GST Audit under Section 35(5) scrapped – What does it mean ?

GST Audit scrapped section 35(5) from GST Act 2017 OMITTED /New Provisions for Section 44 inserted

Under GST, the compliance obligations under section 35(5) from GST Act has been removed to allow self-certification.

Section 35 of the Central Goods and Services Tax Act Sub Section (5) shall be omitted.

Before removal of Section 35(5) it read as that every registered person whose turnover during a financial year exceeds the prescribed limit shall get his accounts audited by a chartered accountant or a cost accountant and shall submit a copy of the audited annual accounts, the reconciliation statement under sub-section (2) of section 44 and such other documents in such form and manner as may be prescribed and

Section 44 prescribes that every registered person, other than an Input Service Distributor, a person paying tax under section 51 or section 52, a casual taxable person and a non-resident taxable person, shall furnish an annual return for every financial year electronically in such form and manner as may be prescribed on or before the thirty-first day of December following the end of such financial year 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.

During the presentation of the Finance Bill 2021 as part of Budget, under

Clause 101 sought to omit sub-section (5) of section 35 of the Central Goods and Services Tax Act so as to remove the mandatory requirement of getting annual accounts audited and the reconciliation statement submitted by specified professional.

Also Clause 102 sought to replace the provisions of Section 44 as follows:

“ 44. Every registered person, other than an Input Service Distributor, a person paying tax under section 51 or section 52, a casual taxable person and a non-resident taxable person shall furnish an annual return which may include a self- certified reconciliation statement, reconciling the value of supplies declared in the return furnished for the financial year, with the audited annual financial statement for every financial year electronically, within such time and in such form and in such manner as may be prescribed……………..

Impact Analysis:

1. Omission of Sub-section (5) of section 35 of the CGST Act 2017 – to remove the mandatory requirement of getting annual accounts audited and reconciliation statement submitted by specified professional.

2. Replacement of Section 44 of the CGST – remove the mandatory requirement of furnishing a reconciliation statement duly audited by specified professional and to provide for filing of the annual return on self- certification basis.

3. It further provides for the Commissioner to exempt a class of taxpayers from the requirement of filing the annual return.

In this regard,

Notification 30/2021-Central Tax dated 30.07.2021 has also been issued replacing the existing Rule 80 and making required amendments in FORM GSTR-9 & FORM GSTR-9C also issued. The default due date remains 31st December following the financial year (as earlier) but now it’s prescribed under Rule 80 of CGT Rules 2017.

Any person paying tax under Composition Levy scheme under Section 10 shall continue to furnish the annual return in FORM GSTR-9A

Notification 31/2021-Central Tax dated 30.07.2021 has been issued which exempts the registered person whose aggregate turnover in the financial year 2020-21 is upto two crore rupees, from filing annual return for the said financial year 2020-21.

Departmental Audit which is one of the Compliance verification mechanism will still continue.

No other misconceptions 😃

SRIVATSAN.R.