Submission of GST Audit Report: The concept of audit by a Chartered Accountant in the area of Indirect Taxes was confined to State Value Added Tax and Central Sales Tax laws of certain States. In Central Excise and Service tax only in case of suspicion of undervaluation or excessive credit special audits were prescribed (not much used) which continue in GST. Therefore, Chartered Accountants engaged in rendering professional services in the areas of State taxes would be familiar with those provisions. The GST law has subsumed several Indirect Tax laws – among others, it subsumed Central Excise, Service Tax, Luxury Tax, Entertainment Tax, VAT/CST, Entry tax laws etc.; certain levies under the Customs laws have also been subsumed into the GST laws.
Submission of GST Audit Report
Section 35(5) read with Section 44(2) of the CGST Act provides that the following documents shall be furnished electronically by the assessee upon conclusion of the audit:
- a. GST Annual Return;
- b. Copy of the audited annual accounts;
- c. Reconciliation statement, reconciling the value of supplies declared in the return furnished for the financial year with the audited annual financial statement in FORM GSTR 9C (this FORM is expected to undergo some simplification), duly certified;
- d. Such other particulars, as may be prescribed.
A format for the audit report / certificate is yet to be notified. It is not clear as to whether it will be in the nature of an audit report like the statutory audit report or tax audit report, or a certificate like in case of VAT audits. If it is in the nature of a certificate, the responsibility of the GST auditor would be substantially higher.
Certificate Vs. Report – Para 2.2 of the ‘Guidance Note on Audit Report and certificates for Special Purpose’ issued by the ICAI notes the difference between the term ‘certificate’ and ‘report’ as under;
- “A Certificate is a written confirmation of the accuracy of facts stated there in and does not involve any estimate or the opinion.”;
- “A Report, on the other hand, is a formal statement usually made after an enquiry, examination or review of specified matters under report and includes the reporting auditor’s opinion thereon”.
Thus, where a certificate is issued, the Chartered Accountant shall be responsible for factual accuracy of what is stated therein. In case of a report, he is responsible for ensuring that the report is based on the factual data, true and fair (or in some cases true and correct) to the best of his belief, knowledge and information furnished to him.
Every registered person [other than an input service distributor (ISD), person required to deduct tax at source (TDS), person required to collect tax at source (TCS), casual taxable person (CTP) and non-resident taxable person] shall furnish an annual return for every financial year electronically in the FORM GSTR 9 (composition suppliers in GSTR-9A and e-commerce operators in FORM GSTR-9B) on or before 31st December following the end of the financial year. Where a registered person is required to get his accounts audited, such annual return shall be furnished along with the audited accounts.
On a plain reading of the relevant the provisions, it appears that the annual return is not merely the sum total of the periodic returns filed for the year, but a return reflecting the correct turnovers, data and details as per the provisions of the GST laws, based on the annual accounts of the assessee. Where it is required to be audited, the turnovers appearing in the annual return shall be as per the audited figures.
During the course of the audit, any discrepancies found shall be corrected / rectified by declaring the correct turnovers in the annual returns. In this regard, it may be noted that the time limit for declaring the details of debit note/ credit note and for taking the input tax credit would lapse in September of the following year, whereas the annual return can be furnished by the end of December of the following year. Where any discrepancies are noted during the course of the GST audit post September, it appears that no recourse would be available to the auditee.
The auditor must note that the reconciliation statement can be prepared only when the audited financial statements are made available. The law, however, does not explicitly provide that the reconciliation must be prepared between the accounts audited by him and the annual return, in case of registered persons whose books of account have not been audited, say, in the case of non-company assessees.
Such other particulars, as may be prescribed – The Government is yet to prescribe the format of audit report and annexures thereto. It is also not clear as to whether the auditor is required to identify and report the discrepancies month-wise or annually.