GST has undoubtedly changed the face of indirect taxation in India since its launch in 2017. But while GST does help simplify taxation for businesses, it is still complicated in terms of compliance; a business must regularly file many returns and forms. Filing the Annual GST Audit Form (GSTR 9C) is crucial to compliance.
As a finance head, GSTR 9C compliance is directly your responsibility. Especially now, with the FY 2020-21 self-certification requirements, you are responsible for accuracy and deadlines. So you’re the Finance Head and want to ensure GSTR 9C compliance runs smoothly? Here is everything we gather for you in this blog. Let’s get right into it!
Understanding GSTR 9C
The GSTR 9C is an annual reconciliation statement between the returns filed under GST and audited financial sources. Taxpayers whose aggregate annual turnover for a financial year exceeds ₹5 crore shall file GSTR-9C and the form of return GSRTR-9.
In plain words, GSTR 9C verifies the values reported in your monthly returns against those already entered into accounts based on books of account. This reconciliation assures compliant taxation and accurately closes any holes in reporting.
Key Details in GSTR 9C
As a finance head involved in GSTR 9C filing, you need clarity on what it entails. Here are the key details:
- Reconciliation of Taxable Turnover: Comparing turnover details reported in GSTR 9 with audited financial statements
- Reconciliation of Tax Liability: Matching net tax liability across GST returns and financial records
- Reconciliation of Input Tax Credit: Ensuring ITC claims match with audited financial expense heads
- Reporting Additional Liability: Disclosing any additional taxes if reconciliation differences require it
- Certification by Finance Head: Self-certifying that GSTR 9C is accurate and complete
Who Needs to File GSTR 9C?
While GSTR 9 is meant for all normal taxpayers, GSTR 9C requirements are specifically for those meeting the following eligibility:
Turnover Threshold: Any business with an aggregate annual turnover exceeding ₹5 crores in a financial year needs GSTR 9C reconciliation and certification. This turnover includes taxable supplies, exempt supplies, exports, and inter-state supplies.
Other Taxpayers: Apart from meeting the above turnover threshold, GSTR 9C must be filed by taxpayers registered as:
- The regular taxpayer under the GST
- SEZ developer/units
- Casual taxable person (if turnover > ₹5 crores)
The following taxpayers are not required to file GSTR 9C despite high turnovers:
- Input Service Distributors (ISDs)
- Composition dealers
- Non-resident taxable persons
- Persons deducting TDS under GST
- Suppliers of Online Information Database Access and Retrieval (OIDAR) services
The eligibility criteria clearly state that GSTR 9C is primarily for large, compliant taxpayers. As finance heads of such entities, you must ensure preparedness for this key reconciliation statement well in time.
Key Changes in GSTR 9C after Self-Certification
Historically, GSTR 9C filing mandated certification from a practising Chartered Accountant (CA) or Cost Accountant (CMA). However, the 43rd GST Council meeting in May 2021 brought two major changes:
- Removal of Mandatory Audit: Certification by an auditor/CA is no longer required
- Introduction of Self-Certification: The taxpayer self-certifies compliance by the Director/Authorized Signatory
The government notified these changes via Notification No. 29/2021, dated 30th July 2021. Consequently, Finance Heads now self-certify GSTR 9C from FY 2020-21 onwards.
Let’s understand the impact of this transition to self-certification.
Impact of GSTR 9C Self-Certification
Self-certification increases the responsibilities and risk exposure of finance heads compared to third-party audits. Here are the significant implications:
- Increased Accountability: The onus of accuracy and compliance now falls directly on the taxpayer and finance head certifying GSTR 9C. There is no external validation buffer.
- Higher Penalty Risks: Since taxpayers self-assess compliance, errors or gaps can readily attract penalties upwards of 50% under Section 74.
- Greater Scrutiny: Department officials can quickly question or audit a self-certified GSTR 9C instead of an externally certified one.
- Departments can invoke up to 5 years for assessing past period liabilities compared to 3 years earlier.
Finance heads sign up for tremendous accountability, compliance rigour and risks with self-certification. The next section covers specific roles and responsibilities coming your way.
