Arjuna (Fictional Character): Krishna, On 15th August India’s Independence Day is celebrated enthusiastically. Nowadays its very difficult to maintain one’s own independence from slavery of another person. The introduction of new Income Tax Audit Report on August 20 for the financial year 2017-18 would require to give details of GST alongwith Income Tax. Due to this the freedom of Income tax auditor, would now depend on his GST knowledge as well. As the details of GST are also required to be given, it raises a question that whether due to GST the freedom of taxpayers under Income tax lands in a problem?
Krishna (Fictional Character): Arjuna, it really seems that the freedom of Income tax Taxpayers have been reduced after implementation of GST. This would be the first Tax audit after implementation of GST. Recently the Government has provided the new tax Audit report format in which the taxpayers are required to provide few details in relation to GST.
Arjuna: Krishna, what information in relation to GST, taxpayers are required to provide in the tax audit report?
Krishna: Arjuna taxpayers are required to give their GST registration number in the tax audit report. Also the details of expenditure like-
Total amount of expenditure incurred during the year.
From the above how much is expenditure in relation to Registered Entities regarding-
Goods/services exempt from GST.
Relating to entities registered as composition dealer.
Expenditure relating to other Registered entities.
Total payment made to registered entities.
Expenditure relating to entities not registered.
Arjuna: Krishna from where these details are to be provided and whether there is any difficulty to provide these?
Krishna: Arjuna, taxpayers may face the following difficulties while furnishing information of GST in tax audit report.
1) Taxpayers have the details of Registered taxpayers as well as unregistered persons in their books of accounts but do not maintain details of payment made/expenditure incurred relating to composition persons, so details in relation to the same is difficult to provide.
2) Information relating to purchases from Registered person is easy to get from books but the amount paid for same would require efforts.
3) In 3CD report details of expenditure is asked and also the bifurcation thereof as discussed above, but there is no clarity about type of expenditure ,like revenue or capital or both? Also it would be interesting to note that in GST 3B we give details of ITC and no bifurcation in relation to revenue and capital expenditure is made.
4) Total expenditure incurred during the year is required to be given in the GST bifurcation as mentioned earlier but GST has been implemented from July. What one needs to do about expenditure of 3 months (april-june) is not clear.
Arjuna: Do taxpayer’s need to provide any information other than GST?
Krishna: Arjuna in tax audit report along with the details of GST, disclosure of ICDS i.e Income Computation and Disclosure Standard are also required to be given.
Arjuna: What information of ICDS is asked?
Krishna: Under ICDS taxes duties cess etc. paid or payable on stock, purchases and sales needs to be reported under as per section 145 A and its effect on profit or loss. Thus VAT, Service Tax, excise, customs etc. for 3 months and GST of 9 months effects needs to be disclosed, this is going to be cumbersome activity for taxpayers.
Arjuna: What lesson should taxpayers take from this?
Krishna: Arjuna, after implementation of GST this would be 1ST Tax audit. As GST was new to everyone, taxpayers had to undergo many changes in their books of accounts. Maintaining and reconciling Books of accounts as per GST and Income tax was difficult for them. But now as tax audit is approaching it would be better to reconcile books with GST returns and its other provisions. This means that taxpayers and auditors should have knowledge of Income Tax as well as GST so as to ensure their Independence.
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