GST Annual Return & Audit
GST Annual Return & Audit - A Detailed Overview
In India, the Goods and Services Tax (GST) regime has streamlined the indirect tax structure and brought in a comprehensive tax system. As part of the compliance process under GST, businesses must file regular returns, and larger businesses are required to undergo an annual return and audit process to ensure accuracy and transparency. This section will discuss everything you need to know about GST Annual Return and GST Audit.
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What is GST Annual Return?
GST Annual Return refers to the summary of all transactions made by a GST-registered business throughout the financial year. It is filed to consolidate all the monthly/quarterly returns into a single return for a year. The GST Annual Return serves as a self-assessment document that reflects the business’s total output and input tax liabilities.
The primary purpose of the GST Annual Return is to reconcile the information provided during the year in various monthly or quarterly returns (such as GSTR-1, GSTR-3B, etc.) with the final data for the whole year. It ensures that businesses comply with the GST laws and fulfill all their tax obligations correctly.
Types of GST Annual Returns
There are different types of GST Annual Returns based on the category of taxpayer:
GSTR-9 (Annual Return for Regular Taxpayers):
- This return is mandatory for regular taxpayers who have an annual turnover above the threshold limit of ₹2 Crore. It includes a detailed summary of the outward and inward supplies (sales and purchases) made during the year, along with taxes paid, tax liability, and input tax credit (ITC) claimed.
GSTR-9A (Annual Return for Composition Scheme Taxpayers):
- Taxpayers who have opted for the Composition Scheme (for businesses with a turnover less than ₹1.5 crore) need to file GSTR-9A. This is a simplified return that captures the summary of transactions conducted during the year under the composition scheme.
GSTR-9C (Audit Reconciliation Statement):
- This is an important document for larger taxpayers with a turnover above ₹5 Crore. GSTR-9C contains the reconciliation statement, where the taxpayer must reconcile the figures reported in the GST returns with the audited financial statements. This reconciliation statement is a part of the GST Audit process.
Components of GST Annual Return (GSTR-9)
The GSTR-9 is divided into several parts, where taxpayers need to provide detailed information on various aspects of their business. The key components of GSTR-9 include:
Basic Information:
- This includes general details like GSTIN, the financial year, and business type.
Particulars of Outward and Inward Supplies:
- This section requires businesses to mention the total sales and purchases made during the year. The information should align with the details mentioned in GSTR-1 and GSTR-3B.
Tax Paid and ITC Claimed:
- Businesses must report the taxes paid on their sales (output tax) and the tax credits claimed on their purchases (input tax). This section also helps businesses identify whether they have claimed the correct ITC.
Reconciliation of Turnover:
- The business must reconcile its turnover as reported in the financial statement (audited books) with the turnover declared in the GST returns.
Refunds and Late Fee Details:
- If any refunds were claimed or late fees were paid, they must be mentioned in this section.
GST Liability for the Year:
- This section summarizes the tax liability for the year after accounting for the input tax credit.
Additional Information:
- Any additional details that are required by the government (like transactions with related parties, export transactions, and adjustments for errors made in earlier returns).
What is GST Audit (GSTR-9C)?
GST Audit is a process where businesses with a turnover above ₹5 Crore must undergo a detailed review of their financial records by a qualified professional. The audit ensures that the figures mentioned in the GST returns are accurate and match with the financial statements.
GSTR-9C is the GST Audit Reconciliation Statement that needs to be submitted along with the annual return GSTR-9. It is based on a reconciliation of the taxpayer’s financial records and the data reported in the GST returns.
GST Audit Process
Reconciliation of Turnover:
- The auditor compares the turnover declared in the financial statements with the turnover reported in GST returns (GSTR-1, GSTR-3B). Any discrepancies must be identified and explained.
Verification of Input Tax Credit (ITC):
- The auditor checks if the input tax credit claimed by the business is in compliance with the provisions of the GST law. The auditor also ensures that the ITC has been correctly claimed for valid purchases only.
Cross-checking of Transactions:
- The auditor will cross-check all transactions, such as sales, purchases, exports, and interstate supplies, to ensure that the GST returns reflect the correct amounts.
Tax Computation:
- The auditor verifies whether the tax liabilities reported are accurate, including output tax liability and the credit claimed on inputs.
Reporting Discrepancies:
- Any discrepancies identified during the audit must be reported in the GSTR-9C form. These discrepancies are typically reconciled by the business with the appropriate corrective action.
Certification:
- After completing the audit and reconciliation process, the auditor will certify the accuracy of the taxpayer’s GSTR-9C and sign it.
Importance of GST Annual Return and Audit
Compliance with GST Laws:
- Filing the annual return and undergoing GST Audit ensures that businesses comply with the GST Act and avoid penalties or legal issues.
Tax Transparency:
- Annual returns and audits help in maintaining transparency in business transactions, ensuring that all taxes are paid correctly, and reducing the possibility of errors.
Claiming Refunds:
- GST Annual Return provides an opportunity for businesses to claim any eligible refunds. For example, excess GST paid during the year can be claimed back from the government.
Tax Planning and Strategy:
- The audit process can help businesses identify areas where they can save taxes, optimize their GST-related costs, and plan for better tax management in the future.
Business Credibility:
- Being compliant with GST filing requirements and having an audit performed by a qualified professional improves a business’s credibility with stakeholders, customers, and authorities.
Penalties for Non-Compliance
Failure to file GST Annual Returns or conduct the audit (when applicable) can lead to significant penalties and legal consequences:
Late Fees:
- There is a late fee for filing GSTR-9 and GSTR-9C after the due date, which is ₹200 per day (₹100 each for CGST and SGST), subject to a maximum of ₹5,000.
Tax Penalties:
- If discrepancies are found during the audit, and taxes are not paid accordingly, penalties and interest will be levied for the underpayment of taxes.
