The entire reconciliation statement in the form GSTR 9C has been divided into the following Parts namely:
1. Basic details.
2. Reconciliation of turnover declared in the audited Annual Financial Statement with turnover declared in Annual Return
3. Reconciliation of tax paid Reconciliation of Input Tax Credit (ITC); and lastly
4. Auditor’s recommendation on additional Liability due to non-reconciliation
Before we start with the relevant topic, we must understand that GST being the new system and pertain to the major area from where the state government and the central government drive their revenue.
Hence, if you want to make sure that the revenue is not leaking from any point then you must place proper checkpoints and to understand that these checkpoints are effective the same assurance can be obtained if the required outcome is matching with the expected one and if not then there must be some reconciliation with the proper explanation.
This is what the government is doing through the current reconciliation statement in the form 9C and its certification.
As the input tax credit plays the major role in the GST calculation it is quite obvious to place the best checkpoints to detect the revenue leakage.
A. Firstly make sure that the credit availed as per the books of account are matching with the credit availed as per the annual return in form GSTR-9. And if there is any difference then each category of the difference shall be correctly explained.
B. Reconciliation of ITC declared in Annual Return (GSTR9) with ITC availed on expenses as per audited Annual Financial Statement or books of account. the same can be bifurcated as:
- Amount of total ITC in that particular Head of Income; and
- The amount of eligible ITC availed (this requires the verification of each invoice)
This clause is somewhat similar to the clause 34 of the tax audit report for the TDS reconciliation. Hence we must have the expense and credit bifurcation of the following expenses:
- Purchases
- Freight / Carriage
- Power and Fuel Imported goods (Including received from SEZs)
- Rent and Insurance
- Goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples
- Royalties
- Employees’ Cost (Salaries, wages, Bonus etc.)
- Conveyance charges
- Bank Charges
- Entertainment charges
- Stationery Expenses (including postage etc.)
- Repair and Maintenance
- Other Miscellaneous expenses
- Capital goods
- Any other expense (remaining expenses can be clubbed in this head)
After consolidating the credit under the different heads we shall make sure that it matched with the amount claimed in the annual return in form 9.
If we have kept the proper record in the excel sheet or other software then the required information becomes a cake walk by inserting the expense head column and then dong the pivot.
If the same is not matching then each category of the difference shall be properly explained.
After making and explaining the above two reconciliations, there may be a situation where some amount may become payable to the government in the form of:
- CGST
- CGST/UTGCT
- IGST
- Cess
- Interest; and
- Penalty
The same shall be properly calculated and mentioned in the reconciliation statement.
Form the above it is quite clear that if the proper records are not maintained then it’s going to be very difficult as it requires again going to the source documents for the checking.
Disclaimer: The above should be considered as broad guidance and not a considered opinion as fact and circumstances could be different and change in the law is ongoing
Author Bio
please let me know if ineligible taken during the month of Jan 2018 by mistake and if it get reversed during this month attracts Interest ? and what about the reversal of Input which my suplier has not filed return ( after six month ) then i have to pay gst with interest or without interest ?