WORKING FOR GST ANNUAL RETURN
GST Laws makes provisions for Annual Return and Reconciliation Statement. These are
required to be filed for each Financial Year (April – March) by 31 st December of next Financial Year. In its continued endeavour to reduce the burden on small taxpayers, the government has removed GST Audit and exempted GST-registered taxpayers with annual aggregate turnover up to Rs.2 crore in FY 20-21 from filing Form GSTR-9.
This article is an attempt to discuss the GST Annual Return Preparations as certain details
require for filing the same:
1. Purchase, Sales & ITC breakup needed
2. Reconciliation Statements [Audited Annual Financial Statements vs Annual Return (GSTR-
9)]
3. Reconciliation of Input Tax Credit
4. Reconciliation of Revenue, Tax & Other Items
5. Related Party Disclosure
6. Maintenance of Books of Accounts
1. PURCHASES, SALES & ITC BREAKUP NEEDED
The GST annual return and audit require the following bifurcated details of sales/purchases:
1.1. BREAKUP OF PURCHASES & ITC DETAILS
Inward supplies (other than those liable to reverse charge) - Input, Capital Goods and Input
services.
Inward supplies received from unregistered persons (liable to reverse charge) - Input, Capital
Goods and Input services.
Inward supplies received from registered persons (liable to reverse charge) - Input, Capital
Goods and Input services,
Import of goods- Inputs, Capital goods and Import of services; ITC breakup - Input, Capital
Goods and Input services,
ITC under reverse charge breakup - registered and unregistered persons and imports, HSN
wise summary of inward supplies,
Summary of ineligible ITC
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1.2. SALES DETAILS
Outward supplies- unregistered persons (B2C), Registered Persons (B2B) and Zero rated
supply (Export) on payment of tax.
Outward supplies (on which tax is not payable) - exempted, nil rated and Non-GST supply.
1.3. OTHER DETAILS
Other details required include -
Deemed exports,
SEZ supplies,
Credit notes/debit notes issued in respect of B2B supplies.
2. RECONCILIATION STATEMENTS [AUDITED ANNUAL FINANCIAL STATEMENTS VS
ANNUAL RETURN (GSTR-9)]
Usually the Audited Financial statements are prepared at PAN India level i.e. consolidated.
On the other hand, for reconciliation, GSTIN wise breakup is required i.e. state-wise in which
the entity is registered. Therefore, it is suggested to maintain the break-up of the audited
financial statement from beginning itself at GSTIN level for preparing such reconciliation (and
for reporting in GSTR-9C too).
The following reconciliations should be carried out for reporting of correct values and making
them in consonance with each other:
Values as declared in invoices and those declared in books of accounts.
Values declared in books of accounts and that declared in GSTR 3B
Values declared in books of accounts and values as per GSTR 1
Values declared in GSTR 3B and that declared in GSTR 1
2.1. RECONCILIATION OF TURNOVER
Some of the major differences which will be helpful in making such reconciliations between sale value as per books of accounts and value reported in GST returns are as follows:
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Inter-state stock transfer is treated as an outward supply under GST even though it is not
shown as a sale transaction as per the books of accounts.
Recovery from employees is treated as an outward supply under GST even though it is not a sale transaction as per the books of accounts.
In many cases, companies are charging GST on free samples/FOC supply which is not
reported as sale in the books of accounts.
Any amount recovered from vendor on account of penalty is treated as outward supply
under GST even though it is not a sale transaction as per the books of accounts.
2.2. RECONCILIATION OF TAX PAID
GST rate-wise reporting of the tax liability that arose in FY 2020-21 as per the accounts and paid as reported in the GSTR-9 respectively with the differences thereof needs to be prepared. In case,
an additional liability is identified, the taxpayers shall state the additional liability due to
unreconciled differences noticed upon reconciliation.
3. RECONCILIATION OF INPUT TAX CREDIT
A reconciliation of Input Tax Credit (ITC) availed and utilised by taxpayers as reported in
GSTR-9 and as reported in the Audited Financial Statement need to be prepared.
Further, it needs a reporting of expenses booked as per the Audited Accounts, with a breakup of eligible and ineligible ITC and reconciliation of the eligible ITC with that amount claimed as per GSTR-9.
Following is tentative list of things needed to be checked with respect to ITC
ITC availed should be in line with invoices received from vendors like Bill of entry, tax
invoice, debit note, self-invoice, ISD Invoice. The same should be as per the entries in
Inward supplies records as well.
Inward supplies records should be in line with the Monthly return and reconciliations can be
prepared periodically (in case of variations).
ITC should not be taken on restricted ITC items as per the GST law.
Tax collections should reconcile with payments Set-off of tax adjustments should be
correctly done with relevant journal entries.
ITC should be reversed in case of sale of capital goods as specified in GST law.
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Reversal of ITC for the goods sent for job work. The recipient of supply should affect the
payment for such inward supply within 180 days from the date of Invoice. Else, ITC needs to
be reversed.
ITC availed should be debited to recoverable account for availing re-credit.
The supplier should not avail the benefits of depreciation and input tax credit together as
per GST law.
The documents (tax invoice/ debit note) on the basis on which ITC is claimed should contain the mandatory details of the recipient such as Name, GSTIN, Address and all other
particulars as prescribed.
ITC should be reversed against the receipt of Credit Note.
ITC should be bifurcated into eligible, ineligible, blocked and common credits.
