Analysis of recent clarification on GST Annual returns and Reconciliation statement

Table summarizing disclosures relating to debit note (DN) and credit note (CN) in various scenarios

S.No	Document type	Document dated	Reported in GSTR1/3B	To be Reported in GSTR 9 at	To be Reported in GSTR 9C at
1	CN	F.Y. 2017-18	F.Y. 2017-18	B2C- Table 4A B2B- Table 4I
2		F.Y. 2017-18	F.Y. 2018-19	Table 11
3		F.Y. 2018-19 pertaining to supplies  of F.Y. 2017-18 (Provision made in BoA in 2017-18)	F.Y. 2018-19	Table 11	FY 17-18 - Table 5E if impact not considered in Table 5A.
4		F.Y. 2018-19 pertaining to supplies  of F.Y. 2017-18 (Accounted in BoA in 2018-19)	F.Y. 2018-19	Will not appear in GSTR-9 of FY 2017-18. Will become part of GSTR-9 of F.Y 2018-19 in Table 4I.	Will not appear in GSTR-9C of FY 2017-18. Will become part of table 5A in GSTR-9C of F.Y. 2018-19.
5	Financial CN	F.Y. 2017-18	NA	NA	Table 5J - if impact not considered in Table 5A.
6		F.Y. 2018-19 but provision made in F.Y.2017-18	NA	NA	Table 5J - if impact not considered in Table 5A.
7		F.Y. 2018-19 but booked in F.Y.2018-19	NA	NA	Table 5J of GSTR-9C 2018-19
8	DN	F.Y. 2017-18	F.Y. 2017-18	B2C- Table 4A B2B- Table 4J
9		F.Y. 2017-18	F.Y. 2018-19	Table 10
10		F.Y. 2018-19 relating to supply of F.Y.2017-18 and provisioned in BoA in F.Y.2017-18	F.Y. 2018-19	Table 10	Table 5O if impact not considered in Table 5A.
11		F.Y. 2018-19 relating to supply of F.Y.2017-18 and  accounted in BoA in 2018-19	F.Y. 2018-19	Will become part of GSTR-9 of F.Y.2018-19 table 4J.	Will become part of GSTR-9C of  F.Y. 2018-19 in table 5A

