We need to understand the legal provisions related to GST audit in order to know the meaning and relevance of Form GSTR 9C.
Hence, two important provisions are laid out in section 35(5) and section 44(2) of CGST act in context of GST audit. Therefore, according to section 35(5)
“A registered person having a turnover more than the prescribed limit shall get his accounts audited by a CA or a cost accountant. Furthermore, he shall submit a copy of:
- audited annual accounts
- reconciliation statement as per section 44(2) and
- other documents
Also, the above mentioned documents shall be submitted in such form and manner as may be prescribed.
Then, as per section 44(2), a registered person liable to get his accounts audited under section 35(5) must file :
- annual return in form GSTR-9
- a copy of audited annual accounts
- a reconciliation statement reconciling the value of supplies declared in the annual return with the audited financial statement.
Furthermore, rule 80(3) mentions the applicability of these rules on specific types of assesses. This rule states that a registered person with an annual turnover of more than Rs. 2 crores during a financial year needs to get his accounts audited as per section 35(5).
Furthermore, these persons need to furnish (i) a copy of audited annual accounts, (ii) a reconciliation statement in form GSTR 9C and an annual return. These documents need to be filed electronically via the common portal either directly or through a facilitation centre.
Therefore, these legal provisions lay down the foundation in order to define Form GSTR 9C.
What is Form GSTR 9C?
Every registered person having an aggregate turnover of more than Rs. 2 crores during a financial year must get his accounts audited by a CA or cost account. Furthermore, he needs to submit the annual return a copy of the audited accounts and a reconciliation statement.
This reconciliation statement is in Form GSTR 9C. So basically, GSTR 9C is a reconciliation statement reconciling value of supplies declared in annual return with the audited annual accounts.
Further, the term aggregate turnover is defined as all India PAN based turnover for a particular financial year. This includes:
- inter state supplies
- exempt supplies
- stock turnovers etc.
This means that there can be multiple distinct registrations under the same PAN. This is to say that the registered person may have GST registrations in more than one state under the same PAN.
Therefore, separate audits need to be carried out for each of the distinct registrations under the same PAN. This means several GSTR 9C forms need to be filed.
Components of Form GSTR 9C
Form GSTR 9C has two parts. Part A is termed as reconciliation statement and part B deals with certification.
Part A Reconciliation Statement
Point I. Basic Details
Point I under part A of the reconciliation statement gives the basic details such as:
- the financial year to which the reconciliation statement relates
- GSTIN of the taxpayer or registered person
- legal name, that is the name by which a person is known with reference to a statute
trade name, that is a name used by trade and industry to identify a business
are you liable to audit under any act.
Thus, a GST auditor needs to thoroughly examine GSTIN of the registered person based on PAN and the GST certificate. Furthermore, he also needs to verify the legal and trade name with certificate of registration issued by the concerned department.
Point II. Reconciliation of Turnover Declared in Audited Annual Financial Statement with Turnover Declared in Annual Return (GSTR 9)
5. Reconciliation of Gross Turnover
A. Turnover (including exports) as per the audited financial statements for the State/UT
This section reconciles the gross turnover calculated in the audited financial statements with the turnover declared in annual return.
There are cases where an entity has multiple registrations (that is multiple GSTINs) under the same PAN. Such registrations too would be liable for GST audit as per section 35(5). Hence, these entities need to provide GSTIN wise turnover details to the auditor for declaration under this part.
Further, the turnover details mentioned in this part must be taken from the audited financial statements only Thus, this turnover may also consist of any adjustments made or revenue recognized as per the requirements of the accounting standards.
B. Unbilled Revenue at the Beginning of the Financial Year
This section declares the unbilled revenue of an entity. Unbilled revenue means the revenue recognized in the books of accounts before issuing invoice at the end of the accounting period.
Thus, accounting standards require an entity to recognize revenue on full or partial completion of services. This is despite the fact that the due date to issue invoice for such services may be at a later date.
Therefore, the unbilled revenue at the beginning of the year needs to be declared in this section. This revenue is recorded in the books of accounts on the accrual basis of accounting in the previous financial year. And GST is payable on such revenue.
C. Unadjusted Advances at the End of the Financial Year
This section includes the advances collected from customers before making supplies to them. Generally, these advances are recorded as a liability in the balance sheet at the end of a financial year.
This is because the revenue is not earned as there is no supply of goods or services. However, it would exclude the advances received for exempted supplies and refundable deposits.
D. Deemed Supplies Under Schedule I
This section covers the aggregate value of four classes of deemed supplies mentioned under Schedule I of the CGST act. However, this section does not include the deemed supplies included in the turnover in the audited financial statements.
This means this section includes the deemed supply transactions not reported in the financial statements but were reported in GST returns.
E. Credit Notes Issued After the end of the Financial Year but Reflected in Annual Return
This section covers the aggregate value of the credit notes issued after the completion of the previous financial year. These credit notes are issued against a supply that was accounted for in the current financial year. However, these credit notes were reflected in the annual return (GSTR 9) of the previous year.
