DECODING GST – CLAUSE BY CLAUSE ANALYSIS OF GST FORM 9C

5A. Turnover as per audited financial statements
for the State/UT (for multi-GSTIN units under same PAN the turnover shall be
derived from the audited financial statement) – Starting Point

Report the revenue from operations of the entity
in the P&L for the financial year April 2017 to March 2018 (incl. the
non-GST period)

•  Auditor should obtain the signed financial
  statements.  In case of multiple
  registrations, auditor should obtain GSTIN level data which aggregates to the
  audited figure under a representation letter.

Revenue excluding GST component should be adopted
from financial statements

No adjustment should be made to the financial
number and it should be directly planted into this clause. Any adjustments to
this number should be made only via form 9C.

• This clause does not require a ‘State level
  Trial Balance’ and the auditor can rely on any suitable methodology in the
  company which extracts the registration level turnover from the revenue GL
  (such as cost centre, location codes, etc).
  

•  Other income streams in separate schedules
  should not be included here. Only those having GST implications should be
  added as a separate line item.

•   All
  subsequent clauses should also be applied at the GSTIN level only.

•  The auditor should check if the audit
  adjustments on account of transfer pricing / IND-AS / provisions, etc., are
  accounted for in the books at registration level / consolidated level and
  accordingly, the registration level revenue should be arrived at.

•  Auditor may consider documenting/ reporting the
  broad composition of the starting point as an observation in Part-B since all
  subsequent adjustments are dependent on this composition. 

5B. Unbilled revenue (UBR) at the beginning of the financial year(+)

5H. UBR at the end of the financial year (-)

UBR as reported in the Asset GL as on
01-04-2017and 31-03-2018 (+/-) to be taken at state level

•  The objective of this clause is to adjust
  opening UBR which is billed during the GST period and eliminate fresh
  recognition of UBR by reducing it from the audited revenue

•  It may be advisable to map the opening
  composition of UBR with billing under Service tax/ GST period

• Auditor to document the revenue recognition
  policy and management’s view for its variance with the Time of Supply
  provisions

• Delay in billing beyond the contractual due
  date may need to be analysed considering the provision of Time of Supply
  under GST.

•  A MRL may be obtained with regards to details
  of Unbilled Revenue provision of earlier period reversed during the period
  under audit and fresh unbilled revenue provision created during the period of
  audit

• Some entities have taken a conservative stand
  and considered UBR as their taxable turnover under Service tax (especially
  export entities).  In such case, a note
  that UBR has not been reported since there is no timing variance between
  revenue recognition and time of supply provisions could be provided.

5C. Unadjusted advances (UADV) at the beginning of the financial year
(-)

5I. UADV at the end of the financial year (+)

Report the UADV as on 31-03-2018 and 01-04-2017
as per BS/ location level accounts

• Only taxable advances need to be included in
  the opening/ closing values i.e. advances on which tax has been paid

• In case of decentralised billing/ accounting
  practiced during the service tax regime, it would be easy for the assessee to
  ascertain the state level opening UADV

•  In case of service entities having centralised
  registration under service tax, the adjustments towards opening UADV and the
  service tax turnover may be recorded only in the Form 9C of the centralised
  office of the tax payer

• Verify opening UADV with the state level
  billing in subsequent period to ensure accuracy of the data provided by the
  assessee and ensure there is no cross adjustments between branches

•  If assessee has not offered advances to
  taxation during the service tax/ GST period, this clause would become
  redundant and an observation should be made in the certificate

• Auditor to verify that tax has been paid and
  turnover has been reported in GSTR-9 at the time of receipt of advances which
  are comprised in the year end UADV

•  In certain cases tax payers have paid the tax
  on advances based on an incorrect place of supply (i.e. IGST instead of
  CGST+SGST), necessary adjustments may need to be made at the tax level if not
  already adjusted in the returns. Refund of the incorrect tax may be sought by
  the assessee through a separate process (refer tax level reconciliation)

5D. Deemed Supply under Schedule I

Transactions without considerations are to be
captured here such as Branch transfers/ intra-entity cross-charges; principal
agent supplies, etc

• This should include activities which are deemed
  to be supply under the GST law, i.e., covered under schedule I of the CGST
  Act but not included in the financial statements/ state level turnover.

• Auditor should identify all such cases which
  might be covered under Schedule I of the CGST Act.

•  Auditor may consider reconciling the delivery
  challans/ e-way bills generation data for completeness of the reporting.

