Issues you must check before you sign off GSTR 9C - (Keshav R Garg) B.com, FCA, CS, ISA(ICAI), AMP-IIM-A, LLB

Issues you must check before you sign off GSTR 9C

(Keshav R Garg)

B.com, FCA, CS, ISA(ICAI), AMP-IIM-A, LLB

Although most of the fields in GSTR 9 and GSTR 9C has been made optional, it does not mean that as an auditor you can sit back and relax and sign whatever comes your way. At the outset it must be understood that “optional” does not mean “not required”, it certainly means that if the necessary data is available, you must enter that while filing annual returns. Further if it is becoming time consuming and is something which is making filing of annual return difficult, you can leave those at the moment. But it is most likely that the assessing authority would certainly call for these details at the time of assessment proceedings. So with this background, as an auditor you must understand that your responsibility has not been waived off, instead it would be the auditor or the consultant who would have to clarify issues at the later stage. So what are the check points you should be considering before signing off GSTR 9C:

1.     Understanding the flow of data:

As an auditor it becomes really important that you understand the flow of data between GSTR 9 and GSTR 9C. Please do not trust the data flow as being done by your software. It has been largely found that most of the software are not well equipped and are not flowing the data in right columns. The wrong coding of the software may lead to wrong data entry which can prove damaging at the later stage. More than enough study material is available to understand the data flow. Hence I shall not be elaborating it again. But certainly readers can reach out to us for any assistance. It is really important to understand the flow of information entered in GSTR 1/3B during FY 2018-19 in respect of FY 2017-18. For instance data in Table 5 of GSTR 9C should flow from summation of Table 4 and Table 10,11,12,13 collectively. Similarly Tax payable in Table 9 of GSTR 9C should flow from summation of Table 9, 10, 11, and 14 of GSTR 9. So as an auditor it becomes really very important to correlate GSTR 9 with GSTR 9c, otherwise you may land up submitting wrong figures.

2.     Analyzing the turnover in comparison to audited Balance Sheet:

Though its your duty as an auditor to verify the records of the auditee. But at the same time you must define the boundaries for your work. You should not step out and interfere in the audit function carried out by the statutory auditor of your client. So restricting yourself to the figures posted in audited balance sheet, you must conduct your audit around it. There might be several cases where the client would not have paid GST on a supply he had been making. For instance rent received on commercial property, commission income etc. These all can be verified only from the audited balance sheet and annexures along with income tax return. There is a high possibility that the turnover declared does not include these other incomes as the former becomes part of the Trading Account whereas the latter is reflected in P&L. Also as an auditor you must check whether there are any valuation issues which is resulting into unreconciled turnover in GSTR 9C. For instance for purposes of GST, Freight charged from customer becomes part of value of supply, but while preparing books of accounts, statutory auditors might have classified the same under the head freight instead of sales. These all possibilities must be well worked out before you actually freeze the figures.

3.     Details of rate wise liability in terms of HSN Codes:

The rates of GST has been changing very often especially during FY 2017-18. It becomes important that the turnover of the auditee must be properly classified at the different rates applicable at different period of time. Levying one rate on whole turnover may lead to unreconciled tax, answer to which might become difficult. In case you are unable to figure out the same, it will be better to show the said tax amount under the head “others” instead of showing it against the wrong tax rate. Showing the tax under wrong rate head can lead to reconciliation issue not only for tax payable purposes but also for reconciling turnover as well. Also you must take all cautions while deciding the tax rate keeping in view the HSN applicable on the output of the auditee.

4.     Interest on delayed payment of tax:

Since GST portal has not been charging interest on delayed payment of tax, it becomes the responsibility of the auditor to calculate the same and get it discharged. As an auditor you must prepare a chart of various due dates during FY 2017-18 and then work out the interest payable by your client. Whether to charge interest on gross tax or net of ITC can become tricky as an auditor. But keeping in view various judgments and GST Council’s proposal to amend section 50, you can form your opinion and mention it in the audit certificate. It is highly certain that your client may not agree to pay interest on gross tax amount but as auditor you must make the necessary disclosures, keeping your client well informed.

