[Opinion] Various Important Reconciliations under GST Annual Returns – GST Audit Series

[2022] 145 taxmann.com 626 (Article)

Introduction

In any accounting system, there is a need to see that all transactions are accounted completely, accurately and in a timely manner. Under GST, the need to capture the transactions which constitute a “supply” and exclude those which are not supply, is an added requirement. The eligibility of ITC is subject to prescribed conditions. There is a need to pay GST under reverse charge mechanism and then claim the ITC. Compliances like these would require a mandatory reconciliation exercise. The reconciliation statements would be useful for finalisation of books of account, filing of GSTR-9 and GSTR-9C. Various benefits for the auditee by having the reconciliation statements are as follows:

(a) Identification of the excess or short payment of taxes
(b) Identification of missed out or duplicated credits
(c) Identification of wrong type of credits claimed such as CGST/ SGST claimed as IGST or vice versa
(d) Identification of expenses on which GST under RCM not paid or excess paid
(e) Ensuring satisfaction of condition of suppliers compliance to claim input tax credit.
(f) Increase in confidence of the department and statutory auditors with good systems such reconciliation
(g) Facilitates smooth filing of GST annual return and self-certification
(h) Ensures that export benefits are not missed out.

The above are only indicative benefits. There are many more. With the advent of technology, it is possible for the auditee to prepare the reconciliation much faster and with more efficiency involving lesser time. Few reconciliation statements which would be useful for regular GST compliance and filing of Form 9 & 9C are discussed hereunder:

Reconciliation of supply (after considering the returns) on which output tax is payable

In this outwards supply (simple) reconciliation, the interpretation of few aspects required for arriving at the due taxes have not been considered. Some of them are enumerated hereunder:

• Incorrect exemption or incorrect classification leading to no GST payment.
• Incorrect rate adopted leading to short/excess payment of taxes.
• Application of concept of composite, non-composite, or mixed supply
• Whether the IGST or CGST and SGST should have been charged?
• The need to apply the proper valuation under Section 15.

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