•  Some entities have practiced departmental
  accounting for state level registration and made consolidation adjustments at
  the time of preparation of financial statements.  One may verify whether the turnover in 5A
  already includes this figure

• In case where state level data has been
  extracted from cost centres/ location codes, adjustments to the accounting
  turnover becomes necessary.

• Fixed asset and other inventory registers may
  be examined to ascertain whether there are disposals/ write-off of business
  assets on which input tax credit has been availed

•  For instance, branch transfer of goods can be
  identified based on the examination of the inventory registers for
  identification of inter-state stock movements and its reporting in GSTR-3B/1.
  Similarly, deemed supply of service between distinct persons can be
  identified by doing a revenue cost analysis for each registration and reviewing
  the documented policy in this regard.

• Auditor should conduct a review of all assets
  and seek representation on the physical location/ presence within the
  respective States to determine whether there is any permanent transfer/
  disposal of assets

• Auditors may consider caveating their report to
  the extent that auditing methodologies only facilitate review of identified
  branch transfers and that the certificate should not be construed as a
  comprehensive identification of all such deemed supplies

• In case of supply of goods, tax payers have
  been exempted from payment of taxes at the time of receipt of advances.  In such cases, closing unadjusted advances
  for supply of goods would only comprise of receipts during July 2017 to Nov
  2017.

5E. Credit notes issued after the end of the financial year but
reflected in the annual return (+) : apparent error in signage

Credit notes u/s. 35 are issued for cases
involving change in taxable value or on account of goods return or deficient
supplies

• Credit notes raised by an entity could be those
  which have a GST impact, i.e., satisfy the conditions prescribed u/s. 35 and
  those which do not have a GST impact (for example, account settlement credit
  notes or bad debts and so on).  This
  clause is meant to captures the former and that also only to the extent such
  credit notes are issued during the subsequent financial year in relation to
  supply made during the period under audit are reflected in the Annual return
  filed for the period under audit

• The auditor will have to review the GSTR 1
  filed for the period from April to September of the next financial year and
  determine credit notes which are issued in relation to supply made during the
  period under audit and further analyse whether the same have been disclosed
  in the Annual return or not.

• There is lack of clarity on this clause and we
  have to await an amendment to this clause.
  Credit notes raised during 18-19 are logically not required to be
  reported as part of the 17-18 reconciliation.
  It is highly probable that this clause might be amended

5J. Credit Notes accounted for in the audited
financial statement but are not permissible under GST (-): apparent error in
signage

Credit notes u/s. 35 are issued for reduction of
taxable turnover (such as price re-negotiation, short shipment, incorrect tax
rate, etc)

• This clause would capture all such credit
  notes, where reduction in GST is not allowed u/s. 35 as discussed for the
  earlier clause.

•  Identification of credit notes and reasons for
  reduction sought in the taxable turnover should be documented as working
  papers

• Management may seek confirmations on reversal
  of credit on the recipient end

5F. Trade Discounts accounted for in the audited
financial statements but not permissible under GST

Trade discounts u/s. 15(3) could be those granted
at the time of supply or post supply

• Trade discount here should be understood to
  include cash discounts, target discounts, incentives, etc. which do not
  satisfy the conditions prescribed u/s. 15(3) for non-inclusion in the value
  of taxable supply.

• Auditor may consider conducting a sample
  analysis of major contracts to identify whether discounts given during the
  year on which section 15 (3) benefit has been claimed satisfy the parameters
  prescribed therein

Gratuitous discount given by a company on 100^th
year celebration to its all India distributors may not be permissible under
this clause

5G. Turnover during April 2017-June 2017 (-)

Audited financial turnover at the location level
for the said period is to be reduced

• The accounting turnover (net of all credit
  notes/ debit notes and accounting adjustments) which was used to arrive at
  the opening figure should be reduced to nullify the effect of pre-GST period
  revenue during the FY.

• 
  Turnover in excise/ service tax/ VAT returns are irrelevant for reporting
  here.

