More than a year has passed, since the NDA Government rolled out the Goods and Services Tax (GST), on 1 July, 2017. The introduction of this indirect tax regime marked the end of over a decade of squabbling, where politicians struggled to build accord across party lines. Heralded as India’s greatest tax reform, the aim of the GST was to free Indians from multiple taxes and setting the base for a unified common market — One Nation, One Tax, One Market.

However, with the introduction of GST came multiple challenges related to implementation both at the organisation and the country level. Some of the common challenges that organisations faced post GST implementation were change in business processes, change in product pricing, Tax positions, Transition and Compliances. However, to ensure the unbroken implementation of GST law on notified entities, the Government entrusted on Chartered Accountants and Cost Accountant to conduct audit and submit report under the notified form. Instance, the Section 35(5) read with Section 44 and Rule 80(3) of Goods and Services Tax (GST) Laws, provides that every registered person, whose aggregate turnover during a financial year exceeds two crore rupees, is required to get its accounts audited. In GST, there are 3 types of audits, Audit by Chartered Accountant or Cost Accountant, Audit by Department and Special Audit.

The copy of auditedannual accounts and a reconciliation statement, duly certified, in Form GSTR-9C has to be submitted on or before the 31st Day of December (extended to 30th June 2019for FY 2017-18 by Government in its 31st GST council meeting) by the tax payer. In this regard, the Government has also notified Form comprising of reconciliation statement, certification, records, returns and other documents maintained by the registered person to verify the correctness of declared turnover, taxes paid, refund claimed and input tax credit availed and to assess his compliance with the GST provisions. With the higheremphasis on compliancesby Government and the comprehensive reporting burden on companies, GST reconciliations and documentations will not be an easy task, butGST audit allows companies to self-examine the tax positions taken and allow improving the same for next year. To ensure timely and efficient compliance of GST audit, companies should appoint their GST auditor, plan way forward, start gathering documents, and create internal controls for been GST law compliant.

It’s important that companies start preparing for these audits in order to avoid any loss of credits, applicability of interest/penalties, etc. Some of the key aspects to be considered by companies during audit should be:

Reconciliations: Ensure reconciliations of output tax/input tax between the books of accounts, returns and e-waybills issued;

Taxpositions: Review the tax positions adopted and also whether these are correctly reflected in documentation;

Credits: Review if any ineligible credits have been availed and, in the process, also ensure completeness of credits;

Reverse Charge: check all inward supply of goods or services which are covered under reverse charge mechanism and whether tax has been remitted in capacity of recipient of supply, where required;

Export/RFD01: check the option selected to supply for export without payment of integrated tax and has paid the tax or vice versa.

Also, it is essential to take make note of the sector wise considerations during the GST audit. Some of these include:

Banking /NBFC Sector — Reversal of ITC in according to the rule 38 of the CGST Act, 2017, & time limit for issuance of Invoice is 45 days (Instead of 30 days as per general rule).

E-Commerce Sector — E-commerce aggregators are made responsible under the GST law for deducting and depositing tax at the rate of 1% from each of the transaction. Any dealers/traders selling goods/services online would get the payment after deduction of 1% tax. It is a significant change which would increase a lot of compliance and administration cost for online aggregators.

Exporters- Exporter will export under the Letter of Undertaking (LUT) that would be valid for a financial year or Bond, or with payment of tax. Filling of RFD-01 for claiming the Input tax credit paid on the inward supplies.

Real Estate Sector — Sale of immovable properties before or after completion certificates are issued, sale of property under the credit linked subsidy scheme. Reconciliation will be an issue because builders recognise the income based of percentage completion method as per IND-AS which is not in line with time of supply as per GST.

Presumptive Taxpayers (Life Insurance companies, Travel Agents) — Turnover in Financial statements would be different from turnover in GST.

Sectors where outward supplies are exempted (Like Power Sector, Universities) -Focus on Reverse charge mechanism liability to be discharged.   

Apart from the above, there are numerous issues which taxpayers might face during audit depending on the nature of business. Therefore it is well suggested that taxpayers should start working on annual GST return with their auditors in order to execute the compliances well before time.

(The article is contributed by CA Maneet Pal, IP Pasricha & Co, Partner. Views expressed are personal)