Budget 2021 – Self certification of GST Annual Returns

Budget 2021 from the indirect tax standpoint made various announcements primarily focusing on the two major aspects i.e. penalize fraudulent transaction and reduce the compliance burden. Of the many amendments proposed under GST, three main amendments that needs serious deliberation by taxpayers are

a) The rationalization of the annual GST compliance;

b) The amendment to the provisional attachment provision; and

c) The amendment to the provision enhancing the power of the Commissioner to call for information.

One of the biggest announcements from the compliance standpoint was the announcement to withdraw the requirement of getting the GSTR-9C form (reconciliation statement) certified by a Chartered Accountant/Cost Accountant. The Finance Bill, 2021 has further proposed to introduce filing of self-certified reconciliation statement along with the GST Annual return.

The above amendment was brought in primarily to reduce the compliance burden of the tax payers. However, it is important to note that the amendment now cast an additional responsibility on the taxpayer to self-certify their respective accounts and the corresponding reconciliation statement.

Typically, in a business set-up, the entire value chain is divided into strategic business units (‘SBUs’), Cost center units (`CCs’), etc. Each of the SBUs are responsible for its functioning, generation of revenue, control the associated cost, etc. and the CCs are responsible for the overhead costs of the company. The accounting of the revenue generated and the cost incurred are either handled by the operation team of the SBUs or by a separate accounts and finance. From the monthly GST returns point including the annual returns, the information/data required for filling are collated/compiled by the finance and accounts team or by the internal tax team (as the case may be) and after ensuring the required checks and balance the data/information are forwarded to the consultants (Chartered Accountants/Cost Accountants) for verification and onward filing. The consultants thereafter after ensuring adequate verification and audit certifies the same and ensure filing of the returns.

Now with the proposed amendment to file a self-certified annual return, the responsibility of filing returns may not be restricted to the finance and/or tax team. Each Business unit may be equally responsible for the data that they have entered in the books of accounts. Businesses may now will have to build in a stronger internal control mechanism wherein each SBUs/CCs will have to ensure that there are no revenue leakages or inadvertent error in availing tax credits, or inadvertent error in complying with the GST provisions. The need to have a stronger control mechanism can also be supported by two other key amendments which is discussed in succeeding paras.

Amendment to the provisional attachment provision — The existing provision of section 83(1) prescribes that the proceedings for provisional attachment of property (including bank account) can be initiated by the Commissioner for only specified types of assessments, search and seizure, and demand and assessment proceedings. This specified category is restricted to non-filers of GST returns, unregistered persons, summary assessment in certain cases, etc.

The Finance Bill proposes to enhance this power of the commissioner to bring within its scope all the provisions of Chapter XII i.e. self-assessment, provisional assessment, scrutiny of returns, etc.), Chapter XIV which includes inspection of goods in movement and chapter XV.

Interestingly, the proposed amendment gives power to the Commissioner to attach property even for proceeding initiated against returns filed by the tax payer on self -assessment basis and/or for scrutiny of returns, irrespective of the fact that scrutiny may or may not result in any demand.

Further, section 68 of the CGST Act, prescribes provision for inspection of goods in movement by the proper officer. The said provision requires the person in charge of the conveyance to produce requisite documents and allow inspection of goods. There have been many reported cases of goods being detained even for inadvertent procedural lapses. The said provision is also now under the ambit of the amended provisional attachment provisions.

Amendment proposed with respect to calling of information – Currently, section 151 of the CGST Act, gives power to the Commissioner to call for concerned person to furnish such information as may be required for statistics purpose. This provision is now proposed to be amended. The amended provision has now widen the powers of the Commissioner, to call upon ‘any person ’to ‘furnish information’ ‘relating to any matter’ in ‘connection with this act’. In other words, the proposed amendment gives power to the commissioner to call upon any person and not just the authorized/concerned person to furnish the required information. Failure to comply, will automatically result in penalty.

From the combining reading of all these major amendments it can be inferred that businesses will now be required to device stringent internal control mechanism/processes and co-ordinate the efforts of various teams while filing their respective GST returns (both monthly and annual).