•  Auditor would need to understand the process of
  ascertaining locational level turnover for April-June’17 especially under
  service tax regime since many assessee might have opted for centralised
  registration under service tax and would not have identified a turnover to a
  specific location

•  A view with adequate disclosure may be given
  that consolidated turnover for April-June’17 is to be tagged to the state
  where service tax jurisdiction applies and the disclosure is not having any
  adverse tax consequences

5K. Adjustments on account of supply of goods by
SEZ units to DTA units (-)

Report DTA sales by SEZ unit

•  ‘Removals’ from SEZ units are liable to custom
  duties as any other imported stock in the hands of the person who declares
  himself as an importer on record (generally the DTA buyer).  Since buyer discharges the customs duties
  on the basis of bill of entry for home consumption, it is not considered as a
  taxable supply by the SEZ unit even-though it is a turnover in the accounts

•  Where the SEZ unit declares itself as an importer on record, pays
  the custom duties and also charges IGST on the stock transfer invoice to the
  DTA unit, this would form part of the turnover of the SEZ unit and no
  adjustments are required in this clause

•  The auditor may obtain a list of all DTA sales by the SEZ unit and
  also obtain a copy of Bill of Entry filed by the customer as importer to
  satisfy that the onus of discharging tax was not on the SEZ unit but on the
  DTA unit buying the goods

•  DTA clearances of capital goods by SEZ
  developers are not covered in this clause though principally similar implications
  would apply  (Section 30 of the SEZ Act
  operates only for SEZ Unit)

5L. Turnover for the period under Composition (-)

Accounting turnover during the period under
Composition Scheme to be excluded

•  GSTR-4 data to be reconciled with accounting
  turnover under the composition schemeand then excluded under this clause.

•  NIL

•  NIL

5M. Adjustments in turnover u/s. 15 and rules
made thereunder  (+/-)

Variances in commercial value and GST value to be
aggregated and reported here

• Section 15 and rules may require upward/
  downward adjustment to taxable value (such as air travel agent invoices/
  money-changer transactions, trading of used goods, admitted undervaluation in
  related party transactions, admitted Free-of cost supplies with external
  parties, etc)

•  Auditor can ascertain this figure by a invoice-wise comparison of
  revenue GL and GST register (value column)

• Auditor may study the upward/downward variance at a conceptual
  level and aggregate the same but is not required to attest the said
  quantification

•  Certain value exemption notifications (such as
  sale of flats, sale of second hand pre-GST motor vehicles , etc) may also be
  included here eventhough they are not part of section 15

5N. Adjustments in turnover due to foreign
exchange fluctuations (+/-)

Difference in valuation due to forex rates
adopted for revenue recognition / GST valuation

•  In respect of export of goods, the law requires
  the customs notified rates to be adopted but commercially agreed currency/
  forex rates may vary. Therefore, there will always be a difference in the
  value of export of goods reported in the Annual Return vis-à-vis books of
  accounts which will have to be reported here.

• Auditor to examine the internal accounting policy in respect of
  adoption of foreign exchange rates. 

• In addition, the auditors should obtain a statement of export of
  goods during the year with both, the figures as per books of accounts as well
  as the shipping bill plotted for verification and record purposes.

• Certain accounting practices for companies who have hedged their
  foreign exchange exposures on export revenue may be examined

•  Any variance in turnover due to difference in
  foreign exchange rates at the time of receipt of advance and time of its
  adjustments may need some reporting

5O. Adjustments in turnover due to reasons not
listed above (+/-)

Residual entry for all other adjustments

•  All case-specific adjustments may be carried
  out here.  If the web-portal does not
  permit multiple sub-items, it may be advisable to maintain a internal working
  and upload a scanned copy if permitted by the web-portal

 Auditor to seek representation on this residual
adjustments and maintain working papers on the reasons for the adjustments
and its impact at the tax level. Missed reporting of outward supply should
not be reported here but reported as unreconciled difference

 Expense recoveries which are debited to the
profit and loss account

•  High-sea sales/ drop shipments which are
  excluded from GST

• Sale of fixed assets, residual value of
  destroyed goods, etc.

5R = 5Q-5P : Unreconciled difference between the Accounting
turnover (with adjustments) and the GSTR-9 turnover

Reasons for non-reconciliation to be provided
here

• It is absolutely essential to reconcile the two
turnovers to the last rupee to eliminate the possibility of compensating
reconciling items

• Auditor cannot adopt a materiality test for this
  unreconciled difference (eg. a Re 10 +ve and Re 9 –ve may result in Re 1
  +ve).  Auditor to identify every
  difference

•  It is also essential to comment whether tax is
  due on this difference and if yes, whether tax has been discharged and the
  relevant tax period. If tax has not been discharged, auditor may consider
  reporting the same as additional liability

PART 7& 8 – RECONCILIATION OF TAXABLE TURNOVER

This part aims at moving
from the reconciled total turnover as per accounts to the taxable turnover as
reported in GSTR-9.  By this stage, the
accounting turnover has been brought to the level of total turnover as per
GSTR-9. Any difference arising in this reconciliation table would primarily
be on account of: (a) short-reporting of non-taxable turnover in GSTR-1 (say
interest income); or (b) short reporting of taxable turnover; (c) incorrect
reporting head.  In the author’s view,
it may be advisable to rectify any short reporting of non-taxable turnover
and reporting errors of GSTR-1 in GSTR-9 itself so one is left only with
items having a final impact on the tax liability.

