GSTR 9C: Reconciliation of Turnover Declared in Audited Annual Financial Statement

What details are required to be furnished in part II of GSTR 9C? 

Part II consists of reconciliation of the annual turnover declared in the audited Annual Financial Statement with the turnover as declared in the Annual Return furnished in FORM GSTR-9 for this GSTIN. Part II comprises 4 clauses namely Clause 5, Clause 6, Clause 7, and Clause 8.

How to furnish the details in clause 5 of GSTR 9C?

Clause 5 deals with the reconciliation of gross turnover. It has in total 16 sub-clauses.

How reconciliation of gross turnover is done? 

How to furnish the details in clause 5A of GSTR 9C? 

CLAUSE 5A: Turnover (including exports) as per audited financial statements for the State/UT (For multi-GSTIN units under same PAN the turnover shall be derived from the audited Annual Financial Statement)

Details to be included: 

1. 1. Turnover (including exports) as per audited financial statements FOR the State/UT.
   2. In the case of entity having multiple GSTIN units under same PAN, the turnover for the State/UT shall be derived from the audited Annual Financial Statement.
   3. It is worthwhile to note that ‘Turnover in State/Union Territory’ has been defined in section 2(112) of the GST Act, 2017, which is not be taken for the purpose of Clause 5A as because the base for reconciliation is made the turnover as reported in the annual financial statements.
   4. In simple words, GSTIN-wise turnover has to be segregated from the turnover reported in the audited Financial Statements. Prima facie, it appears that Profit and Loss Account does not re-flect the turnover GSTIN was, therefore, it has been clarified in the instructions that the reference to audited Annual Financial Statement includes reference to BOOKS OF ACCOUNT in case of persons/entities having presence over multiple States.

Important points to remember:

* Annual Financial Statements constitutes of four elements namely Profit & Loss account, Balance Sheet, Cash Flow Statement and Notes to Accounts.

Illustration :

ABC & Co. has 5 GSTIN. In both the cases mentioned below, GST Audit is required.

Situation 1 : Aggregate turnover exceeds INR 2 cr. but turnover of eachGSTIN is upto INR 2 Cr.

Situation 2 : Turnover of one GSTIN exceed INR 2 Cr. & another GSTINis upto INR 2 cr.

How to furnish the details in clause 5B of GSTR 9C? 

CLAUSE 5B: Unbilled revenue at the beginning of Financial Year

Meaning of unbilled revenue: 

1. There may be instances where the entity recognizes the revenue in respect of supply of goods and/or services in the books of account on the accrual basis based on the applicable accounting standards against which no invoice has been issued by the closing of the last financial year.
2. These type of revenues are popularly termed as ‘unbilled revenue’.
3. For instance, in respect of FY 2016-17, the closing balance of unbilled revenue stands at INR 5 crores. This means that INR 5 crores is the part of the turnover for the FY 2016-17 of the entity.
4. Certainly, sooner or later invoices against these unbilled revenues has to be issued by the entity.
5. So, once the invoices will be issued on which GST is payable then such unbilled revenue has to be adjusted from the Turnover which is required to be shown in Clause 5A of GSTR 9C.
6. It is worthwhile to note that since the invoice has been issued in the current FY 2017-18 it will be reflected in the annual return of FY 2017-18, however, on the contrary, as per the audited Financial Statements, these unbilled revenues were duly accounted in the last FY 2016-17 only, therefore, there will be outright mis-match in the Financial Statement Turnover vis-à-vis GST Returns turnover.
7. Hence, in order to reconcile, the amount of invoices on which GST has been paid in current FY shall be duly added in the Turnover shown in Clause 5A as because the turnover shown in the financial statements for the period FY 2017-18 does not take into account the unbilled revenue which is already shown in the turnover of the FY 2016-17.
8. In the instant case , if invoices of INR 5 crores has been issued on which GST is paid in regard to unbilled revenue at the beginning of the Financial year, then an amount of INR 5 crores shall be added in the turnover.
9. In cases of telecom industry, annual maintenance contract (AMC), insurance, etc. it is often seen that the billing cycle is of 2-3 months wherein it is certain that during the closing of the Financial Year, revenues are booked at the end of the financial year as unbilled revenue in the books of account against which the invoices is issued in the next financial year.
10. Reference can be made to Accounting Standard 9 0r Ind AS 18.

Related Articles:

• GST Audit Checklist
• Types of GST Audit
• What is the purpose of GSTR 1, GSTR 2 & GSTR 3
• Form GSTR 9