GSTR-9C: Importance, Filing Procedures, and Compliance Insights

GSTR-9C is a pivotal document in the Indian Goods and Services Tax (GST) regime, serving as a reconciliation statement between the audited financial statements of a taxpayer and the annual return filed in GSTR-9. This reconciliation is essential to ensure the accuracy and consistency of data reported to the tax authorities. Introduced under the GST laws, GSTR-9C aims to bridge the gap between the GST records and financial statements, thereby enhancing transparency and compliance.

What is GSTR-9C?

GSTR-9C is a reconciliation statement certified by a Chartered Accountant (CA) or a Cost Accountant (CMA). It is required to be filed by taxpayers whose annual aggregate turnover exceeds INR 2 crores. This form essentially compares the figures declared in GSTR-9 (Annual Return) with the figures in the audited financial statements. Any discrepancies identified during this reconciliation process must be explained and documented in GSTR-9C.

Components of GSTR-9C

GSTR-9C comprises two main parts:

Part A: Reconciliation Statement

• Reconciliation of turnover declared in the audited financial statement with turnover declared in Annual Return (GSTR-9): This involves comparing the sales figures as per the audited financials with those declared in GSTR-9.

• Reconciliation of tax paid: This section matches the tax payable as per the annual return with the tax paid as per the audited financials.

• Reconciliation of Input Tax Credit (ITC): It involves comparing the ITC claimed in GSTR-9 with the ITC available as per the audited financials.

• Reconciliation of adjustments made: This part deals with adjustments or corrections made during the financial year and their impact on tax liability.

Part B: Certification

This part includes the certification by a CA or CMA after a thorough examination of the reconciliation statement and relevant documents.

Significance of GSTR-9C

GSTR-9C holds significant importance in the GST compliance framework for several reasons:

Enhancing Transparency and Accountability:

By requiring a certified reconciliation between the financial statements and GST returns, GSTR-9C ensures that the data reported to tax authorities is accurate and consistent. This reduces the likelihood of discrepancies and enhances transparency.

Facilitating Tax Audits:

The detailed reconciliation provided in GSTR-9C aids tax authorities in conducting audits more efficiently. It helps identify areas of concern or non-compliance, thereby facilitating targeted audits and investigations.

Improving Compliance:

The requirement for a certified reconciliation statement encourages taxpayers to maintain accurate records and adhere to GST regulations. This helps in improving overall compliance within the GST ecosystem.

Providing Clarity on ITC Claims:

GSTR-9C plays a crucial role in validating ITC claims. By reconciling ITC claimed in the annual return with that in the financial statements, it ensures that only legitimate claims are made, thereby preventing misuse of ITC provisions.

Simplifying the Assessment Process:

The comprehensive reconciliation in GSTR-9C simplifies the assessment process for both taxpayers and tax authorities. It provides a clear and consolidated view of the taxpayer’s financials and GST returns, making it easier to assess tax liabilities and compliance.

Detailed Breakdown of GSTR-9C Sections

Part A: Reconciliation Statement

1. Reconciliation of Turnover

This section compares the turnover declared in the audited financial statements with the turnover declared in the annual return (GSTR-9). The key points of reconciliation include:

• Gross Turnover as per Financial Statements: This includes the total turnover declared in the audited financial statements for the financial year.

• Unbilled Revenue at the Beginning and End of Financial Year: Adjustments are made for unbilled revenue to align it with the turnover declared in GSTR-9.

• Turnover for April to June 2017: For the financial year 2017-18, adjustments are made for turnover related to the pre-GST period.

• Credit Notes Issued After Year-End: Any credit notes issued after the financial year-end but pertaining to the financial year are considered.

• Trade Discounts: Discounts given are adjusted to reconcile with the declared turnover.

• Turnover from Activities Not Covered under GST: Revenue from activities not covered under GST is excluded from the reconciliation.

2. Reconciliation of Tax Paid

This section reconciles the tax payable as per the annual return with the tax actually paid as per the audited financials. The reconciliation involves:

• Taxable Turnover and Tax Rate: Comparing the taxable turnover and applicable tax rates declared in GSTR-9 with the audited financial statements.

• Adjustments for Reverse Charge Mechanism (RCM): Adjustments are made for liabilities under the RCM.

• Tax Paid on Advances: Any tax paid on advances is considered in the reconciliation.

• Difference in Tax Paid and Tax Payable: Any differences between the tax paid and tax payable are identified and explained.

