GST has brought uniformity to the indirect tax system in India. Self-assessment and self-compliance form the foundation of the GST system. In this trust-based taxation regime, the taxpayer is required to self-assess his returns and determine his tax liability. In such a system, a strong mechanism to measure and ensure compliance is crucial. Auditing is an important compliance verification tool introduced by the government to check tax evasion and ensure compliance. Auditing and certification requirements are mandatory for taxpayers with a turnover above the specified threshold limit as part of GST compliance in India. Here we discuss in detail the auditing and certification requirements for GSTR-9.
Audit requirements in GSTR-9
As per Section 2(13) of the CGST/SGST Act, an audit in GST means a detailed examination of records, returns, and other documents to verify the correctness of turnover, taxes paid, refund claimed, ITC availed, and the assessment of compliance with the provisions of the GST rules and laws.
Types of audits in GST
There are three types of audits prescribed under GST. They are:
- Audit by tax authorities: Section 65 of the CGST/SGST Act, 2017, and Rule 101 of the CGST/SGST Rules, 2017 provide for audit by an authorized officer, delegated by the commissioner. There is no turnover limit in this type of audit.
- Special audit: Section 66 of the CGST/SGST Act, 2017, read with Rule 102 of the CGST/SGST Rules, 2017, details the special audit by a chartered or cost accountant on the order of an officer not below the rank of the assistant commissioner, with appointment by the commissioner.
- Turnover-based audit: When the aggregate turnover of a taxpayer exceeds 5 crore rupees, he is required to submit a self-certified reconciliation statement in Form GSTR-9C. This return is a statement of reconciliation of the values of supplies declared in GSTR-9 furnished for the financial year with the audited annual financial statement.
The objective of audit in GSTR-9
The objective of an audit under GSTR-9 is to verify the correctness of turnover declared, taxes paid, refund claimed, and input tax credit availed. It is also to assess the taxpayer’s compliance with the provisions of GST rules and procedures.
All taxpayers whose aggregate annual turnover exceeds the limit specified by GST law are required to get their accounts audited as specified under the law and submit a copy of the audited annual accounts and a reconciliation statement duly certified in Form GSTR-9C.
Annual return: GSTR-9
GSTR-9 is an annual return that is required to be filed by all taxpayers registered under GST except those exempted under the GST law. The essentials of the GST annual return and GST audit statement are as follows:
- GSTR-9 primarily comprises details of all inward and outward supplies made under various tax heads and HSN codes during the year, along with tax liability, tax paid, and input tax credit availed.
- GSTR-9 is a consolidation of all the monthly and quarterly returns, like GSTR-1 and GSTR-3B, filed during the year.
- It is mandatory for registered persons whose turnover exceeds 2 crore rupees in a financial year to file the annual return in Form GSTR-9. For taxpayers whose annual turnover is up to 2 crore rupees in a financial year, it is optional to fileGSTR-9
- If the turnover is above a specified limit in a financial year, the registered persons are required to file GSTR-9C along with the annual return.
- The annual return in Form GSTR-9 as per the provisions of Section 44(1) and the audit reconciliation statement as per Section 44(2) are required to be filed by the taxpayers.
- A reconciliation statement is the reconciliation of data as per books of accounts and data as reported in GSTR-9.
The importance of reconciliation in GSTR-9
Normal taxpayers, including SEZ units and developers, whose aggregate turnover is above a specified threshold limit are required to file a reconciliation statement in Form GSTR-C during the particular financial year. The necessity of the reconciliation statement is due to the difference in methods of submission of returns and maintenance of books of account by businesses. reconciliations allow the GST authorities to verify the accuracy of the returns filed by the taxpayer.
The annual return is based on transactions reported during the year in various returns in which supplies of all types are required to be reported. But the books of accounts are maintained based on different principles. Because of this, there may be many transactions reflected in the annual return but not shown in the books of account, like trade discount, credit notes, unbilled revenue, etc. Therefore, reconciliation is necessary to identify the differences and the reasons for them.
Audits and reconciliations are compulsory for taxpayers whose turnover exceeds a prescribed limit. Such taxpayers are required to submit the reconciliation statement in Form GSTR-9C along with the annual return. Here we discuss in detail the auditing and certification requirements for GSTR-9C
GSTR-9 audit checklist
Some of the areas in which audit checks are conducted for levels of compliance are:
- Maintenance of books of account
- Details of supplies and time of supplies
- Value of the supplies
- Tax rate changes
- ITC, RCM, and refunds
- Laws, circulars, and clarifications
What is Form GSTR-9C?