5.     Analyzing Profit and Loss Account:

Although Table 14 of GSTR 9C has been made optional. But as mentioned in opening paragraph of this article, “optional” does not mean “not required”. An Auditor must deeply analyse the profit and loss account. Not only to check the ITC claimed or eligible ITC but other way around as well. Deriving the value of expense from the ITC can give you a fair idea about the expenses on which either GST has not been charged by the vendor or it has not been claimed by the auditee. In the first case you should also work out on tax liable to be paid under Reverse Charge in case of purchases till 13^th Oct 2017 made from unregistered vendors. Analyzing Profit and Loss statement has the potential to reveal glaring defaults made by your client. All these might become important for reporting purposes. Not only you must analyse cash expenses but also non cash expenses such as depreciation etc. Analysis of Depreciation might reveal the additions made to fixed assets and whether your client has availed any blocked ITC. Similarly would be the case of business promotion expenses. As an auditor, profit and loss can bring out interesting results which you should consider before finalizing your audit report.

6.     Claims made during 2018-19 in respect of FY 2017-18:

Adjustment made during FY 2018-19 in relation to FY 2017-18 reflected in Table 10 to 13 of GSTR 9, must be minutely scrutinized. There is huge possibility that these adjustments had been made in to plug any tax omission/error in returns. This might call for any interest which would become payable. Please note that it is not necessary that the auto populated figures in GSTR 9 are correct. There could also be a possibility of wrong data entry by the auditee himself. Also most of the taxpayer had been inquiring whether they can change an invoice from B2C to B2B. The main intention which I found as an auditor was to do carry out sale/purchase of invoices. There is no actual movement of goods. Although this adjustment is not possible in GSTR 9, but if your client asks you this question, you must get prepared to verify the actual movement of stock by auditee and find if there are any red flags.

7.     Refunds taken by auditee:

Since most of MSMEs has been getting their compliance done from people other than professionals, it has been found that most of them has claimed wrong refund. For Instance, refund of ITC paid on capital goods in case of exports under LUT or refund of ITC on services in case of Inverted Duty structure, or refund of accumulated ITC in case of excess purchases etc. All these cases though processed by the department, must be minutely checked as an auditor. If you find that your client has encashed something which he was not allowed, you must get that paid back in cash along with interest in Form DRC-03. You must educate auditee about the repercussions of Section 74 , if they do not reverse the said erroneous refund at the time of filing GSTR 9.

8.     Obtain Management Representation

For any issue which might have been left unaddressed and more importantly to save your skin, you must procure a detailed management representation from the auditee. You must mention the complete details along with relevant figures in such representation. It will not only make your client serious about the GST Audit but you shall feel relieved by sharing the burden with your client. Management Representation indeed becomes important in today’s world where most of the clients have tendency to hide facts which are later revealed at the time of inspections and audits carried out by the tax department.

9.     Generate UDIN:

As an auditor, you must not forget to generate UDIN before you sign off. Although you have 15 days from the date of signing, but as a CA myself, I would recommend that you must do that before hand to avoid any hassle at later stage. Since most of the software which we are using for filing of annual return does not remind us of UDIN, it is most likely that we may forget to generate it. So do it in time and relax instead of facing any issue which may arise later.

10. Charge the professional fees you deserve:

Last but not the least, don’t forget to charge audit fees from your client. It is seen that clients tend to include annual filing fees in the monthly retainership fees they had been paying you for monthly returns. Please make it very clear with your client and educate him about the amount of work you shall be doing. In country like ours, where you are paid off only when someone is in trouble, you must make the auditee understand the trouble GSTR 9 and GSTR 9C are going to pose on them. Charge your fees well which you deserve. There must be no regrets when you actually sign off  an audit assignment.

Keshav R Garg

     (B.Com, FCA, CS, ISA (ICAI), LLB)

     3328, First Floor, Sector 27 D, Chandigarh, INDIA 160019

     Phones: +91-172-461-3328, +91-98880-90008

     E-mail: keshavgarg@kdai.in