3. Reconciliation of Input Tax Credit (ITC)

This section involves comparing the ITC claimed in the annual return with the ITC available as per the audited financials. Key points include:

• ITC Claimed and ITC as per Financials: Comparing the ITC claimed in GSTR-9 with the ITC recorded in the financial statements.

• Reversal of ITC: Any ITC reversals made during the financial year are considered.

• ITC on Capital Goods: ITC claimed on capital goods is reconciled with the financial statements.

• ITC on Import of Goods and Services: ITC claimed on imports is reconciled.

• Difference in ITC Claimed and ITC Available: Any differences between ITC claimed and ITC available are identified and explained.

4. Reconciliation of Adjustments

This section deals with adjustments or corrections made during the financial year and their impact on tax liability. It includes:

• Adjustments for Previous Financial Year: Adjustments related to the previous financial year but made in the current financial year.

• Adjustments in Current Financial Year: Any adjustments made in the current financial year.

• Impact on Tax Liability: The impact of these adjustments on the tax liability is calculated and reconciled.

Part B: Certification

This part includes the certification by a CA or CMA. The certification process involves:

• Verification of Reconciliation Statement: The CA or CMA verifies the reconciliation statement and ensures that the data is accurate and consistent with the audited financial statements.

• Review of Relevant Documents: The certification involves a thorough review of relevant documents, including financial statements, GST returns, and other supporting documents.

• Issuance of Certificate: After verification, the CA or CMA issues a certificate, confirming the accuracy of the reconciliation statement and compliance with GST regulations.

Filing Process of GSTR-9C

Eligibility and Due Date

GSTR-9C is mandatory for taxpayers with an annual aggregate turnover exceeding INR 2 crores. The due date for filing GSTR-9C is the same as that for GSTR-9, which is typically 31st December following the end of the financial year.

Steps for Filing GSTR-9C

• Preparation of Financial Statements: Ensure that the financial statements for the financial year are audited and ready for reconciliation.

• Preparation of GSTR-9: File the annual return in GSTR-9, which forms the basis for reconciliation in GSTR-9C.

Reconciliation Statement:

• Prepare the reconciliation statement in GSTR-9C by comparing the figures in the financial statements with those in GSTR-9.

Certification by CA/CMA:

Get the reconciliation statement certified by a CA or CMA. The certification process involves verification of the reconciliation and relevant documents.

Filing of GSTR-9C:

File the certified GSTR-9C on the GST portal along with the audited financial statements.

Key Challenges and Common Issues in Filing GSTR-9C

Data Accuracy and Consistency

Ensuring data accuracy and consistency between the financial statements and GST returns is crucial. Discrepancies can arise due to various reasons, including incorrect reporting, classification errors, and timing differences.

Complexity in Reconciliation

The reconciliation process can be complex and time-consuming, especially for large businesses with multiple transactions and diverse revenue streams. Proper documentation and record-keeping are essential to simplify the reconciliation process.

ITC Claims and Reversals

Validating ITC claims and reversals can be challenging, particularly when dealing with multiple suppliers and invoices. Ensuring that ITC claims are legitimate and supported by proper documentation is crucial to avoid discrepancies.

Compliance with GST Regulations

Staying updated with the latest GST regulations and amendments is essential to ensure compliance. Non-compliance can lead to penalties and interest, making it important to adhere to statutory requirements.

Importance of Professional Assistance

Given the complexity and significance of GSTR-9C, seeking professional assistance from a CA or CMA is advisable. Professional expertise can help in:

• Accurate Reconciliation: Ensuring that the reconciliation statement is accurate and consistent with the financial statements and GST returns.

• Compliance with Regulations: Staying updated with the latest GST regulations and amendments to ensure compliance.

• Timely Filing: Ensuring that GSTR-9C is filed within the due date to avoid penalties and interest.

• Handling Discrepancies: Identifying and addressing discrepancies effectively to avoid issues during tax audits and assessments.

Conclusion - GSTR-9C is a critical document in the GST compliance framework, ensuring transparency, accountability, and accuracy in the data reported to tax authorities. It serves as a reconciliation statement between the audited financial statements and the annual return, helping in identifying and addressing discrepancies. While the process of preparing and filing GSTR-9C can be complex, seeking professional assistance can simplify the process and ensure compliance with GST regulations. As the GST regime continues to evolve, the importance of GSTR-9C in enhancing transparency and improving compliance cannot be overstated.