Role and Responsibilities of Finance Heads
As GSTR 9C directly reconciles financial statements with GST returns, finance heads, and CFOs have clear obligations for smooth compliance:
- Ensure Strong Grasp of GST Compliance Requirements: Keep up-to-date with the latest compliance updates across returns, reconciliations, registrations, payments, refunds, notices, and more. Gaps can prove costly.
- Spearhead Reconciliation Efforts: As GSTR 9C bridges your company’s financial performance and tax compliance, you must steer reconciliation seamlessly. Gather data, spot gaps, and address mismatches through appropriate accounting adjustments.
- Liaise Smoothly with Tax Team: Work closely with your tax team to share financial performance data, discuss adjustments, clarify revenue recognition aspects, and ensure accurate tax compliance across GST and Income Tax.
- Guide Auditors and Accountants: Collaborate with internal/external auditors to certify accurate financial statements before GSTR 9C reconciliation.
- Certify Accurate Compliance: With self-certification upon you, ensure all facets of GSTR 9C meet compliance needs before self-certifying.
As your company’s financial integrity and growth custodian, GSTR 9C compliance now directly hinges on your prudence and proficiency. Perform this responsibility meticulously.
Let’s now break down the compliance process into clear, actionable steps.
Step-by-Step Process to File GSTR 9C
The GSTR 9C process can be broken into 3 stages:
- Preparing reconciliation statement
- Uploading reconciliation data on the GST portal
- Self-certifying filed details
Here is an in-depth, step-by-step process for finance heads:
I. Prepare Reconciliation Statement
- Collating Financial Performance Data Gather audited financial statements and all schedules for the relevant financial year. This is your primary data source revealing revenues, expenses, taxes paid, and input credits claimed at a company level.
Further, gather supplementary data like trial balance sheets for the financial year, reconciliation statements between 3B returns and financial statements, and other worksheets supporting GST compliances.
- Segregating Entity-Wide Information GSTIN wise Typically, financial statements capture company-wide performance spanning multiple GST registrations applicable State-wise or business vertical-wise.
However, GSTR 9C reconciliation must be undertaken at individual GSTIN level for all registrations with turnover exceeding ₹5 crores.
Therefore, you need to slice and dice the entity-wide financial performance to carve out GSTIN-specific data sets based on variance analyses and cost allocation drivers.
This facilitates like-to-like comparison with GST returns during reconciliation.
- Mapping GST Return Data Next, you must collate all GST returns filed for the financial year – primarily GSTR 1 outward supplies and GSTR 3B tax liability returns.
Download both returns from the portal using login credentials to create tax performance data sets for reconciliation with financial records.
- Identifying Differences through GSTR 9C Data Comparison With financial statements and GST returns data on hand, map comparisons to identify discrepancies across key reconciliation areas:
- Turnover levels
- Tax liability submissions
- Input tax credits claimed
Gather supporting documents and work papers to ascertain the correct data and potential accounting adjustments required for differences identified.
For instance, input tax credit reconciliations often compare ITC claimed in returns with ITC available in GSTR 2A purchase registers and invoices.
- Making Appropriate Accounting Adjustments To address identified data gaps between GST returns and financial statements, accountants may suggest appropriate accounting adjustments.
Common examples include:
- Creating reconciliation ledgers for unreconciled input credits
- Passing adjustment journal entries to modify financial statement tax expenses
- Booking unreconciled taxes as statutory liabilities through journal entries
- Accounting for timing differences in revenue/expense recognition across GST returns and financial statements.
Assess implications, validate with cross-functional teams and formalise fit-for-purpose adjustments for addressing reconciliation differences.
- Populating Data Summary Sheet With data reconciliation and adjustments complete, populate the reconciliation statement summary datasheet.
GSTR 9C essentially summarises 4 key reconciliation aspects in a prescribed format:
- Reconciliation of Turnover
- Reconciliation of Tax Paid
- Reconciliation of Input Tax Credit
- Additional Liability Calculation
Aggregate the totals and comparisons between GST and financial data into prescribed Excel-based offline utility form tables.
- Finalising GSTR 9C Data Sheet Before finalizing data, rigorously validate information captured in the reconciliation statement from the following lens:
- Arithmetic accuracy of auto-calculated fields
- Data consistency across multiple tables
- No erroneous data or formulas
- Numbers represented in INR Lakhs
On validation, finalise the reconciliation statement for auditors’ review and verification. Collate all supporting documents regarding data sources, adjustments, work papers, and assumptions considered.
