It is submitted that Section 35 and 44 of The Central Goods and Services Tax, Act, 2017 (CGST Act, 2017) are proposed to be amended in Finance Bill, 2021. Please note that these proposals will come into effect from a date to be notified later. It is stated that Sections 2 to 79 of Finance Act, 2021 shall come into force on the 1st day of April, 2021 and Sections 99 to 114 of Finance Act, 2021 shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint.
It is stated that the Finance Minister, Smt. Nirmala Sitharam in her Budget Speech on 1st day of February 2021, omitted Section 35(5) and substituted Section 44 [by Section 101 & 102 of the Finance Act, 2021 respectively] of the CGST Act, 2017, so as to remove the mandatory requirement of furnishing a Reconciliation Statement (GSTR-9C) duly audited by a Practicing Chartered Accountants or Cost Accountants and to provide for filing of the Annual Return (GSTR-9) on self-certification basis with a reconciliation statement.
Before the aforesaid amendment, the necessary provision of applicability of audit and auditor’s Certification under Section 35(5), read with Section 44(2) of CGST Act, 2017, read with Rule 80(3) of CGST Rules, 2017 are as under
“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.
Provided that nothing contained in this sub-section shall apply to any department of the Central Government or a State Government or a local authority whose books of accounts are subject to audit by the Comptroller and Auditor General of India or auditor appointed for auditing the accounts of local authorities under any law for the time being in force.”
“Section 42(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 accounts statement, and such other particulars as may be prescribed.”
“Rule 80(3). Every registered person other than those referred to in the proviso to sub-section (5) of Section 35, 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 audited annual accounts and a reconciliation statement, duly certified, in FORM GSTR-9C, electronically through the common portal either directly or through a Facilitation Centre notified by the Commissioner.”
It is submitted that 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 Section 44(2) of CGST Act, 2017 and such other documents in such form and manner as may be prescribed.
Pursuant to Rule 80(3) of the CGST Rules, 2017 every registered person whose aggregate turnover during a financial year exceeds two crore rupees shall get his accounts audited as specified under Section 35(5) of the CGST Act, 2017. He shall furnish a copy of 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, duly certified, in Form GSTR-9C, electronically. It is submitted that filing of GSTR 9C for the financial year 2018-19 is waived off for businesses with an annual turnover of less than Rs 5 crores.
Further, the Audit by Chartered/Cost Accountant is not required if the taxable person is any department of the Central Government/ State Government/ local authority, whose books of account are subject to audit by the Comptroller and Auditor-General of India or an auditor appointed for auditing the accounts of local authorities under any law for the time being in force.
Now, with Section 101 & 102 of the Finance Act, 2021, the aforesaid sub-section (5) of Section 35 of the CGST Act, 2017 is going to be deleted and Section 44 of the CGST Act, 2017 is to be substituted completely.
“44. Every registered person, other than an Input Service Distributor, a person paying tax under section 51 or section 52, a casual taxable person and a non-resident taxable person shall furnish an annual return which may include a self-certified reconciliation statement, reconciling the value of supplies declared in the return furnished for the financial year, with the audited annual financial statement for every financial year electronically, within such time and in such form and in such manner as may be prescribed:
Provided that the Commissioner may, on the recommendations of the Council, by notification, exempt any class of registered persons from filing annual return under this section:
Provided further that nothing contained in this section shall apply to any department of the Central Government or a State Government or a local authority, whose books of account are subject to audit by the Comptroller and Auditor- General of India or an auditor appointed for auditing the accounts of local authorities under any law for the time being in force.”.
It is submitted that the responsibility of reconciliation has been shifted to the taxpayers now instead of GST auditors earlier. It further provides for the Commissioner to exempt a class of taxpayers from the requirement of filing the annual return.
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