The common credits should be reversed as per rule 42 of the CGST Rules.
Reconciliation of ITC between GSTR 3B and GSTR 2A should be done regularly.
Transitional Credit should be availed as per the provisions of the law.
Any ineligible transitional credit should be reversed as per the law.
Reversal of ITC should be done in case of a change in the scheme from composition to Regular.
4. RECONCILIATION OF REVENUE, TAX & OTHER ITEMS
4.1. SUPPLIES WITHOUT CONSIDERATION
As per Schedule 1 of the CGST Act- GST is leviable on certain transactions even if such
transactions are made without consideration like disposal of business assets, supplies to related parties, etc.
Under Ind AS-115* transactions without any consideration does not form a part of the financial
statements and would be a treated as non-balance sheet items/off balance sheet items and the treatment depends on the economic substance of the transactions.
* Indian Accounting Standard (Ind AS) 115, Revenue from Contracts with Customers
4.2. AGENT PRINCIPAL TRANSACTIONS
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Supplies on behalf of the principal are not reflected in the financial statements of the agent. Only commission is shown as the revenue of the agent. Under the GST Law, such turnover would be treated as part of the agent's turnover.
4.3. POST-SALES DISCOUNTS
Post-sale discount offered to customers in the form of a financial credit note is not subject to
GST and not reduced from turnover for GST purpose.
For accounting purpose, such discounts are reported as discounts in the financial statements.
4.4. GOVERNMENTAL GRANTS
As per Accounting Standards, governmental grants are assistance provided by the Government in cash or kind to an entity for past or future compliance with certain conditions. An appropriate amount in respect of such earned benefits, estimated on a prudent basis, is to be credited to income for the year, even though the actual amount of such benefits may be finally settled and received after the end of the relevant accounting period.
On the other hand, under the GST Laws, as per sec 15(2) (e) of the CGST Act "the value of supply shall include subsidies directly linked to the price excluding subsidies provided by the Central Government and State Governments". Therefore, governmental grants are not treated as revenue for the purpose of GST.
4.5. GOODS SENT FOR JOB WORK
Conditions should be fulfilled for claiming ITC on goods (including capital goods) sent for
job work.
The Principal should send the goods to the job worker under the cover of delivery challan.
The registered person should furnish FORM ITC 04 for the quarters in which goods were
sent out for job work.
In case the registered person has supplied goods directly from the place of business of job
worker, the conditions laid down in the proviso to section 143(1) of the GST Act should be
satisfied.
In case the job worker is unregistered and supplies any waste/scrap generated during the job
work from his place of business directly, the registered person should pay GST on such
supply (if applicable).
The goods sent for job work should be returned within the specified timelines.
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4.6. GST COLLECTIONS AND PAYMENTS
Tax payable should be paid within the prescribed time as per GST law.
Tax should not be collected beyond tax payable (sec 76 of the CGST Act).
The provisions of rule 35 of the CGST Rules should be followed in respect of collection of
taxes.
4.7. REVERSE CHARGE
Reverse charge tax should be paid under 9(4) of the CGST Act 2017.
Reverse charge tax on notified supplies under section 9(3) and 9(5) of the CGST Act 2017
should be duly paid.
Corresponding ITC should be availed on reverse charge. Conditions of paying tax for RCM
should be fulfilled.
4.8. INWARD SUPPLY
Purchase invoice/delivery challans should tally with the purchase register.
HSN Classification should be correct for inward supplies. Inward supply to be in lines with
the monthly returns.
Reconciliation of inward supply invoices against which there are no corresponding entries in
inward supply records and GST return.
Inward supplies should be classified between intra-State, inter-State, Imports etc.
5. RELATED PARTY DISCLOSURES
Related Party as per AS 18 Related Party Disclosures/Ind AS 24 Related Party Disclosures and related party as defined under valuation provision under GST may not be the same.
It can however be ensured that entity carries out transactions with related party as per valuation rule 28 for GST purpose wherein valuation and GST calculation should be done as per the prescribed rules.
6. MAINTENANCE OF BOOKS OF ACCOUNTS
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Books of accounts should be maintained as specified in section 35 read with rules 56, 57 and 58 of the GST Laws.
Books of accounts to be maintained at each place of business.
Copies of agreements/agent agreement and other supporting documents should be in place.
Audited Financial Statements for each registration wise should be in place.
Transporter/Warehouse keeper should maintain the books of accounts as per the law.
The Register e-way bill/delivery challan should be maintained as law.
The register of ITC-01, ITC-02, ITC-02A, ITC-03, and ITC-04 should be maintained as per
the GST law.
The supplier should maintain the cash/bank register for recording the transactions entity
wise.
CONCLUSION & DISCLAIMER
As the Due Date of GST Annual Return and GST Reconciliation Statement is approaching fast
it, I hope this article will help you in streamlining the process and completion of requisite
work.
Disclaimer: This writeup is for sharing knowledge. The content of this writeup is for helping
fellow professionals. Author is no where responsible for any damage because of taking action
or non-action on the basis of this writeup. Author believes that the content of this writeup
does not violates any existing copyright or intellectual property of others in any manner.
However, in case any source has not been duly attributed, the writer may be notified in
writing for necessary action.
Thanks & Regards
Abhishek Raja Ram
9810638155, fca.gst@live.com
https://www.linkedin.com/in/abhishekrajaram/
