In this article we will analysis on GST Annual Audit Form GSTR 9C.
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Part 1: Form GSTR 9C – Basic Details
Part 1 of Form GSTR 9C requires you to fill in some basic details with regards to your business –
- Financial Year
- Legal Name
- Trade Name (if any)
- Are you liable to audit under any Act?
Part 2: Reconciliation of turnover declared in audited Annual Financial Statement with turnover declared in Annual Return (Form GSTR 9)
Part 2 of Form GSTR 9C comprises of the following tables:
Reconciliation of Gross Turnover
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)
While considering the turnover from the audited financial statements, the Auditor is also required to include indirect income in the form of dividend, interest, forex fluctuation, profit on sale of asset etc.
Point to be Noted: –
Any amount of return supplies credited to purchase or expenditure account would not be considered for the purpose of arriving at the turnover.
Unbilled revenue at the beginning of Financial Year (+)
Unbilled revenue which was recorded in the books of accounts on the basis of accrual system of accounting in the earlier financial year for which the invoice is issued under GST law is required to be declared here.
– Unbilled revenue which is invoiced with GST should be added
– If related to pre-GST, don’t add
– Segregate for each GSTIN
E.g. Representation services provided on 25th of March for which invoice is raised on 5th of April would be recognized as unbilled revenue. However, this would not be part of Clause 5B as this transaction is of the period April 2017 to June 2017.
E.g. IT/ITES services provided for the month of March 2017 for which invoice is raised on 1st of July 2017 as per the terms of contract would be recognized as unbilled revenue.
Unadjusted advances at the end of the Financial Year (+)
Declare here advance received on which GST is paid but not recognised as revenue in Financial Statement
– Presently goods advance not subject to GST [ 1.7.17 to 13.10.17 ( for TO less than 150 L- from 15.11.17 not for all] but advance for service, subject to GST
– Advance for exempted income, exports, SEZ, don’t add
– Advance received and invoiced in same year, don’t add
– Advance for pre-GST regime, but not adjusted, don’ add
Deemed Supply under Schedule-I (+)
Aggregate value of deemed supplies shall be declared here. Any deemed supply, which is already part of the turnover in the audited Annual Financial Statement, is not required to be included here.
Auditor should verify fixed asset register, e-way bills, tax invoices for assuring that there is no deemed supply during the Financial Year 2017-2018
Credit Notes issued after the end of the financial year but reflected in the annual return (-)
Aggregate value of credit notes which were issued after 31st of March for any supply accounted in the current financial year 2017-18 but such credit notes were reflected in Form GSTR 9 shall be declared here.
Trade Discounts accounted for in the audited Annual Financial Statement but are not permissible under GST (+)
Trade discounts accounted in the audited financial statements but not allowed as deduction from the value of supply as per VALUATION RULES to be added
As per Sec.15(3) following discount is permissible –
a. If discount is mentioned on face of Invoice , it can be reduced from the Value of Supply.
b. If discount is not mentioned on face of Invoice , it can be reduced from the Value of Supply , on fulfilling following conditions :
-Both Supplier & Recipient have agreed about the discount before the supply &
-Such discount is specifically linked to relevant invoices &
Proportionate ITC attributable to discount has been reversed by the Recipient.
The Trade discounts can be issued in various ways and manners like special discounts for maintaining the business relationship; bonus discount for purchasing goods beyond certain stipulated targets.
Turnover from April 2017 to June 2017 (-)
Turnover included in the audited Annual Financial Statement for April 2017 to June 2017 shall be declared here.
Unbilled revenue at the end of Financial Year (-)
Unbilled revenue which was recorded in the books of accounts based on accrual system of accounting during the current financial year, but GST was not payable on such revenue in the same financial year shall be declared here.
Deduct only if GST not paid and not considered in annual return
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.
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 the audited Annual Financial Statement but were not admissible shall be declared here.
Point to be Noted:-
-Consider only if reduced from turnover. If accounted as expenditure, don’t add
– If credit note issue only with tax impact, then don’t add
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.
Point to be Noted: –
Goods are supplied by SEZ to DTA and DTA authorised SEZ to filed BOE in hi behalf . S u c h transaction will not require to be disclose here.
Turnover for the period under composition scheme (-)
There may be cases where registered persons might have opted out of the composition scheme during the current financial year. Their turnover as per the 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 the composition scheme shall be declared here.
Adjustments in turnover under section 15 and rules thereunder (+) / (-)
There may be cases where the taxable value and the invoice value differ due to valuation principles. Therefore, any difference between the turnover reported in Form GSTR 9 and turnover reported in the audited Annual Financial Statement due to difference in valuation of supplies shall be declared here.
