.
Prior to 15th November, 2017 – the activity of supplying food and beverages for human consumption was taxed at the rate of 18% and full Input Tax Credit was allowed to such businesses. An increase in tax slowed down the demand for eating out and hurt the overall economy of the sector.
In an attempt to spur public demand for restaurants, the laws were amended and the new rate of tax for this activity is 5% ( albeit without allowing any ITC to the business ). Although it beneficial for the customers

12. Contents of Form 9C Form 9C Part A consists of V parts -
Part I – Basic Details
Part II- Reconciliation of Turnover declared in audited Annual Financial statement with turnover declared in Annual Return i.e GSTR 9
Part III – Reconciliation of Tax Paid
Part IV – Reconciliation of ITC
Part V – Auditors recommendations on additional liability due to non-reconciliation
Form 9C Part B is the certification by the statutory auditor conducting GST audit or other auditor conducting GST audit.
Clause 3(b) in the certification by the statutory auditor is skipped in the certification by other auditor
GST was implemented in India from 1st July 17.
Prior to 1st July – the effective rate of tax on this activity for ~12% and ITC was allowed on the food element.
Prior to 15th November, 2017 – the activity of supplying food and beverages for human consumption was taxed at the rate of 18% and full Input Tax Credit was allowed to such businesses. An increase in tax slowed down the demand for eating out and hurt the overall economy of the sector.
In an attempt to spur public demand for restaurants, the laws were amended and the new rate of tax for this activity is 5% ( albeit without allowing any ITC to the business ). Although it beneficial for the customers

13. Contents of Form 9C
Starts with Turnover as per audited financial statements for the state/UT (For Multi GTIN units under same PAN the turnover shall be derived from Audited annual financial statements)
Drills down to Turnover as per Annual Return
Turnover to be considered for financial year as a whole and not for 9 months period
Turnover for April to June 17 to be deducted separately
GST was implemented in India from 1st July 17.
Prior to 1st July – the effective rate of tax on this activity for ~12% and ITC was allowed on the food element.
Prior to 15th November, 2017 – the activity of supplying food and beverages for human consumption was taxed at the rate of 18% and full Input Tax Credit was allowed to such businesses. An increase in tax slowed down the demand for eating out and hurt the overall economy of the sector.
In an attempt to spur public demand for restaurants, the laws were amended and the new rate of tax for this activity is 5% ( albeit without allowing any ITC to the business ). Although it beneficial for the customers

14. GST Audit – Approach

15. Value Propositions Steps to be taken for GST Audit
Finalization of GST Auditor – Centralized V/s Decentralised approach
Business and Process Notes
Assess capabilities of IT systems to provide desired data/details
Compiling basic details
Bifurcation of Annual Turnover in case of Multi state operations
Identification of transactions outside financial statements
Commercials calls/decisions to be taken on taxability of few transactions i.e discounts, high sea sales etc
TFS must review all outlet agreements and evaluate if they can be adjusted in a manner that effectively allows TFS to receive a management fee income from the partner chain rather than following the practise of booking FnB sales on its own books and then paying out a profit sharing fee to the partner.
Example of existing contract with management fee** : McDonalds pays a 7% fee for the space leased out at Delhi T3
Complicated Agreements which can be simplified** :
Brands such as “Chayoos” and “Wow Momos” where TFS books F&B Sales in own books ; which is taxed at
5%(w/o ITC) and has an impact in increasing ITC reversal.

16. Value Propositions Steps to be taken for GST Audit
Inventory records and reconciliation – unit wise, state wise, entity wise
Important reconciliations to be completed at the earliest i.e GSTR 2A with Books etc
Classification i.e Mixed Supply/Composite supply etc and GST rates on the products/change of rates
Reconciliations – Discussed separately
Team allocation for GST Audits – Plant wise/Unit Wise/Corporate office
State VAT Audits and GST Audit – Which audit to be completed first
Use of IT software vis-à-vis GSTN utilities
TFS must review all outlet agreements and evaluate if they can be adjusted in a manner that effectively allows TFS to receive a management fee income from the partner chain rather than following the practise of booking FnB sales on its own books and then paying out a profit sharing fee to the partner.
Example of existing contract with management fee** : McDonalds pays a 7% fee for the space leased out at Delhi T3
Complicated Agreements which can be simplified** :
Brands such as “Chayoos” and “Wow Momos” where TFS books F&B Sales in own books ; which is taxed at
5%(w/o ITC) and has an impact in increasing ITC reversal.