F. Trade Discounts Accounted for in the Audited Annual Financial Statements but are not Permissible Under GST
This section reflects the trade discounts that have been affected in the audited financial statements. However, these discounts do not form part of deductions provided under the GST law on the value of supply.
It is a normal practice followed by businesses to net off the trade discounts against the turnover of outward supplies. So this section reflects the discounts not eligible for deduction in order to compute GST taxable turnover. But these discounts are reflected in the books of accounts.
However, GST would be levied if certain ineligible discounts are found to be adjusted on verification to compute GST turnover.
G. Turnover from April 2017 to June 2017
This section is not valid anymore.
H. Unbilled Revenue at the End of the Financial Year
This section records the unbilled revenue recorded in the books of accounts on accrual basis of accounting during the current financial year. But the GST on such revenue is not payable in the same financial year.
I. Unadjusted Advances at the Beginning of the Financial Year
This section reflects the value of advances for which GST has not been paid. However, these advances are recognized in the audited annual financial statements.
J. Credit Notes Accounted for in the Audited Annual Financial Statements but are not Permissible Under GST
This section declares the aggregate value of credit notes that are accounted for in the audited financial statements. But such notes are not permitted to be adjusted against supplies in GST returns.
Therefore, this section reflects all the adjustments made to the turnover that lead to its reduction as a result of issue of credit notes. This is doone to reconcile the books of accounts
K. Adjustments on Account of Supply of Goods by SEZ Units to DTA Units
In this section, an SEZ needs to declare the aggregate value of all the goods supplied to DTA units for which such DTA units have filed Bill of Entry.
L. Turnover For The Period under Composition Scheme
There are cases where registered persons might withdraw from the Composition Scheme during a current financial case. In such a scenario, their audited Annual Financial Statement would capture both the turnovers. That is, turnover as a composition taxpayer as well as a normal taxpayer.
Thus, this section would cover only the turnover for which GST was paid as a composition taxpayer registered under the Composition Scheme.
M. Adjustments in Turnover Under Section 15 and Rules Thereunder
There are scenarios when there is a difference between the taxable value and the invoice value. These differences are on account of the Valuation Principles as per section 15 of the CGST Act, 2017 and Rules thereunder.
Thus, a taxpayer would declare in this any differences between the turnover declared in the Annual Return (GSTR-9) and the turnover reported in the Audited Financial Statement arising due to variation in valuation principles.
N. Adjustments in Turnover Due To Foreign Exchange Fluctuations
Under this section, you need to declare any difference between the turnover reported in the Annual Return (GSTR9) and turnover reported in the audited Annual Financial Statement due to
foreign exchange fluctuations.
O. Adjustments in Turnover Due To Reasons Not Listed Above
Under this section, you need to declare any difference between the turnover reported in the Annual Return (GSTR9) and turnover reported in the audited Annual Financial Statement due to
reasons not listed above.
P. Annual Turnover After Adjustments As Above
This section is an auto-populated section.
Q. Turnover As Declared in Annual Return (GSTR-9)
You need to declare Annual turnover as declared in the Annual Return (GSTR 9) in this section. Thus, you can take such a turnover from Sr. No. 5N, 10 and 11 of your Annual Return (GSTR 9).
R. Un-Reconciled Turnover
The Un-Reconciled Turnover (Q-P) is the difference between the ‘Annual turnover after adjustments as above’ at Sl.No. 5P and ‘turnover as declared in the Annual Returns (GSTR 9)’ as declared at Sl.No. 5Q. This difference is auto generated.
6. Reasons For Un-Reconciled Difference in Annual Gross Turnover
In this section, you need to declare the underlying reasons for non-reconciliation between the annual turnover declared in the audited Annual Financial Statement and turnover as declared in the Annual Return (GSTR 9).
7. Reconciliation of Taxable Turnover
This section provides for reconciliation of taxable turnover from the audited
annual turnover. Such a reconciliation is done after making adjustments with the taxable turnover declared in annual return (GSTR-9).This section has two parts: 7A and 7B.
A. Annual Turnover After Adjustments (from 5P above)
This section is auto-populated. It reports the annual turnover as derived in in Table 5P above.
B. Value of Exempted, Nil Rated, Non-GST supplies, No-Supply Turnover
This section declares the value of exempted, nil rated, non-GST and no-supply turnover. Such a turnover is reported net of credit notes, debit notes and amendments if any.
C. Zero Rated Supplies Without Payment of Tax
In this section, you need to declare the value of zero-rated supplies (including supplies to SEZs) on which tax is not paid. Such supplies are reported net of credit notes, debit notes and amendments if any.
D. Supplies On Which Tax is to Be Paid By The Recipient On Reverse Charge Basis
You need to declare the value of reverse charge supplies on which tax is to be paid by the recipient. Again, such supplies need to be reported net of credit notes, debit notes
and amendments if any.
E. Taxable Turnover As Per Adjustments
This is an auto-populated section of the return. It captures the amount of taxable turnover that is 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 Table 7B, 7C and 7D above.
F. Taxable Turnover as per Liability Declared in Annual Return
You need to declare in this section the value of reverse charge supplies on which tax is to be paid by the recipient. Again, such supplies need to be reported net of credit notes, debit notes and amendments if any.