difference to be explained in GSTR-9C. This clarification does not seem to be in line with the basic premise/ structure in which the information is demanded in the forms.. In case of RCM, even though the entry of expenditure relating is recorded in the FY 17-18, still it states that the details of taxes paid under RCM in FY 18-19 needs to be disclosed in the Annual returns to be filed in FY 18-19 even though the transaction pertains to FY 17-18. One must note that exactly opposite stand is taken for disclosure of details of outward supplies, wherein the details of taxes paid in FY 18-19 are reported in table 10 of Part V of the same annual return. This revised understanding of the disclosure mechanism would lead to unnecessary reconciliation differences, although it is clarified to report the differences in GSTR 9C with reasons.
H	Role of chartered accountant or a cost accountant in certifying reconciliation statement: There are apprehensions that the chartered accountant or cost accountant may go beyond the books of account in their recommendations under FORM GSTR-9C. The GST Act is clear in this regard. With respect to the reconciliation statement, their role is limited to reconciling the values declared in annual return (FORM GSTR-9) with the audited annual accounts of the taxpayer.	Post issue of this press release, there has been tremendous confusion as to the scope of the scope of auditor w.r.t to the submission of the reconciliation statement and certification of the same. In order to understand the scope, following possible situations to be considered: Possibility 1: Whether scope of auditor is to merely reconcile the number as per audited financial statement with the annual return? Possibility 2: Whether auditor has to legally validate the transactions contained in the books of account i.e. taxability, ITC eligibility, rate of tax etc. or merely proceed based on the tax treatment as per books of account? Possibility 3: Whether auditor is required to look beyond the books of account also i.e. to identify the transactions of deemed supply, cross charge, clandestine removal, bogus billings etc.? It has been clarified that the scope of auditor is to reconcile the value declared in the books of account with the GSTR-9. This indicates that the scope of auditor is as per possibility 1 explained above. However, in view of the authors, the scope of auditor cannot be confined to merely reconciliation as the term 'Audit' has a wide connotation under GST Act and while signing auditor is expected to acknowledge the declaration of details to be 'true and correct'. Therefore, if any non-compliance comes to the knowledge of the auditor in the course of performance of the reconciliation and the auditor come across any instances where ITC has been taken wrongly or tax has not been charged on the transactions appearing in the books of account, then it should report the same in GSTR-9C. Further, the press release does not specifically state to restrict or limit the scope of the auditors to be merely a reconciliation exercise, it however provides a major relief in as much as auditor is not required to look beyond books of account to identify and report the instances of non-compliance by auditee.
I	Turnover for eligibility of filing of reconciliation statement: It may be noted that the aggregate turnover i.e. the turnover of all the registrations having the same Permanent Account Number is to be used for determining the requirement of filing of reconciliation statement. Therefore, if there are two registrations in two different States on the same PAN, say State A (with turnover of Rs. 1.2 Crore) and State B (with turnover of Rs.. 1 Crore) they are both required to file reconciliation statements individually for their registrations since their aggregate turnover is greater than Rs. 2 Crore. The aggregate turnover for this purpose shall be reckoned for the period July, 2017 to March, 2018.	This was a much needed clarification whereby only the turnover from Jul '17 to Mar '18 would have to be considered for ascertaining whether the taxpayer has crossed the Rs. 2 crore aggregate turnover limit, requiring him to file GSTR-9C along with the audited financial statements. However, an exactly opposite view was taken by GSTN in a recently issued FAQ's wherein it was stated that the period of full financial year Apr'17 to Mar'18 must be considered for calculating the turnover limit of Rs. 2 Crore. However, in view of authors, since now the same is being clarified otherwise by the policy wing i.e. CBIC, therefore one may restrict the period of only Jul'17 to Mar'18 for computing the limit of Rs. 2 Crores. Further, aggregate turnover has to be seen at the PAN level.
J	Treatment of Credit Notes / Debit Notes issued during FY 2018-19 for FY 2017-18: It  may    be noted that no credit note which has a tax implication can be issued after the month of September 2018 for any supply pertaining to FY 2017-18; a financial/commercial credit note can, however, be issued. If the credit or debit note for any supply was issued and declared in returns of FY 2018-19 and the provision for the same has been made in the books of accounts for FY 2017-18, the same shall be declared in Pt. V of the annual return. Many taxpayers have also represented that there is no provision in Pt. II of the reconciliation statement for adjustment in turnover in lieu of debit notes issued during FY 2018-19 although provision for the same was made in the books of accounts for FY 2017-18. In such cases, they may adjust the same in Table 5O of the reconciliation statement in FORM GSTR-9C.	There were confusions as to the treatment of credit notes in the GSTR-9 and GSTR-9C. The clarification is a welcome to remove the ambiguity. For ease of reference and understanding, various scenarios of credit notes and debit notes are being explained in the tabular form below.
K	Duplication of information in Table 6B and 6H: Many taxpayers have represented about duplication of information in Table 6B and 6H of the annual return. It may be noted that the label in Table 6H clearly states that information declared in Table 6H is exclusive of Table 6B. Therefore, information of such input tax credit is to be declared in one of the rows only.	It has been clarified that the reclaim of credit reversed due to non-payment within 180 days will appear only once, either in table 6B or 6H.
L	Reconciliation of input tax credit availed on expenses: Table 14 of the reconciliation statement calls for reconciliation of input tax credit availed on expenses with input tax credit declared in the annual return. It may be noted that only those expenses are to be reconciled where input tax credit has been availed. Further, the list of expenses given in Table 14 is a representative list of heads under which input tax credit may have been availed. The taxpayer has the option to add any head of expenses.	It stated that reconciliation is required only w.r.t. expenses where ITC has been availed. Though there is lack of clarity whether the ITC has to be reconciled or the value of expense as per books and ITC ledger has to be reconciled. In our considered view it seems logical to reconcile the ITC, as reconciliation of the expense will not serve any purpose and will lead to no meaningful conclusions. Thereby, the auditor can reconcile the ITC availed as per books and that as per the annual return and disclose the expense figure as appearing in the ITC ledger as per the BoA.