Disclosure 1 in GSTR 9C: Reconciliation and not assurance on overall compliance

♣ It has been clarified by the CBIC vide press release dated 03.07.2019 that the scope of the audit is restricted to provide reasonable assurance on the correctness of the reconciliation given in Part A of this Form and auditor is not required to examine other aspects of levy and compliance including but not limited to classification, valuation, rate of tax etc. Any transaction which is beyond those recorded in the accounts and records has been examined or verified by us.

Financial year (FY) is not defined under GST Law. As per General Clauses Act, FY means the year commencing on the first day of April.

♣ However for, GST audit “aggregate turnover- is considered for the period commencing from 1st July 2017 to 31st March 2018, which is in line with Clarification regarding Annual Returns and Reconciliation Statement Dt. 3rd July 2019.

Disclosure 2 in GSTR 9C:- Management Responsibility:

Management is responsible for compliances with GST laws comprising CGST Act, 2017/GGST Act, 2017 and IGST Act, 2017 and respective rules framed thereunder, and maintenance of adequate records including but not limited to books of accounts, bills of supply, credit notes, debits notes, stock register, vouchers, etc. in accordance with applicable provisions of the CGST Act / GGST Act or any other State GST Act / IGST Act and rules made thereunder.

Disclosure 3 in GSTR 9C:- Auditors Responsibility:-

Our responsibility is to audit the particulars included in the GSTR 9C to provide reasonable assurance that they are free of any material mis-statement.

We have taken into account provisions of CGST Act, 2017/GGST Act, 2017 and IGST Act, 2017 and respective rules framed there under, auditing standards and matters which are required to be included in GSTR-9C under the provisions of the Act and the Rules made thereunder.

The procedure selected is dependent upon auditor’s judgment, including assessment of risks of material misstatement, whether due to fraud or error. In making those risk assessments, we have considered internal financial control relevant to the registered persons assessment with respect to compliance with the Act(s) and Rules made thereunder that give a true and fair view in order to design audit procedures that are appropriate in the circumstances.

We have conducted our audit in accordance with auditing standards generally accepted in India and in line with the requirements under the GST laws. Those standards require that we plan and perform the audit to obtain reasonable assurance as to whether relevant GSTR 9C is free of material mis-statements. Reasonable assurance is high level of assurance but is not a guarantee that an audit conducted by us identifies all non compliances of the registered person while discharging its responsibilities under GST Act. Written representations, Letter received from management in response to inquiries, reasonable and prudent estimates and results of our audit tests comprises the evidential matter relied upon by us in reporting in GSTR 9C.

An audit includes examination on a test basis, using concept of materiality, evidence supporting the amounts and disclosures in GSTR 9C. Having regard to the test nature of an audit, persuasive rather than conclusive nature of audit evidence, together with inherent limitations of any accounting and internal control system, there is an unavoidable risk that even some material misstatements, resulting from fraud and to a lesser extent error, if either exists, may remain undetected. However, as part of an audit in accordance with applicable provisions of the GST Act and rules / regulations / press –release issued in this regard from time to time, we exercise professional judgment and maintain professional skepticism throughout the audit.

We believe that our audit provides a reasonable basis for our reporting on Reconciliation Statements in Form 9C.

Disclosure 4 :- Due to the nature of business, types of supply, complexities of transactions and size of operations, we are unable to identify or comment upon each and every outward and inward supplies for classification, valuation, place of supply and time of supply of goods or services or both. Recipient of the outward supply made by registered person has been verified solely based upon invoices, documents and supporting evidences produced before us and explanation given to us. We have carried out test checks as per the accepted principles of auditing and observations made pursuant to such test checks have been duly considered while reporting GSTR-9C and is subject to the information and declaration or management representation as provided by the registered person.

Disclosure 5:- As per information and explanation given to us and on the basis of examination of records of registered person, an amount of Rs ……. pertaining to credit notes has been reduced from taxable value of outward supplies. Since, no facility till date has been provided to the registered person or to the auditor to verify reversal of ITC by recipient, we are unable to comment on fulfilment/non-fulfilment of the given condition.