8. Reasons for Un – Reconciled Difference in Taxable Turnover
In this section, you need to declare reasons for non-reconciliation between adjusted annual taxable turnover taken from Table 7E above and the taxable turnover reported in Table 7F.
Point III Reconciliation of Tax Paid
9. Reconciliation of Rate Wise Liability and Amount Payable Thereon
A – L. Amount Of Tax Payable Rate Wise
These sections report reconciliation of tax paid as per reconciliation statement and amount of tax paid as declared in Annual Return (GSTR 9). Furthermore, taxpayer needs to declare the supplies where tax was paid on reverse charge basis by the recipient against the components labelled RC.
P. Total Amount to be Paid as per Tables Above
This is an auto-populated field. It reflects the total amount to be paid as per liability declared in Table 9A to 9O.
Q. Total Amount Paid As Declared in Annual Return
In this section, you need to declare the amount payable as declared in Table 9 of the Annual Return (GSTR9). It should also contain any differential tax paid on Table 10 or 11 of the Annual Return (GSTR9).
10. Reasons For Un-Reconciled Payment of Amount
Under this section, you need to declare the reasons for non-reconciliation between payable / liability reported in Table 9P above and the amount payable in Table 9Q.
11. Additional Amount Payable But Not Paid (Due To Reasons Specified Under Tables 6, 8 and 10 Above
In this section, you need to declare any amount which is payable due to reasons specified under Table 6, 8 and 10 above.
Point IV. Reconciliation of Net Input Tax Credit (ITC)
12. Reconciliation of Net ITC
A. 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)
In this section, you need to declare ITC availed (after reversals) as per the audited Annual Financial Statement. However, there are entities or persons who have presence over multiple States and hence have multiple GSTIN (State- wise) registrations on the same PAN.
Thus, such persons or entities would have to internally derive their ITC for each individual GSTIN and declare the same here.
B. ITC booked in earlier Financial Years claimed in current Financial Year
You need to declare in this section any ITC that was booked in earlier year or years when the audited Annual Financial Statement was prepared. But such ITC was availed in the ITC ledger in the financial year for which the reconciliation statement is being filed.
C. ITC booked in current Financial Year to be claimed in subsequent Financial Years
In this section, you need to declare any ITC which has been booked in the audited Annual Financial Statement of the current financial year. But such ITC has not been credited to the ITC ledger for the said financial year.
D. ITC availed as per audited financial statements or books of account
E. ITC claimed in Annual Return (GSTR9)
In this section, declare the Net ITC available for utilization as reported in Table 7J of Annual Return (GSTR9).
F. Un-reconciled ITC
Clause 12F of GSTR 9C provides for the difference between:
- ITC as computed from the books of account in Clause 12D and
- the ITC as claimed for the financial year in Clause 7J of Annual return.
13. Reasons For Un-Reconciled Difference in ITC
In this table of the return, you need to provide 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 the Annual Return (GSTR 9).
14. Reconciliation of ITC Declared in Annual Return (GSTR-9) With ITC Availed On Expenses As Per Audited Annual Financial Statement or Books of Accounts
This section of the Return represents reconciliation of ITC declared in the Annual Return
(GSTR 9) against the expenses booked in the audited Annual Financial Statement or books of accounts.
The components under this section represent the various general expenses in the audited Annual Financial Statement or books of accounts on which ITC may or may not be available.
Thus, you need to declare in this section all such expenses on which GST is payable or has been paid. The list of such expenses are covered from section 14A to 14Q and these may be as follows:
- Power and Fuel
- Imported Goods (Including received from SEZs)
- Rent and Insurance
- Goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples
- Employees’ Cost (Salaries, wages, bonus etc.)
- Conveyance charges
- Bank charges
- Entertainment charges
- Stationery expenses (including postage etc)
- Repair and maintenance
- Other Miscellaneous Expenses
- Capital Goods
- Any Other Expenses
R. Total Amount of Eligible ITC Availed
This section is auto-populated. It captures the total ITC declared in Table 14A to 14Q above.
S. ITC Claimed in Annual Return (GSTR-9)
Under this section, you need to declare Net ITC availed as declared in the Annual Return (GSTR 9). You may use Table 7J of the Annual Return (GSTR 9) to fill this Table.
15. Reasons For Un-Reconciled Difference in ITC
In this section, you need to give reasons for non-reconciliation between ITC availed on the various expenses reported in Table 14R and ITC declared in Table 14S.
16. Tax Payable On Un-Reconciled Difference in ITC (Due To Reasons Specified in 13 and 15 Above)
You need to declare in this section any amount which is payable due to reasons specified in Table 13 and 15. Thus, this table captures the tax that is to be paid due to differences identified in Table 13 and Table 15 of this return.
Part V. Auditor’s Recommendation On Additional Liability Due To Non-Reconciliation
This part covers 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.
Furthermore, the auditor shall also recommend if there is any other amount to be paid for supplies not included in the Annual Return.
Also, the auditor needs to declare any refund that has been claimed erroneously and hence needs to be paid back to the Government.
Finally, if there are any other outstanding amounts that are suggested to be settled by the auditor shall also be declared in this section.