Reconciliation Of GST Annual Return With Financial Statement

The form of annual return does not require reconciliation with Annual Financial Statement (Balance Sheet and Profit and Loss Account) of taxable person for 2017-18. However, taxable persons whose aggregate turnover exceeds Rs. two crores in a financial year have to submit Audit Report in form GSTR-9C. This form is basically reconciliation statement which is required to be duly audited. The reconciliation is required with Annual Financial Statement of the taxable person.

The differences can be on many counts, including following –

  • Annual Return in form GSTR-9 is for the period July 2017 to March 2018 while Annual Financial Statement (Balance Sheet and P&L account) is for the period April 2017 to March 2018
  • Financial Statement will include income and expenditure other than as shown in Annual Return
  • Provisions made at the end of Financial Year to comply with Accounting Standards.

Taxable Persons having aggregate turnover below Rs. two crores are not required to submit Audit Report. However, it is highly advisable they prepare and keep ready such reconciliation statement ready as these details may be asked during departmental audit or other audits.

MEANING OF AGGREGATE TURNOVER

“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 a person having the same Income Tax PAN, to be computed on all India basis and excludes taxes [CGST, SGST, UTGST and IGST] – section 2(6) of CGST Act.

However, interest or discount received by him on deposits, loans or advances will not be considered for calculating aggregate turnover [though interest is exempted service] – Removal of Difficulties Order No. 1/2017-CT dated 13-10-2017.

Since the term used is ‘value’, it should be without taxes.

“Exempt supply” means supply of any goods or services or both which attracts Nil rate of tax or which may be wholly exempt from tax under section 11 of CGST Act or under section 6 of IGST Act, and includes non-taxable supply- section 2(47) of CGST Act.

‘Non-taxable supply’ means a supply of goods or services or both which is not leviable to tax under CGST Act or IGST Act – section 2(78) of CGST Act.

“Zero-rated supply” means a supply of any goods or services or both in terms of section 16 of IGST Act – section 2(23) of IGST Act.

Activities or transactions specified in Schedule III of CGST Act are to be treated as neither goods nor services. Hence, turnover of these will not be includible in ‘aggregate turnover’.

AUDIT REPORT IN FORM GSTR-9C IF AGGREGATE TURNOVER EXCEEDS RS. TWO CRORES

Every registered person who is required to get his accounts audited in accordance with the provisions of section 35(5) of CGST Act shall furnish, electronically, the annual return under section 44(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 – section 44(2) of CGST Act.

Every registered person whose aggregate turnover during a financial year exceeds two crore rupees shall get his accounts audited as specified under section 35(5) of CGST Act and he shall furnish a copy of audited annual accounts and a reconciliation statement, duly certified, in form GSTR-9C, electronically – Rule 80(3) of CGST and SGST Rules, 2017.

The form GSTR-9C has been notified on 13-9-2018. The audit report is required to be filed along with annual return by 31-12-2018.

The audit of reconciliation statement can be conducted either by person who conducted the audit of annual financial statement of the company or by any other practicing CA/CMA.

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.

IF TOTAL TURNOVER OF PERSON EXCEEDS RS. TWO CRORES, AUDIT REPORT REQUIRED FOR EACH BRANCH/DIVISION

The definition of ‘aggregate turnover’ is clear that it includes turnover of a person having the same Income Tax PAN, to be computed on all India basis.

Thus, if a taxable entity having multiple GSTIN has aggregate turnover as per its Annual Financial Statement, separate reconciliation statement and Audit Report is required from each branch/division/factory even if aggregate turnover of such branch/division/factory is less than Rs. two crores per annum.

 

CA Yashwant Kasar
The author is B.Com, FCA, CISA, DISA, PMP, FAIA. He is the regularly contributing for articles in various professional publications and newsletters, he has delivered various lectures on the topics of professional interest at various ICAI Seminars and other forums closely associated with Trade Associations, Colleges and Companies Knowledge sharing in the field of GST & Start-ups.

1 thought on “Reconciliation Of GST Annual Return With Financial Statement”

  1. Kindly let us explain the term
    1) ” Audited Annual Accounts ” Whether the term inclusive of Audited Report or Not ?
    2) ” Audited Financial Statements ” Whether the term inclusive of Audited Report or Not?
    3) Suppose your doctor advice get test from the Lab, will come back with Raw hands or The Lab organiser will
    provide ” LAB Report”. Whether based on Lab report, your doctor will give prescription or Lab report it self a
    Prescription.
    4) Because Section 44(2) described Reconciliation Statement is
    Reconciling with the turnover declared in the return filed to be compare with Audited Financial Statement.
    5) Reconciliation Statement certify as defined under Rule 80(3) means it should be by Authoritative manner, in briefly under Rule 83(10) explained that GSTP shall prepare and furnish affix his signature .
    6) Hence Rule 80(1) and 80(3) explained that even CA and Cost accountant may be a GSTP provided get pass in the GSTP’s examination to do the act of GST inclusively as specified under Rule 83 (10).
    7) Even a Notary also eligible to certify any Statements provided by a person, because Notary also having authoritative and attestation power under constitutional Law.

    Reply

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