Point to be Noted:-
-Adjustment on account of Section 15 to be added or deducted
-Add those where taxable value for GST is more than accounted
-Deduct those where taxable value for GST is less than accounted
Ex: Pure agent expense – Financials not accounted as revenue but GST paid and recorded in annual return
Ex: Munciplal tax on rented building. Added in GST but not financials
Ex: Transactions with related parties. Ex: Partial recoveries from employees
Ex: GST on construction paid on 2/3 value. In financials, full accounted
Adjustments in turnover due to foreign exchange fluctuations (+) / (-)
Any difference between the turnover reported in Form GSTR 9 and turnover reported in the audited Annual Financial Statement due to foreign exchange fluctuations shall be declared here.
A ltd made export of $1.00 Lakhs
CBEC Rate – Rs. 65/-
RBI Rate – Rs. 68/-
Difference = Rs. 3.00 Lakh will be reduce from Annual TO
Adjustments in turnover due to reasons not listed above (+) / (-)
Any difference between the turnover reported in Form GSTR 9 and turnover reported in the audited Annual Financial Statement due to reasons not listed above shall be declared here.
Add items which are treated as value of supply in GST [ Fixed assets sale, exp reimburse netted off
Deduct items which are not treated as income for GST
Items of supply not covered in GSTR-9 and financials but found to be supply as per auditor, to be reported here
Ex: Interest, duty drawback, dividend to be deducted
Ex: Goods sent on approval but not sold in 6 months, goods not received in 1 year after job work to be added
Turnover as declared in Annual Return (GSTR9)
Annual turnover as declared in Form GSTR 9 shall be declared here. This turnover may be derived from Tables 5N, 10 and 11 of Form GSTR 9.
Reasons for Un – Reconciled difference in Annual Gross Turnover
Reasons for non-reconciliation between the annual turnover declared in the audited Annual Financial Statement and turnover as declared in Form GSTR 9 shall be specified here.
7. Reconciliation of Taxable Turnover
The table provides for reconciliation of taxable turnover from the audited annual turnover after adjustments with the taxable turnover declared in Form GSTR 9.
Annual turnover after adjustments (from 5P above)
Annual turnover as derived in Table 5P above would be auto-populated here.
Value of Exempted, Nil Rated, Non-GST supplies, No-Supply turnover
Value of exempted, nil rated, non-GST and no-supply turnover shall be declared here. This shall be reported net of credit notes, debit notes and amendments if any.
All the supplies on which tax has not been charged except for exports and reverse charge supplies should be reported under Clause 7B. The information can generally be obtained from the credit side of the Profit and Loss account.
Zero rated supplies without payment of tax
Value of zero-rated supplies (including supplies to SEZs) on which tax is not paid shall be declared here. This shall be reported net of credit notes, debit notes and amendments if any.
• Whether place of supply to be checked?
• Whether compliance with LUT Requirements to be checked? Attention should be drawn on relaxation provided vide Cir. No 37/2018.
• Receipt in convertible foreign exchange / valuation differences.
• Cross reference with refund Application
• Verification of shipping bill with ICEGATE portal on sample basis
• Wrong disclosures made in returns could be a reason for difference. Ex: Exports as exempt turnover
Supplies on which tax is to be paid by the recipient on reverse charge basis
Value of Outward reverse charge supplies on which tax is to be paid by the recipient shall be declared here. This shall be reported net of credit notes, debit notes and amendments if any.
Taxable turnover as per adjustments above (A-B-C-D)
The taxable turnover is derived as the difference between the annual turnover after adjustments declared in Table 7A above and the sum of all supplies (exempted, non-GST, reverse charge etc.) declared in Tables 7B, 7C and 7D above.
Taxable turnover as per liability declared in Annual Return (GSTR9)
Taxable turnover as declared in Tables (4N – 4G) + (10 -11) of Form GSTR 9 shall be declared here.
Reasons for Un – Reconciled difference in taxable turnover
Reasons for non-reconciliation between adjusted annual taxable turnover as derived from Table 7E above and the taxable turnover declared in Table 7F shall be specified here.
Part 3: Reconciliation of Tax Paid
Part 3 of Form GSTR 9C consists of reconciliation of the tax payable as per declaration in the reconciliation statement and the actual tax paid as declared in the Annual Return i.e. Form GSTR 9.
Part 3 of Form GSTR 9C comprises of the following tables:
9A to 9O
Reconciliation of rate wise liability and amount payable thereon
Table 9 requires the Auditor to provide details of taxable value along with the gross tax Liability of the Registered Person whose Form 9C is being filed by him. The said tax liability needs to be reported rate wise in Table 9. Further, the taxable value and liability of tax on which the given Registered Person is required to pay tax under Reverse Charge Mechanism are also required to be reported rate-wise separately.