Clause Description

Intricacies

Auditor responsibility/ working Papers

Adjustments/ Illustrations

7A. Annual Turnover after (+/-) adjustments above

Turnover as per accounts with the +/- adjustments

•  This is an auto-filled data field

NIL

NIL

7B. Value of Exempted, Nil rates, Non-GST
supplies, No-Supply turnover (-)

Non taxable items comprised in GSTR-9 are
reported there

•  Exempted refers to supplies arising from
  Notifications (Goods/ Services) u/s. 11 of the respective acts i.e. N-02/2017
  and 12/2017

•  Documentation of the list of exemptions availed
  and compliance of exemption conditions may be examined on sample basis

This turnover should be reported net of debit
notes/ credit notes as available from the books of accounts

• Turnover having partial exemption such as rate
  reduction of 18% to 5% or 0.1% or value reduction (in case of
  developers)  would not be reported here

•  Non-GST supplies imply supply of Non-GST
  products (such as petroleum)

•  No-Supply implies turnover covered under
  Schedule III i.e. sale of land, etc

•   Documentation
  of the reasons provided by the assessee for treating the turnover as Non-GST/
  No-Supply, etc.

7C. Zero-rated supplies without payment of tax
(-)

Export Supplies and Supplies to SEZ units/
developers

•  Export supplies of goods and services including
  to SEZ units / developers from accounts is to be extracted and reported here

•  Auditor needs to maintain the LUT as part of
  its working papers and broad parameters on which the assessee has treat the
  transaction as export – a sampling may be undertaken for verification

Same as above

• Tax type would be IGST even for same state SEZs

• Sample verification of SEZ status of customers
  may be carried out on the GSTN portal

7D. Supplies on which tax is to be paid on
reverse charge basis (-)

Turnover of suppliers under RCM

•  Supplies where the supplier records the
  turnover but does not pay the tax  are
  to be reported here

•  Auditor needs to maintain the notification
  under which the assessee has taken the stand that RCM is being discharged by
  recipient

•  Sample invoices for RCM declaration may be
  examined

•  Same as above

7G = 7F – 7E : Taxable turnover as computed above
and compared with the Turnover as per GSTR-9

There could be +ve/ -ve result

•  If everything has been captured above, 7G
  should ideally be NIL

•  +ve implies GSTR-9 taxable turnover is greater
  than accounting taxable turnover indicating tax refund

•  -ve implies GSTR-9 taxable turnover is lesser
  than accounting taxable turnover resulting in indicating tax payable

•  Credible explanation should be provided at item
  level for the difference

•  Auditor needs to ascertain all those cases
  where there is admittedly a tax liability which is payable but the same has
  not been considered by the assessee in its GST workings

•  Where the tax payer represents to have
  discharged the tax liability in subsequent year GSTR-3B, a categorical
  representation is important on this point.

There should not be any un-explainable difference
at this stage.

PART 9, 10 & 11 – RECONCILIATION OF RATE WISE LIABILITY AND AMOUNT
PAYABLE THEREON

This part aims at
reconciling the above adjusted taxable turnover at the rate level (as per
accounts) with the tax liability reported in GSTR-3B.  Since the accounting turnover has undergone
changes prior to this level, one would have to perform a rate classification
(exempt, 6%, 12%, etc) even for the adjustments made until this point.  Therefore, workings for the adjustments
should be maintained at an item level.
This part is also important to examine whether there is any excess
collection of taxes by the tax payer.
The tax GL of the tax payer is the primary source of data for this
clause.

 PART 12 & 13 – INPUT TAX CREDIT RECONCILIATION

This part performs an
analysis of the input tax credit availed as per accounts and that reported in
GSTR-3B.  The tax administration
expects that accounts are the sole basis for credit availment and hence
difference in accounting and receipt of goods/ services could be the primary
reason for any variance in credits. Practically, multiple errors have been
performed during the GST implementation.
This exercise is a good opportunity to rectify clerical errors (such
as claiming excess credit in a particular head) as well as eligibility errors
(such as blocked credits, year-end mandatory credit reversals, etc).  Importantly, this form should not be viewed
as a document to avail/ reclaim any missed credit or even adjust the same
with any output liability.