Also Read:
Reconciliation Of Turnover And Tax Liability In GSTR-9
GST Return Filing-Types Of Returns And Process Of Filing
II. Uploading Reconciliation Data on the Portal
With the final GSTR 9C reconciliation statement ready, finance heads must now upload return information on the GST portal for official filing. Follow the below steps:
- Converting Data into JSON Format
The portal only accepts return data uploads in JSON format. So, you first need to convert the finalised reconciliation sheet data into a JSON file. Using inbuilt file conversion functionality, you can use the GSTR 9C offline utility tool to generate a JSON file from a summary sheet.
- Uploading JSON File Access GST portal using login credentials and navigate to Services > Returns > Annual Return > GSTR9C tile.
On the tile, select the Financial Year period for which reconciliation is done. Click the ‘Prepare Online’ option. Select the ‘Upload JSON’ button on the next screen to browse and upload the recently generated GSTR 9C JSON file. Post successful upload, the portal will process and validate reconciliation statement data.
- Rectifying Upload Errors Sometimes, the portal may display processing errors on uploaded JSON files. Common errors include incorrect file format, data inaccuracies, numerical inconsistencies, etc.
Download the error report, analyse the reasons, and rectify issues. Generate a clean JSON file again and re-upload till errors are resolved.
III. Self-Certifying Filed Details
- Reviewing Filed Details: After a successful upload, the portal makes complete GSTR 9C data visible to you in a readable form. Review values across all reconciliation tables thoroughly. Cross-check if all aggregate figures and comparisons have come accurately per your prepared summary sheet. A download facility is available.
- Making Any Further Changes In case any last-minute changes are required, you can edit reconciliation data even post-file processing. Simply download the earlier uploaded JSON file. Make amendments using the utility tool and upload revised JSON for refreshed data submission.
- Authorizing as a Director Finally, authorize the GSTR 9C to return as a Director against your DIN, just like any other compliance certification. You can instantly e-verify using Aadhaar OTP or EVC if you have pre-registered these modes on the portal. Alternatively, authorize return at a later date using DSC when ready. This completes GSTR 9C filing formalities.
Challenges and Common Mistakes in GSTR 9C Compliance
Despite the step-by-step approach to filing, GSTR 9C throws up real-world challenges and mistakes, prolonging reconciliation and certification. Being forewarned will help you plan suitably.
The top challenges faced by finance heads include:
- Large pan-India companies with 1000+ GST registrations have to collate, map, and reconcile humongous volumes of financial data entity-wise. Managing data seamlessly becomes the prime pain point.
- Reconciliation rigor warrants invoice-level scrutiny, often not readily available through basic financial statements. Granularity gaps lead to adjustment challenges.
- Shortage of time and reconciliation skills crunches near year closing, and a lack of expertise in GST reconciliation principles hinder the depth of reconciliations.
- Finance, operations, and tax teams often work in silos leading to communication gaps. Further, dispersed teams make timely data sharing challenging, prolonging GSTR 9C timelines.
- Delayed sign-offs on financial statements and tax provisions by auditors hampers the finance team’s commencement of GSTR 9C activities, affecting timeliness.
- Delayed processing of amendments filed across regular GST returns delays the finalization of correct GST liability numbers for reconciliation.
- Frequent changes in reconciliation statement filing forms year-on-year complicate version control needs. Also, regular amendments in compliance must make upskilling continually challenging, impacting filing readiness.
In addition to the common challenges, there are mistakes, too.
- Not filing on time leads to penalties
- Reporting data for months before GST launch (April-June 2017)
- Not filing separate GSTR-9 for each State if operating in multiple states
- A mismatch between data reported in monthly/quarterly returns and annual return
- Lack of documentation proof for information reported
- Not segregating data fields like HSN codes, input tax credits
- Not getting audited if turnover above INR 2 crores
- Not filing nil return even if no transactions
- Not disclosing unreported differential tax liabilities from books
- Inaccurate reconciliation before filing leads to future demands
Considering the above challenges and mistakes, what best practices can finance heads adopt for smooth GSTR 9C compliance? Let’s explore ten key suggestions.