Form GSTR-9C is a reconciliation statement that is required to be furnished along with the annual return by taxpayers whose aggregate turnover exceeds 5 crore rupees in a financial year. GSTR-9C is a statement of reconciliation between the annual returns in GSTR-9 and the audited financial statements of the taxpayer. The difference that accrues from the reconciliation is reported along with the reasons reported in this return and then certified. The certified statement must be filed for each GSTIN separately.
Amendments to mandatory requirements for GSTR-9C
The filing of annual returns by the specified taxpayers and the submission of GSTR-9C have been amended. In the amendments made to Sections 35 and 44 of the CGST Act, the mandatory requirement for certification by a chartered accountant or cost accountant was replaced with a reconciliation statement on a self-certification basis by taxpayers. Previously, all taxpayers with an aggregate turnover above 2 crore rupees had to file GSTR-9C. After the amendment of Rule 80(3) and Part-B of the CGST Rules, the threshold limit for annual aggregate turnover is five crore rupees for filing GSTR-9C.
The introduction of self-certification-based submission shifts the complete responsibility of ensuring strict compliance with the GST provisions to the taxpayer. This includes tax credits, tax payments, filing returns, and reconciliation with financials. This requires strong internal systems, reviews, and reconciliation mechanisms to stay compliant and avoid penal consequences due to non-compliance.
Pre-requisites for filing GSTR-9C
- The taxpayer should have registered in GST with a valid GSTIN
- The taxpayer must have filed all the periodical returns relevant to the financial year like GSTR-3B, GSTR-1 and GSTR-9
- The aggregate turnover of the registered person during the financial year must be above the threshold limit specified under GST.
- The accounts and statements of the taxpayers whose aggregate turnover exceeds the threshold limit must be audited as prescribed.
- GSTR-9C filing is enabled only after GSTR-9 has been successfully filed by the taxpayer.
Due-date for filing GSTR-9C
As per Section 44(1) of CGST 2017, every person registered under GST is required to file their annual return for the financial year on or before December 31, following the end of the financial year. The due date for filing GSTR-9C is also December 31st of the subsequent financial year, or as extended by the government.
Late fees on GSTR-9 and GSTR-9C
As per Central Tax Notification No. 7/2023 dated March 31, 2023, late fees for delayed filing of GSTR-9 and GSTR-9C have been reduced for taxpayers with an annual turnover of up to Rs. 20 crore in a financial year. Amnesty has been provided for non-filers for the financial years 2017-18 to 2021-22. The late fees for taxpayers with different aggregate turnovers are as follows:
Turnover up to 5 crores: Rs. 50 per day, subject to a maximum of 0.04% of turnover in the state or union territory
Turnover of 5 crore to 20 crore: Rs. 100/- per day, subject to a maximum of 0.04% of turnover in the state or union territory
Above 20 crores: Rs. 200 per day, subject to a maximum of 0.5% of turnover in state or union territory.
Amnesty for Previous financial years
As per a provision inserted in Notification No. 7/2023 dated March 31, 2023, the annual return, including the self-certified reconciliation statement by registered taxpayers with aggregate turnover up to 20 crore rupees, who have failed to file the returns for any of the financial years starting from 2017-18 to 2021-22, has been reduced to Rs. 20,000 if the returns are filed in the period starting from April 1st, 2023, to June 30th, 2023. There is no reduction in late fees for taxpayers with turnovers above 20 crore rupees. The current late fees are applicable to such taxpayers.
Penal provisions for non-filing or incorrect filings
Strict penal provisions, including prosecution against taxpayers, have been enacted for non-compliance such as incorrect tax filings, non-payment, short payment of tax, availing incorrect input tax credit, mismatch in reported data, etc. They are as follows:
- Cancellation and suspension of registration: For incorrect claims of input tax credit, significant mismatches between GSTR-1 and GSTR-3B, and violations of invoice-related provisions
- Penalty of 100% of the tax amount and imprisonment up to 5 years: For tax evasion, fake invoices and wrongful refunds
- Penalties up to tax amount: For incorrect tax invoice, suppression of turnover, short tax payments, etc.