17. GST Audit - Reconciliations

18. Value Propositions Reconciliations in GST Audit
Reco of Outward supplies between GSTR 3B, GSTR 1 and books
Reco of Outward supplies with 26AS (especially in case of services)
Reco of ITC between GSTR 3B, GSTR 2A and books
Reco of expenses subject to RCM with 3B
Reco of qty/description of stock declared in TRAN -1 with stock records as on 30th June 2017
Reco of qty/description of outward supply in TRAN -2 with GSTR 1 and stock records (July to Dec 17)
Job work movement reco with ITC 04
TFS must review all outlet agreements and evaluate if they can be adjusted in a manner that effectively allows TFS to receive a management fee income from the partner chain rather than following the practise of booking FnB sales on its own books and then paying out a profit sharing fee to the partner.
Example of existing contract with management fee** : McDonalds pays a 7% fee for the space leased out at Delhi T3
Complicated Agreements which can be simplified** :
Brands such as “Chayoos” and “Wow Momos” where TFS books F&B Sales in own books ; which is taxed at
5%(w/o ITC) and has an impact in increasing ITC reversal.

19. Value Propositions Reconciliations in GST Audit
Reco of outward supplies with E Way bills (18-19 onwards)
Reco of total turnover for F Y with VAT/Excise returns and GST Returns
Reco of closing stock with ITC balance as on 31-03
Reco of Balance in E-cash ledger (PMT 5) with books
Reco of Balance on E-credit ledger (PMT 2) with books
Reco of Electronic liability ledger (PMT 1) with books
TFS must review all outlet agreements and evaluate if they can be adjusted in a manner that effectively allows TFS to receive a management fee income from the partner chain rather than following the practise of booking FnB sales on its own books and then paying out a profit sharing fee to the partner.
Example of existing contract with management fee** : McDonalds pays a 7% fee for the space leased out at Delhi T3
Complicated Agreements which can be simplified** :
Brands such as “Chayoos” and “Wow Momos” where TFS books F&B Sales in own books ; which is taxed at
5%(w/o ITC) and has an impact in increasing ITC reversal.

20. Period of Reconciliation in GST Audit
Whether July 17 to March 18 or
July 17 to September 18
April 17 to March 18
April 17 to September 18

21. Reconciliations in GST Audit - Issues
Schedule I activities shown in GST returns but transactions may be netted off or not recorded in financials (Clause 5D)
Schedule III transactions (Clause 7B)
Non GST debit/credit notes received/issued
Sale by SEZ units to DTA units (Clause 5K)
Reverse charge transactions (Clause 7D)
April to June 17 transactions (Clause 5G)
Pure Agent reimbursements (Clause 5M)
Other states supply/turnover in case of Multi Location Organization (Clause 5O)

22. Reconciliations in GST Audit - Issues
Deductions allowed from valuation but recorded gross in financials e.g. airline agent, second hand goods dealer etc (Clause 5M)
Sale of capital assets – Sale of vehicles (changes in taxability)
Expenses netted off but reported at gross in GST returns
Works Contract/Construction Contracts – Unbilled revenues, revenue recognition as per AS 7 (Clause 5B and H)
NON GST items – petroleum products, transaction in securities (Clause 7B)
Employee recoveries
Consideration in kind/barter transactions ( Airline offering free tickets in IPL and in turn branded as travel partner)
Method of accounting (cash basis as per IT V/s accrual as per GST) (Eg Chartered Accountants)

23. GST Audit – Major Challenges

24. Value Propositions GST Audit – Challenges
Multiple Legislations (Excise, VAT, Service tax etc + GST) in same year
GST Audit much wider than Tax audit/Stat audit – how much time will be available to dealer as well as auditor for conducting quality review
State wise P & L and Balance Sheet
Multiple soft wares/ ASP’s/GSP’s – Issues with GST network
Plethora of notifications/circulars/confusing AAR’s – what stand to be taken while finalising the audit report
Transitional issues especially credit carry forwards
Timing difference in due dates for filing state VAT Audit reports and GST Audit report
April to June 17 turnover in state VAT Audit report and GST Audit report – can it be different ?
TFS must review all outlet agreements and evaluate if they can be adjusted in a manner that effectively allows TFS to receive a management fee income from the partner chain rather than following the practise of booking FnB sales on its own books and then paying out a profit sharing fee to the partner.
Example of existing contract with management fee** : McDonalds pays a 7% fee for the space leased out at Delhi T3
Complicated Agreements which can be simplified** :
Brands such as “Chayoos” and “Wow Momos” where TFS books F&B Sales in own books ; which is taxed at
5%(w/o ITC) and has an impact in increasing ITC reversal.

25. Value Propositions GST Audit – Challenges
Multiple details to be prepared for various audits, Conflicting views of different auditors
Degree of Non Compliance vis–a-vis reporting
TFS must review all outlet agreements and evaluate if they can be adjusted in a manner that effectively allows TFS to receive a management fee income from the partner chain rather than following the practise of booking FnB sales on its own books and then paying out a profit sharing fee to the partner.
Example of existing contract with management fee** : McDonalds pays a 7% fee for the space leased out at Delhi T3
Complicated Agreements which can be simplified** :
Brands such as “Chayoos” and “Wow Momos” where TFS books F&B Sales in own books ; which is taxed at
5%(w/o ITC) and has an impact in increasing ITC reversal.

26. Thank You