GST-the biggest indirect tax reform, even after 2 years of its implementation is still in its nascent stages. The due date for filing annual return forms and annual audit forms for the financial year 2017-18 i.e. GSTR-9/GSTR-9A and GSTR-9C respectively have now been extended to November 30, 2019, which was August 31, 2018, before this. Presently, only two-thirds of the 11 million businesses registered under GST file their monthly returns. The key anti-evasion feature of GST was matching the invoices of buyers and suppliers which is currently suspended. It is however expected that the notified annual return forms would be a step towards anti-evasion as the assesses needs to provide complete details of every transaction they have conducted throughout the year in the annual filing forms.
The taxpayers who have deluded the books of accounts or GST returns would end up receiving scrutiny notices. Thus, the taxpayers should gear up to match and reconcile the GST data and financial records correctly to avoid any consequences. The annual return form- GSTR-9 is an annual summary of the supplies made by a registered entity, tax paid on such supplies, input tax credit (ITC) claimed, ineligible credits, demands and refunds, and the HSN on outward and inward supplies. Also, figures with regard to transactions related to the financial year ending March 31, 2018, declared in return of April to March 2019 are to be acknowledged in the annual return.
However, the annual audit form, GSTR-9C is applicable to only those taxpayers who must get their Annual Accounts audited under the GST laws i.e. those registered persons whose Annual aggregate turnover exceeds rupees two crores in that financial year. A Chartered Accountant or Cost Accountant must prepare and certify the same. Both GSTR-9 and GSTR-9C consists of numerous reconciliations which would assist the department in reconciling the details as provided in monthly returns with the data in the books of accounts. Beyond these reconciliations, taxpayers shall expect an automated system based reconciliation of GST data with the data provided to different authorities like Income tax department and ministry of corporate affairs and any significant difference among these would invite stern action.
The seamless flow of input tax credit has always been considered as one of the fundamental features of GST and the input tax credit is considered to be the most crucial component of the tax law. However, since there are certain conditions on the credit entitlement, it becomes a must that the department is able to analyse and identify the buyers/purchasers who have claimed false tax credit. The annual returns provide for multiple reconciliations of input tax credit which would aid the department in identifying such taxpayers. One such reconciliation seeks to reconcile input tax credit is availed in GSTR-3B with that available in online GSTR -2A(Auto-generated form which shows the tax paid by vendors). However, in some cases, it may happen that the recipient has not availed false credit but the supplier has not deposited the tax as collected by him to the government. The recipient in such cases would have to follow up with the supplier pushing him to pay the requisite taxes.
In the second reconciliation, Input tax credit availed in books of account is matched to the input tax credit available in GST monthly filings. In the third reconciliation, expense wise break-up of tax credits is matched with an overall claim of annual tax credit. This three-way reconciliation is strategically bent to identify tax differences pushing the taxpayers to pay the differential taxes. In all the cases mentioned above, the government succeeds in its objective of pushing the tax-payers to self-identify the ineligible tax claims and pay the additional taxes with a levy of interest on the same.
The annual audit forms also seek out reconciliation of turnover as per the audited financial statement with the turnover as declared in the annual return. Any taxpayer who has booked revenue in his books of accounts but has not paid tax on such turnover would be forced to either substantiate the reasons for such non-payment or pay tax with applicable interest.The department may initiate scrutiny in case it feels that any such reason is not justified.
GST annual filing forms may be intrinsically loaded with certain technical and interpretational issues, still are expected to go a long way in detecting and tapping bonafide and malafide tax mistakes committed in payment of taxes.
Revenue department would for the first time have heaps of data and data analytics reports generated from the uni-directional flow of data from monthly returns and transactional way bills portal. This voluminous data of trade and industry would assist the department in zeroing on short payment of taxes and false input tax credit claims.
It is expected that post-filing of these annual filing forms, tax authorities would initiate audit proceeding to check the accuracy of tax payments and validity of tax credits would need to be substantiated by taxpayers and in some cases tax officer may also summon tax auditors to justify the basis of certification.
(The author is a Senior Partner at AMRG & Associates. Views expressed are the author's personal)