“Dahi Handi” of GST Annual Return and GST Audit

We are celebrating 300 parts of Weekly Karneeti Article!!! Thank you to all the readers!!! Enjoy reading karneeti!!!-

CA Umesh Sharma

Karneeti Part 300 – “Dahi Handi” of GST Annual Return and GST Audit

Arjuna (Fictional Character): Krishna, this is 300^th Karneeti article and on the eve of Janmashtami, it’s double celebration. Janmashtami was celebrated with great enthusiasm, all the “Govindas” tried hard for reaching “Dahi Handi” by forming pyramid and breaking “Dahi Handi”. Our GST taxpayers are also trying to break “Dahi Handi” of Annual Return and Audit Report of financial year 2017-18?

Krishna (Fictional Character): Arjuna, breaking “Dahi Handi” is tough task, it’s very difficult to reach “Dahi Handi” and break it. For breaking “Dahi Handi” all “Govindas”(GST Auditor) require great co-ordination. In GST as well, the taxpayers are working hard to co-ordinate with forms of Annual Return and Audit Report so as to break “Dahi Handi” of returns by filing it. The taxpayers are facing many hardships for providing the details as required in form. The biggest worry being the due date for filing return i.e 31^st August, 2019.

Arjuna: Krishna, What difficulties taxpayers are facing while filing GST the Annual return and Audit Report?

Krishna: Arjun, for breaking the “Dahi Handi” taxpayers are required to overcome 10 difficulties i.e. 10 layer pyramid. These layers are as follows:

1. To have a stable pyramid, a strong foundation is required. The biggest hurdle of forming this in GST is calculation of net liability through Annual return and Audit Report, as both the forms provides no information regarding it.

2. If one forms foundation, the next challenge is of setting off such additional liability, arising from the calculation of net liability.

3. After forming 2 layers, the taxpayer is unable to claim additional ITC to set off his liability. Thus, no additional ITC can be claimed which is most unfair rule of this game of “Dahi Handi”. But taxpayer having no option, have to unwillingly accept this rule for participating in this game of “Dahi Handi”.

4. After accepting the unfair rule, the fourth layer is difficult to form. Even if the taxpayer accepts the liability, the payment with DRC-03 is the big challenge awaiting.

5. The next layer is interesting one, where it is expected that the taxpayer has to provide correct details but taxpayer is not allowed to correct the mistakes which had been made while filing the monthly returns. This is the main lacunae faced while filing annual return.

6. While the pyramid is on its halfway, the challenge of HSN-wise details of both outward and inward supplies is awaiting. Though CBIC has given relief in providing details of inward supplies contributing less than 10% of total ITC. But the relaxation has not completely solved the problem of sixth layer.

7. The pyramid will stand still if “Govindas” divide burden among themselves. The seventh layer of GST, too requires bifurcation of ITC as input, input services and capital goods in Table 6 of Annual Return. Even expense head-wise data of ITC is to be provided in Table 14 of GST Audit Report. Till date no such data was required in any monthly returns. Thus, meeting data requirement is real test for taxpayers and burden too.

8. As “Govindas” move near to “Dahi Handi” the balancing of below layers play crucial role. The lack of clarity on credit utilization of ITC is confusing taxpayers.

9. The second last layer mandates the taxpayers to reconcile ITC claimed with GSTR-2A, which is the most cumbersome process.

10. The final layer resembles “Financial Statements” i.e. turnover in books of accounts. As GST was implemented on 1^st July, 2017, the applicability of audit and bifurcation of income on the basis of period is major issue.

Thus, on successful formation of 10 layers, the “Dahi Handi” of GST Annual return and GST Audit Report can finally be cracked.

Arjuna: Krishna, what lesson we should take from this?

Krishna: Arjuna, We are celebrating 300^th episode of our Karneeti article series. We have got lot of love and affection from all of our readers. So, heartly thanks to them. Let’s keep sharing knowledge, only knowledge can break the “Dahi Handi” of illiteracy. Let GST come in life of all ie Growing and Sharing Together. Hope government extends due date of GST audit so that taxpayers can file it with due care.