Disclosure 6:- Reporting in GSTR-9C requires verification of the eligibility of Input Tax Credit in accordance with the provisions of CGST Act, 2017/GGST Act, 2017 and relevant rules made thereunder. Further provision of Section 16(2)(b) requires that tax payer should have received goods or services or both for being eligible to claim input tax credit of the tax charged by the suppliers. Since audit includes test checks of invoices, documents and supporting evidences produced by the registered person before us, therefore reporting under GSTR-9C for eligibility of Input Tax Credit is solely based upon invoices, documents and supporting evidences produced before us and explanation given to us. Observations made pursuant to such test checks have been duly considered while reporting GSTR-9C and is subject to the information and declaration or management representation as provided by the registered person.

Disclosure 7:- Provision of Section 16(2)(c) requires that tax charged in respect of supply received by the registered person has been actually paid to the Government, either in cash or through utilisation of input tax credit admissible in respect of the said supply. Since, no facility till date has been provided either to the registered person or to the auditor to verify compliance of the given condition, we are unable to comment on fulfilment/non-fulfilment of the given condition

Disclosure 8(A):-Reversal of ITC in terms of section 16(2)(d) read with rule 37 can not be verified due to non-availability of required reports. However on test checking basis no such invoice found.

Disclosure 8(B):- Classification of Inward Supplies as Supplies intended to be used exclusively for purposes other than business, for effecting exempt supplies, for effecting supplies other than exempted but including zero rated supplies and common credit has been carried out on test check basis as per the accepted auditing practices and observations made pursuant to such test checks have been duly considered while reporting GSTR-9C and is subject to the information and declaration or management representation as provided by the registered person

Disclosure 8(C):- Classification of expenses for the purpose of reporting in Table 14 of GSTR9C has made optional vide notification no. 56/2019-Central Tax, dated. 14-11-2019 and the same was not reported in GSTR9C.

Disclosure 9:- As part of Management Representation Letter, it has been communicated to us that registered person has not received any penalty notices and therefore our disclosure towards penalty is based upon management representation letter.

Disclosure 10:- As per information and explanation given by the registered person vide the management representation letter, The proper documents has been maintained by the assesse as per Section 35(1) of the CGST Act and SGST Act, 2017 and rules made thereunder.

Disclosure 11:-HSN code and GST rates of the product has been decided by the taxpayer.

Disclosure 12:-That the transaction of Deemed supply under schedule 1 has been taken as per list of related parties and list of transaction given by the taxpayer.

Disclosure 13:- Late Fees for Late filling of GSTR-1 of Rs………… has not been deposited by the taxpayer.

Disclosure 14:- Sales amounting to Rs………….. having IGST of Rs………. , CGST of Rs……… and SGST of Rs ……… was not included in outward taxable supplies in GSTR 3B. However the effect of the same was given in GSTR 3B in financial year 2018-19.

Disclosure 15:- Input tax credit of CGST amounting to Rs…………… and SGST amounting to Rs …….. for the financial year 2017-18 has been taken in GSTR-3B in financial year 2018‑19.

Disclosure 16:- Excess Input tax credit of IGST amounting to Rs. ……related to financial year 2017-18 reversed in GSTR 3B of financial year 2018-19.

Disclosure 17:- The taxpayer has shown credit note of Rs. ……………… in GSTR-1 but the amount of credit note as per books is Rs. ………… So the taxpayer needs to pay IGST of Rs………. on credit note of Rs……….. on account of difference between books and GSTR-1. The same has been paid via challan no………. dated………. through DRC-o3.

Disclosure 18:- IGST of Rs………. for outward taxable supplies amounting to Rs …….. was excess paid while submitting GSTR 3B for the financial year 2017-18. However adjustment of the same was not made within the due dates prescribed by the GST Act. Hence, the IGST of Rs……. will require to be reversed in books of accounts in current year.

Disclosure 19:- There was a search/survey carried out at the premises of the taxpayer. Show cause notice has been issued by the department however till date no liability was quantified.

Disclosure 20:Absence of original documents

I/ We have verified correctness and completeness of the accounts and records required under Section 35 of the CGST Act, 2017 read with Rule 56 of CGST Rules, 2017 from the original documents produced by the Assessee except _______________________ in absence of such documents in his possession and our report is based on self attested copies of such records.