12A. ITC availed as per
audited financial statements for the state at GSTIN level

ITC ledger extracts for each GSTIN to be reported
here

•  Account extracts computing the aggregate of ITC as recorded in
  accounts would be reported here. This figure should be net of any reversals
  made in accounts on the input tax credit front.

•  Internal working should be made at the tax type level (CGST/ SGST or
  IGST) though the reporting is required to be done at the aggregate level.

• GSTR-2A reconciliation summary of the tax payer could be examined for
  completeness.

•  Working papers of rate wise input tax credit as per accounts vs.
  rate wise input tax credit used for GSTR-3B workings to be maintained.

•  Auditor to ascertain if input tax credit availed in a particular
  state is mapped to another state in accounting systems.

ITC availed in accounts but not claimed in any of the transition/GST
returns may be written off/ ignored.

ISD credit availed in GSTR-3B but availed at a different location in
accounts may come up here.

12B. ITC booked in the earlier financial years
and claimed in current financial year (+)

Transition Credit of earlier financial years to
be reported here

•   Transition return workings
  and the accounting treatment would have to be examined and reported here.

•  Cases of capital goods claiming credit in accounts during FY16-17
  but reported in transition returns would also be covered.

•  Auditor to document basis of claim of
  transition credit and the eligible duties/ taxes claimed u/s. 140.

Centralised Cenvat credit which is distributed
during transition may be adjusted appropriately.

12C. ITC booked in current financial year and
claimed in subsequent financial year (-)

ITC booked in accounts but availed in subsequent
financial year in returns

•  GSTR-3B workings and the ITC register as per accounts may be
  reconciled on a line-item basis and the difference may be reported here.

•  This ITC register data may also be compared with
  the ITC reported in GSTR-2A (Table 9 of GSTR-9).

• Auditor need not propose any disallowance of
  input tax credit availed in GSTR-3B merely on the ground of non-reporting of
  invoice in GSTR-2A.

• 
  Auditor need not particularly verify conditions of section 16(2) for
  reporting this figure.

All figures reported here should be net of any
reversals or vendor credit notes.

14. Reconciliation of ITC at description level

Ledger level break-up of ITC credit

•  This table appears to be a ledger-wise breakup
  of the expenses and the corresponding ITC reported in 12A/12B/12C.

•  Auditor would need to obtain ledger level data
  and extract the expenses under each ledger on which ITC has been availed.

Column 4 : Amount of eligible ITC availed represents
the actual ITC availed in accounts net of the adjustments in 12B/C at the
ledger level.

•  ITC from internal stock transfers which do not
  appear at a GL level may also be reported as a separate line item

•  Prima facie examination of ledger
  nomenclature / narrations may be adopted for checking eligibility

13 & 15. Reconciliation of ITC at ledger
level

Reasons for non-reconciliation to be provided
here

•  It is absolutely essential to reconcile the two
  turnovers to the last rupee to eliminate the possibility of compensating
  reconciling items

•  Auditor cannot adopt a materiality test for
  this unreconciled difference (eg. a Re 10 +ve and Re 9 –ve may result in Re 1
  +ve).  Auditor to identify every
  difference

Eg. Admitted reversals of input tax credit not
reversed in GSTR-3B; availment of credit without receipt/ accounting of
goods/ services; credit availed at the wrong GSTIN location

Parameter

Case – 1 : Delayed
reporting in 3B  & 1

Case – 2 : Delay in
reporting only in 1

Case – 3 : delay in
recognition

Original Invoice date

01-01-2018

01-01-2018

01-01-2018

Accrual of liability

January 2018

January 2018

January 2018 (*)

Debit note date/
Accounting entry

31-03-2018

31-03-2018

30-09-2018

Date of Reporting
additional turnover  in GSTR-9

Clause 10 certainly
capture this amendment

Clause 10 would capture
this amendment only at turnover level

Clause 10 would not
capture this and treated as 18-19 transaction

Date of Reporting
additional turnover  in GSTR-1

This would be a
reconciliation item at turnover and tax level for both 17-18 & 18-19

This will be a
reconciliation item only at turnover level for both 17-18 and 18-19

Transaction of purely
18-19 though accrual of liability in 17-18