Over the last month or so, the Central Board of Indirect Taxes and Customs(CBIC) has been engaged in drafting and releasing forms for the simplified return formats under GST as well as the annual returns and reconciliation statements. Though GSTR 9C is labelled a reconciliation statement, in effect it amounts to an audit report in a tabular format. By themselves, the forms appear to be comprehensive enough and contain instructions to enable a taxpayer to complete filling and filing the form — albeit with some assistance.

Yet, some of the forms have some bizarre requirements. Part V of GSTR 9C 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 needed to be paid back to the government shall also be declared in this table. Also, any other outstanding demands recommended to be settled by the auditor shall be declared in a separate table.

Taxpayers shall be given an option to pay their taxes as recommended by the auditor.

Task outsourced

In effect, it appears that the CBIC has outsourced the task of finding out additional liabilities on the community of auditors ( much like the tax audit report being given by the auditors under the Income Tax Act). Since GST laws are still finding their feet, there are different interpretations of many clauses in the Acts/Rules. Different benches of the Authority for Advance Rulings (AAR) are attempting to clarify many questions being raised by taxpayers. Recently, the CBIC extended the time limit for filing the declaration of transition credits in GSTR TRAN 1 for those taxpayers who could not file the form due to technical issues (which almost every taxpayer had). In such a scenario, only a brave auditor would interpret the laws and ask his client to shell out more GST. The auditor has the onerous task of not only stating if there is any other amount payable that has not been included in the return but also any other outstanding demands that are recommended to be settled by the auditor.

The instructions given to fill in different columns in the form are elementary and would need further explanation by way of illustrative examples. For example, Instruction 5F states that “trade discounts which are accounted for in the audited Annual Financial Statement but on which GST was leviable (being not permissible) shall be declared here”. Not all taxpayers would be aware of trade discounts which would attract GST. The CBIC has been attempting to get taxpayers to reconcile their books and GST returns in bits and patches.

Considering the present position of the GST laws, it may be too early to expect an accurate certification of the reconciliation between the financial books and GST returns. Being the first year of annual returns, the CBIC should probably ask taxpayers to submit the reconciliation without insisting on a certification.

Certifications that are given would come with a lot of disclaimers. The CBIC should also assure taxpayers that the reconciliation statement would only be used for analysis and no interest/penal action would be taken unless it has been proved that there has been a wilful attempt to evade payment of GST.

The writer is a chartered accountant.

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