Disclosure 21: Non maintenance of separate Trial Balance

The Assessee has not maintained separate Trial Balance for the GSTIN under Audit. The assessee maintained data on all India basis. However, accounts and records as required to be maintained under Section 35 of the CGST Act, 2017 read with Rule 56 of CGST Rules, 2017 is maintained and produced before us for verification. And thus, we have assumed that such records and accounts record proper transactions as required for the present GSTIN.

Disclosure 22: Survey under other laws

A survey was conducted under section 133 of income tax Act, 1961 on the Assessee on_______. The Assessee has disclosed unrecorded income of Rs______ / unaccounted stock__________ / improper expenses of Rs.______________ during such survey. We have not commented on the implications under GST statutes on such transactions as such information was not recorded in the books of accounts.

Disclosure 23: Transfer of business

The Assessee has transferred his business during the year due to (sales /decease etc.) and has transferred his entire business as a going concern w.e.f. . Thus, the entire period of audit entails to the figures from_______________ to______________ .

Disclosure 24:- Taxpayer has applied for refund of GST amounting to Rs. however till date refund application was under process.

Disclosure 25: Taxpayer has supplied the goods under HSN code. As the delivery challans described the goods as Lehnga/Suits but in Invoices it is used as fabric. As explained to the auditors it was lehnga fabrics/ Unstitched Suit fabrics and not stitched lehnga/Suit.

Disclosure 26: The format of delivery challan for sending goods at job work premises is not as per GST rules. However it has no impact on GST liability.

Disclosure 27: Business closed during the year

The taxpayer has closed his business operation w.e.f________ . The application for closure has been duly filed in GST REG- o6 with Tax Authorities on_________ . ITC of Rs._____ has been disallowed on the closing stock of goods”.

Disclosure 28: Additional Place of business not included in R.C. but turnover considered in GST

The additional place of business ____________ _______________ is not included in Registration Certificate under CGST/SGST Act, 2017 obtained by the taxpayer, but the turnover of outward and inward supplies and taxes there on are included in the GST Returns filed for the period under audit.

Disclosure 29: Payment of interest on Net Liability

The Interest liability has been calculated on the basis of net liability of Tax. Though the Amendment in CGST Act in Union budget 2019 has been made prospective , still as per tax payer as per the spirit of the law and minutes of GST council meetings and as per prudent interpretation it has paid the interest on net tax . We have relied on the same and interest on gross basis is not quantified by the management.

Disclosure 3o: Reconciliation with GSTR 2A

There is difference in ITC as per 2A and as per books . There are some credit which is not reflecting in 2A but ITC has been taken on the basis of that tax payer ha paid the tax to the supplier and having all required documents . Some excess credit reflecting in 2A is not belonging to taxpayer and some credit is ineligible. Some ITC has been claimed in next year as goods were despatched in March month but was received in April 2018.

Further, the management is of the opinion that no liability of ITC reversal/ excess claim arises due to difference in information of ITC as per GSTR-2A and GSTR-9C.

Note: This compilation contains our personal views of RBC Team only. It is not professional advise. We are thankful for all the friends , learned experts whose contents are also incorporated in these draft observations. It is a humble effort to share knowledge with professional fraternity.

Author Bio

Qualification: CA in Practice
Company: Rajesh Bhauwala & Co.
Location: SURAT, Gujarat, IN
Member Since: 12 Feb 2019 | Total Posts: 6
I am practicing since 1997 in the field of Direct Tax, Indirect Tax, Project finance, Subsidy matters. Appearing at ITAT level and having specialisation in handling GST Search matters. Delivered Lectures on Direct Tax and Indirect Taxes at Study Circles, Trade Associations, Public Meetings .Also As View Full Profile

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One Comment


    Dear sir,
    The clarification that the TO for 2017-18 is for the period from 01-07-17 came as a press release only. The ICAI TG states it is the entire year. I was unable to find any notification to that effect. Can the press release alone can be relies upon if one gets a notice for non filing?

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