Format of GSTR-9C
The reconciliation statement GSTR-9C is divided into five parts with a total of 17 tables. The structure of the statement is as follows:
Part I: Basic details
This part comprises the basic details like the financial year, GSTIN, legal name, trade name, and eligibility for audit under the act.
Part II: Reconciliation of turnover declared in audited annual financial statement with turnover declared in annual return GSTR-9
This part consists of the following tables:
- Table 5: This table includes a reconciliation of gross turnover.
- Table 6: This table contains reasons for an unreconciled difference in annual gross turnover.
- Table 7: This table comprises the reconciliation of taxable turnover.
- Table 8: This table consists of an unreconciled difference in taxable turnover.
Part III: Reconciliation of tax paid
- Table 9: This table pertains to the reconciliation of rate-wise liability and the amount payable thereon.
- Table 10: This table is for the reasons for the unreconciled payment of the amount.
- Table 11: This table reflects the additional amount payable but not paid due to reasons specified in tables 6, 8, and 10 above.
Part IV: Reconciliation of input tax credit (ITC)
- Table 12: This table comprises the Reconciliation of net Input Tax Credit (ITC)
- Table 13: This table is to report the reasons for the unreconciled difference in ITC
- Table 14: This table is for the reconciliation of ITC declared in the annual return (GSTR-9) with ITC availed on expenses as per the audited annual financial statement or books of accounts.
- Table 15: This table shows reasons for unreconciled differences in ITC.
- Table 16: This table reflects the tax payable on the unreconciled difference in ITC due to reasons specified in Tables 13 and 15 above.
Part V: Additional liability due to non-reconciliation
- Table 17: This table reflects the additional liability due to non-reconciliation.
Any additional liability can be declared and paid in this form through
GST DRC-03. The taxpayer has to select ‘reconciliation statement’ in the drop down provided in Form DRC-03.
Steps for compliance under GSTR-9C
Accurate filing of GSTR-9 and GSTR-9C is imperative to ensure compliance and avoid the penal consequences of non-compliance. Here are the steps for taxpayers to ensure compliance under GSTR-9 and GSTR-9C:
Regular reviews of GST compliances help in the timely identification of mismatches and corrections taken in real time with regard to payment of taxes, input tax credit, and other GST compliances, including the filing of returns.
Preparation of reconciliations:
Taxpayers must collect the data and be well prepared before hand so that accurate filing of GSTR-9 and GSTR-9C can be done. Self-certification casts accountability and responsibility on the taxpayer. So taxpayers must take adequate care to reconcile the annual return and file accurate details.
Audit by department:
The removal of audits by professionals will lead to increase in frequency of scrutiny and investigations by the GST authorities. So taxpayers must maintain proper records, documents, and returns. Taxpayers have to ensure diligence in following the rules and procedures to ensure compliance and avoid penalties and other legal consequences.
Auditing and certification requirements in GSTR-9 were introduced to avoid tax evasion and ensure compliance. As per the latest amendment, the mandatory requirement of the chartered accountant’s certificate for audit of accounts, statements, and returns is replaced and merged with GSTR-9. Now the annual return along with the reconciliation statement on a self-certification basis is required to be submitted. This places a high level of accountability and responsibility on the taxpayer. Therefore, the taxpayer must be well aware of the GST rules and regulations, record all financial transactions, maintain proper documents, and conduct reviews and reconciliations regularly. This way, discrepancies can be identified soon and rectified. Timely and accurate submission of GSTR-9 and GSTR-9C is very important for taxpayers registered under GST.
Frequently asked questions
Which documents must be submitted for audit under GSTR-9?
Answer: The important documents required to be submitted for audit under GSTR-9 are as follows:
- Annual return in Form GSTR-9
- Audited annual accounts
- Reconciliation statement in Form GSTR-9C
- Other information is as prescribed.
Is there an offline facility for filing Form GSTR-9C?
Answer: Yes, offline facilities for filing GSTR-9C are provided in the GST portal.
Can the liability computed during the audit be paid through ITC?
Answer: No. Any additional liability declared during the audit cannot be paid through ITC. It has to be paid through the electronic cash ledger through the Form GST DRC-03 provided while filing the returns.