Best Practices for Finance Heads
The secret sauce for mastering timely and accurate GSTR 9C compliances lies in the following:
- Committing additional capacity upfront
- Streamlining inter-departmental coordination
Adopting reconciliation enablers or tools - Building compliance knowledge continually
Here are ten specific recommendations:
- Plan Reconciliation Prep Early Start collating financial data for reconciliation at least 6 months before due timelines. Avoid last-minute rushes, given the scale of activities.
- Assign Exclusive Teams Have dedicated teams across finance and accounts just focusing on GSTR 9C compliances for rigorous reconciliation over 2-3 months.
- Set up a Centralised Data Repository Build a centralized data warehouse collating financial records, tax filings, returns, masters, and all allied reconciliation data in one place for easy access.
- Ensure Multi-Department Coordination Involve tax teams, operations, and auditors regularly in reconciliation reviews through Centre of Excellence teams rather than just year-end touchpoints.
- Create Robust Accounting Guidelines Evolve clear accounting guidelines for standardising financial adjustments to address common reconciliation differences. Remove subjectivity and enhance process efficiency.
- Use Technology Enablers Extensively Deploy GST SaaS tools, hugely minimizing manual efforts in data exchange, validations, and certifications through process automation.
- Adopt a Distributed Review Mechanism. Encourage distributed and peer reviews of draft reconciliation statements before finalization for more comprehensive validation coverage.
- Maintain Detailed Documentation Keep copies of key documents like audit reports, financial statements, accounting adjustment entries, liability provision calculations, etc, handy to address reconciliation queries anytime.
- Stay updated on the latest compliance amendments in reconciliation statement filing to avoid rejection of uploaded statements or inquiries later.
- Make GSTR 9C reconciliation statement reviews a self-learning tool for finance teams testing financial accounting and tax proficiency.
The above recommendations will go a long way in overcoming identified challenges for you as a Finance Head.
Conclusion
We hope this guide helped you grasp GSTR 9C self-certification nitty-gritty end-to-end as a finance head – from conceptual understanding to real-world filing process to best practices.
With self-certification in place, your role becomes central, and compliance rigor is paramount in safeguarding organizational risks and reputes effectively. Commit additional bandwidth, streamline processes, and deploy tools effectively.
If key concerns around managing high data volumes, minimizing manual interventions, or lowering compliance risk exposure still plague you; it may be wise to evaluate software solutions that help you file accurately within timelines year after year.
Also Read: How To File GSTR 9C Offline Utility – General Issues Faced And How To Solve Them
FAQs
1. What is GSTR 9C?
GSTR 9C is an annual reconciliation between GST returns and audited financial statements for taxpayers with turnover over Rs. 5 crores.
2. Who needs to file GSTR 9C?
Taxpayers registered as regular dealers having annual aggregate turnover over Rs. 5 crores must file GSTR 9C.
3. What are the key changes in GSTR 9C from FY 2020-21?
The key changes are the removal of mandatory audit certification and the introduction of self-certification by the authorized signatory.
4. What additional obligations does self-certification place?
Self-certification increases accountability, penalty risks, and scrutiny possibilities on the taxpayers directly.
5. What are the key focus areas for reconciliation in GSTR 9C?
Key areas are turnover reconciliation, tax liability, and input tax credits between GST returns and financial statements.
6. What are the main challenges in GSTR 9C filing?
The main challenges are managing high data volumes, lack of invoice-level details, coordination issues across teams, and frequent procedural changes.
7. What are the best practices finance heads must adopt?
Best practices include detailed planning, usage of tech tools, maintaining documentation, coordination across teams, distributed reviews, and focus on continual GST understanding.
8. How do you generate a JSON file for GSTR 9C?
The JSON file can be generated using the offline Excel utility before uploading it to the GST portal.
9. Can amendments be made to GSTR 9C after the initial upload?
Yes, amendments are allowed by downloading earlier submitted JSON files, making changes, and uploading them afresh.
10. How do you authorize a filed GSTR 9C to return?
Filed returns can be authorized on the GST portal through digital signatures or Aadhaar-based e-verification modes.
