MAY 21, 2019

By Lukose Joseph (CA) & Anil P Nair (CA)

THE Tiger near the door

Finally time has arrived for registered persons under GST and hence their Chartered Accountants to confront the tiger and it is near the door. GSTR9 due date for the very first year (period) of GST, 2017-18 is June 30, 2019 and even the second one for the year 2018-19 is not very far. GSTR9 is being filed once a year by all registered tax payers and is expected to consolidate all the information filed so far in the Returns for the reference year with details of supplies received and made under CGST, SGST and IGST.

Reconciliation and the Credit/Debit Note conundrum

Accountants of Taxpayers are going through a harrowing period of filling up the Annual return and reconciling with the Audited Accounts to make both ends meet! We are in the third year since the evolution of GST era; yet the forms cannot be said to be fully equipped to capture the intricacies in every industry. Thoroughly revised now, these Annual Return and Reconciliation Statement forms still throw up ambiguities.

Current Year

Usage of words 'current year' and 'previous year' in Part V of Form GSTR- 9 (Hereinafter referred to as Form 9 or Annual Return), read with corresponding instructions 10 and 11 of the said form and instruction 3 and instruction for 5E of GSTR-9C (Hereinafter referred to as Form 9C or Reconciliation Statement) is not matching. See below-

Part V of Form 9 reads as follows:

Particulars of the transaction of the previous FY (Financial Year) declared in returns of April to September of 'current FY' or up to date of filing of annual return of previous Financial Year…

Now, Instruction Number 3 of Form 9C reads as follows.

The reference to 'current financial year' in this statement is the financial year for which the reconciliation statement is filed for.

This means in Form 9C, "Current Year" for Reconciliation Statement prepared for 2017-18 is year 2017-18 only whereas in Form 9, "current year" for Annual Return prepared for 2017-18 is not 2017-18 but it is 2018-19.

In our opinion, it is better to have homogeneity in definition or meaning of a word all through the law, rule and forms prescribed so as to shun confusion and serve better perception.

Failure of Supplier, Penalty for Assessee

Table 8A of Form 9 is auto populated as effect of supply uploaded by suppliers during the year and post financial year. Wrong uploading or failure to upload by the supplier will be disclosed in Table 8D which eventually ends up in show cause notice. The column is so unstable and subject to changes every moment.

No column for Debit Note

Special Table is provided for credit note in Form 9C (Please see Table 5E), but no such column provided for debit notes. Column for "others" may take care of such ambiguity. But in our opinion it is better not to give scope for improvisation for taxpayers.

Why a Form at all for reconciliation? Why not a general remark to provide reconciliation for sales, purchase, tax credit and tax payment instead of providing a
comprehensive format with vagueness for reconciliation.

May be a careful reading of instructions and some practical thinking may solve the issue but prefer to have uniformity in definition/meaning in legal drafting.

Made vs. Declared

Two views are probable on disclosure in Table 4 of Form 9.

Details of advances and supplies made during the financial year shall contain information provided in July to March and adjustments pertaining to 2017-18 made during April to September 2018 shall be made in Table 10 and 11 of Form 9.

Another view is invoices as well as amendments connected to 2017-18 will be reported in Table 4 of Form 9 being the words "made" brought to form in place of
"declared".

Reconciliation (An Example)

Below we are giving a simplified version of an Annual Return and its Reconciliation.

We were presented with a query on reconciliation aspect of credit note/debit note relating to the relevant 'current financial year', but issued after the end of such financial year. (See Table 5E and 5O of Form 9C) Those which are already provided in the audited accounts for the relevant financial year and those which are not given such impact in relevant financial year are both disclosed in Table 10 and 11 of Form 9C.

Here we are trying to reconcile these transactions of credit note and debit note which are issued in Current Year (2018-19) after the close of the Financial Year 2017-18 and reflected in monthly returns of 2018-19 but relating to Annual Return for financial year 2017-18. If you are still having confusion with the usage of the word current year, we are helpless!

In fact, the issue relates to the accounting treatment given during the finalizing of the accounts. We are trying to answer the impact of the accounting treatment on GST Annual Return and Reconciliation.

Here it is assumed that in the given example, details of advances and supplies made during the financial year (Table 4) shall contain information provided in July to March and adjustments pertaining to 2017-18 made during April to September 2018 shall be made in Table 10 and 11 of Form 9 and taxable value and tax payable on reverse charge basis (Table 4G) is Nil.

The Query

Supplies and advances on which tax is to be paid is Rs. 100/- and hence the total turnover is Rs. 100/-. Debit Notes relating to 2017-18 were issued for Rs. 5 and Rs. 3 respectively during 2017-18 and 2018-19. Credit Notes relating to 2017-18 were issued for Rs. 8 and Rs. 7 respectively during 2017-18 and 2018-19. Out of the above debit note for Rs. 3/-, Rs. 1/- was adjusted in the Audited Annual Accounts of 2017-18 along with the Debit Note of Rs. 5/-. Out of the above credit note for Rs. 7/-, Rs. 4/- was adjusted in the Audited Annual Accounts of 2017-18 along with the Credit Note of Rs. 8/-. Turnover as per Audited Annual Accounts was Rs. 94/-. How do we give effect to above in Annual return and Reconciliation?

The Solution

See how the above information is given effect:

GSTR 9 (ANNUAL RETURN)

GSTR 9C (RECONCILIATION)

We hope the given reconciliation is clear to our readers. We wholeheartedly invite further opinions.

(The views expressed are strictly personal)