Various clarifications issued by Government regarding Annual Return and Reconciliation Statement

The Government vide Press Release dated July 03, 2017 has issued various clarifications which can be very relieving for industry Inc. as well as Auditors certifying the Reconciliation Statement.

Following clarifications are made by the Government through the Press Release:

1. Payment of any unpaid taxes

In cases where some information has not been furnished in Form GSTR-1 or in Form GSTR-3B, taxpayers may pay the tax with interest through Form GST DRC-03 at any time. In fact, the Annual Return provides an additional opportunity for such taxpayers to declare the summary of supply against which payment of tax is made. If such additional tax is paid along with interest before service of any notice, no penalty shall be leviable in terms of section 73 of Central Goods and Services Tax Act, 2017 (“CGST Act”).

2. Source of data to be declared in Annual Return

There has been a huge confusion as to what data need to be furnished in GSTR-9 i.e. whether the data furnished in GSTR-1 or GSTR-3B or the data as per books of accounts is the correct data which need to be furnished. It is clarified that, all the three sources data should be synchronous and the values should match across different forms and the books of accounts. If the same does not match, there can be broadly two scenarios:

a. Tax was not paid to the Government: Declare in annual return and pay through DRC-03

b. Tax was paid in excess: Declare in Annual Return and apply for refund in Form RFD-01A.

Further, no input tax credit can be reversed or availed through the annual return. If taxpayers find themselves liable for reversing any input tax credit, they may do the same through FORM GST DRC-03 separately.

3. Reconciliation of ITC as per GSTR-3B and GSTR-2A

It is clarified that, data of Form GSTR-2A which is auto-populated in Table 8A of GSTR-9 is only picking up the data of such Form GSTR-1 which were furnished by corresponding suppliers till May 01, 2019. If suppliers had furnished Form GSTR-1 containing invoices of Financial Year (“FY”) 2017-18 after May 01, 2019, then the figure auto-populated in Table 8A and updated GSTR-2A shall have differences.

It has further clarified that, taxpayers need not worry for the differences reflecting in Table 8D of GSTR-9, as such differences are on account of credit available in 2A but not availed by the taxpayer till March 2019.

However, no clarification has been made w.r.t. negative differences which can be on account of supplier not filing his Form GSTR-1, supplies reported as B2C supplies, supplier mentioned wrong GSTIN etc.

Similarly, taxpayers need not worry for the differences reflecting in Table 8J of GSTR-9, as such differences are on account of credit available to taxpayer on import of goods, but taxpayer chose not to avail the same.

4. Difficulty in reporting of information in Table 16A or Table 18 of GSTR-9:

No separate workings were maintained by various taxpayers w.r.t. HSN wise summary of inward supplies or supplies received from composition taxpayers, nor the details were required to be reported under any return or statement. In this context it is clarified now that, taxpayer should declare all such data / details to the best of their knowledge and records as these are only for information purposes.

5. Reporting in Table 5D (Exempted), Table 5E (Nil-rated) and Table 5F (Non-GST supplies) of GSTR-9:

Citing the reason that, there are some overlap between their classification, if there is a reasonable/explainable overlap of information reported across these tables, such overlap will not be viewed adversely. It has further been clarified that, for the purposes of reporting, non-GST supplies (and “no supply”) includes supply of alcoholic liquor for human consumption, motor spirit (commonly known as petrol), high speed diesel, aviation turbine fuel, petroleum crude and natural gas and transactions specified in Schedule III of the CGST Act.

6. RCM liability of FY 2017-18 paid during FY 2018-19

It has been clarified that, since payment of RCM liability was made during FY 2018-19, the input tax credit on such payment of tax would have been availed in FY 2018-19 only. Therefore, such details will not be declared in the annual return for the FY 2017-18, rather it shall be reported in Annual return of FY 2018-19. If there are any variations in the calculation of turnover on account of this adjustment, the same may be reported with reasons in the Form GSTR-9C.

7. Role of Auditors in certifying reconciliation statement

Since, certification of “true and correct” view was required to be provided by the auditors (Chartered Accountants and Cost Accountants), they had apprehensions that, they may have to go beyond the books of account in their recommendations under Form GSTR-9C. It is clarified that, their role is limited to reconciling the values declared in annual return (Form GSTR-9) with the audited annual financial statements of the taxpayer.

8. Turnover for eligibility of filing of reconciliation statement

It has been clarified that, PAN-wise turnover shall be considered for determining the requirement of filing Form GSTR-9C. For example, turnover of company ‘A’ from GSTIN Maharashtra is Rs. 1 cr and from GSTIN Delhi is Rs. 1.7 cr. Then both the GSTIN shall have to furnish Form GSTR-9C as the aggregate turnover exceeds Rs. 2 cr.

9. Treatment of Credit Notes/ Debit Notes issued during FY 2018-19 for FY 2017-18

It has been clarified that, if credit or debit note for any supply was issued and declared in returns of FY 2018-19 and the provision for the same has been made in the books of accounts for FY 2017-18, the same shall be declared in Pt. V of the annual return.

Reporting such credit notes/debit notes in Form GSTR-9C:

a. Credit notes which are issued in FY 2018-19 related to FY 2017-18 are required to be reported under Table 5E of GSTR-9C.

b. Debit notes which are issued in FY 2018-19 related to FY 2017-18 are required to be reported under Table 5O of GSTR-9C.

10. Non-duplication of information in Table 6B and 6H

Since, label in Table 6H clearly states that information declared in Table 6H is exclusive of Table 6B, therefore information of such input tax credit is to be declared in one of the rows only.

11. Expense-wise reconciliation of ITC (Table 14 of GSTR-9C)

It has been clarified that, under Table 14 of GSTR-9C details of only such expenses should be reported on which input tax credit has been availed.

DISCLAIMER: The views expressed are strictly of the author and A2Z Taxcorp LLP. The contents of this article are solely for informational purpose. It does not constitute professional advice or recommendation of firm. Neither the author nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon.

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