CA Ramandeep Singh Bhatia
Article discusses Turnover for GST Audit if a Dealer in Registered in more than one State, Inclusion of Turnover of April to June 2017 for Calculation of Turnover Limit for GST Audit and Applicability of GST Audit of Audit is been carried out under other statutes like Companies Act, Income-tax Act, Co-operative Societies Act, etc.
Three important provisions which will be important for FAQS is reproduced for better understanding:
Section 35(5) “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”.
Rule 80(3) of the CGST Rules “every registered person whose aggregate turnover during a financial year exceeds two crore rupees shall get his accounts audited as specified under sub-section (5) of section 35 and he shall furnish a copy of the audited annual accounts and a reconciliation statement, duly certified, in GSTR 9C, electronically through the common portal either directly or through a Facilitation Centre notified by the Commissioner”.
Section 44(2) “every registered person who is required to get his accounts audited in accordance with the provisions of sub-section (5) of section 35 shall furnish, electronically, the annual return under sub-section (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”.
1. Question:I am registered entity in 3 states and my aggregate turnover is more than Rs 2 crore but my standalone turnover in each state is less than Rs.2 Crore. Whether i am required to do GST audit in the present situation?
Answer : Lets answer the above question analysing the section and rules applicable ,
Section 35(5) commences with the expression “every registered person whose turnover during a financial year exceeds the prescribed limit” whereas the relevant Rule 80(3) uses the expression “every registered person whose aggregate turnover during a financial year exceeds two crore rupees”. It must be noted that the word turnover has not been defined whereas the expressions aggregate turnover has been defined. One may note that the expression turnover in State or turnover in Union territory is defined. In this backdrop the following understanding is relevant, aggregate turnover is PAN based while turnover in a State / UT is similarly worded except to the extent that turnover in a State / UT is limited to a State.
It is therefore, reasonable to interpret that the word turnover used in section 35(5) ought to be understood as aggregate turnover. Hence it can be said that for applicability of GST audit aggregate turnover need to be seen than turnover of a individual state. In the present case the registered person is required to get GST audit done when his turnover in each state is less than Rs.2.00 Crore but aggregate turnover exceeds Rs. 2.00 Crores.
2. Question: Does turnover of April to June 2017 will be included for calculating turnover limit under section 35(5) ?
Answer: For the financial year 2017-18, the GST period comprises of 9 months whereas the relevant section 35(5) uses the expression financial year; Therefore, in the absence of clarification from government, also to avoid any cases of default, it is reasonable to understand that to reckon the turnover limits prescribed for audit i.e., Rs. 2 crores one has to reckon the turnovers for the whole of the financial year which would also include the first quarter of the financial year 2017-18.
3. Question : If entities required to be audited under any other statutes like Companies Act, Income-tax Act, Co-operative Societies Act, etc., are still required to get audit done under sec.35(5) ? Does the auditor can be same or different for audit under different statutes?
Answer : Combined reading of the section 35(5), 44(2) along with forms notified, give rise to two situations, first being entities not required to be audited under any other statute in which case audit has to be carried out in terms of Section 35(5) and reconciliation statement to be drawn under Section 44(2) duly certified.
The second situation being entities required to be audited under any other statutes like Companies Act, Income-tax Act, Co-operative Societies Act, etc., When the records of the entity is audited under any other statute, the reconciliation statement can be drawn up by the same auditor, who also certifies the same if auditor happens to be Chartered Accountant. Alternatively, the reconciliation statement can be drawn up and certified by another Chartered Accountant or Cost Accountant.
Disclaimer: The above FAQS are prepared based on the provision / rules and laws prevailing as on the date of publishing, there are personal interpretations involved in answering the above which may vary.
Sources: *Technical Guide on Annual Return & GST Audit issued by ICAI on 17-10-2018.
(Author may be contacted at [email protected] or on + 91 9827152729)