Point to be Noted: –
During the year 2017-18 FY 2017-18 the rate of tax on supply of goods and services have changed many times. To keep a track of same
Total amount to be paid as per tables above
The total amount to be paid as per liability declared in Tables 9A to 9O is auto populated here.
Total amount paid as declared in Annual Return (GSTR 9)
The amount payable as declared in Table 9 of Form GSTR 9 shall be declared here. It should also contain any differential tax paid on Table 10 or 11 of Form GSTR 9.
Reasons for un-reconciled payment of amount
Reasons for non-reconciliation between payable / liability declared in Table 9P above and the amount payable in Table 9Q shall be specified here.
Additional amount payable but not paid (due to reasons specified under Tables 6,8 and 10 above)
The amount of tax, interest, penalty, late fees and other dues which are payable in accordance with the non-reconciliation reported under Table 6, 8 and 10 but not actually paid as declared in Annual Return in GSTR 9 are to be reported with rate-wise bifurcation.
Part 4: Reconciliation of Input Tax Credit (ITC)
Part 4 of Form GSTR 9C consists of reconciliation of ITC and comprises of the following tables:
ITC availed as per audited Annual Financial Statement for the State/ UT (For multi-GSTIN units under same PAN this should be derived from books of accounts)
ITC availed (after reversals) as per the audited Annual Financial Statement shall be declared here. There may be cases where multiple GSTINs (State-wise) registrations exist on the same PAN. This is common for persons or entities with presence over multiple States. Such persons or entities will have to internally derive their ITC for each individual GSTIN and declare the same here. It may be noted that reference to audited Annual Financial Statement includes reference to books of accounts in case of persons or entities having presence over multiple states.
ITC booked in earlier Financial Years claimed in current Financial Year (+)
Any ITC which was booked in the audited Annual Financial Statement of earlier financial year(s) but availed in the ITC ledger in the financial year for which the reconciliation statement is being filed for shall be declared here. This shall include transitional credit which was booked in earlier years but availed during Financial Year 2017-18.
ITC booked in current Financial Year to be claimed in subsequent Financial Years (-)
Any ITC which has been booked in the audited Annual Financial Statement of the current financial year but the same has not been credited to the ITC ledger for the said financial year shall be declared here.
ITC availed as per audited financial statements or books of account
ITC availed as per audited Annual Financial Statement or books of accounts as derived from values declared in Tables 12A, 12B and 12C above will be auto-populated here.
ITC claimed in Annual Return (GSTR9)
Net ITC available for utilization as declared in Table 7J of Form GSTR 9 shall be declared here.
Reasons for un-reconciled difference in ITC
Reasons for non-reconciliation of ITC as per audited Annual Financial Statement or books of account (Table 12D) and the net ITC (Table 12E) availed in Form GSTR 9 shall be specified here.
14A to 14Q
Reconciliation of ITC declared in Annual Return (GSTR9) with ITC availed on expenses as per audited Annual Financial Statement or books of account
This table is for reconciliation of ITC declared in Form GSTR 9 against the expenses booked in the audited Annual Financial Statement or books of account. The various sub-heads specified under this table are general expenses in the audited Annual Financial Statement or books of account on which ITC may or may not be available. Further, this is only an indicative list of heads under which expenses are generally booked. Taxpayers may add or delete any of these heads but all heads of expenses on which GST has been paid / was payable are to be declared here.
Total amount of eligible ITC availed
Total ITC declared in Tables 14A to 14Q above shall be auto populated here.
ITC claimed in Annual Return (GSTR9)
Net ITC availed as declared in Form GSTR 9 shall be declared here. Table 7J of Form GSTR 9 may be used for filing this table.
Reasons for un – reconciled difference in ITC
Reasons for non-reconciliation between ITC availed on the various expenses declared in Table 14R and ITC declared in Table 14S shall be specified here.
Tax payable on un-reconciled difference in ITC (due to reasons specified in 13 and 15 above)
Any amount which is payable due to reasons specified in Table 13 and 15 above shall be declared here.
Part 5: Auditor’s recommendation on additional Liability due to non-reconciliation
This 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
- 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 which shall be paid back
- Lastly, any other outstanding demands which is recommended to be settled by the auditor shall be declared in this Table.
Part 5 of Form GSTR 9C requires Auditor to fill the additional liability details across the following heads:
- Input Tax Credit
- Late Fee
- Any other amount paid for supplies not included in Form GSTR 9
- Erroneous refund to be paid back
- Outstanding demands to be settled
- Other (Please Specify)
Auditor only has a recommendatory power while furnishing his report. Any recommendations given by the Auditor may or may not be acceptable to the Registered Person.
• Quantum of Part V = Amt reported in Table 11+ Table 16.Audit
Suggestive Checklist for GST Audit