GST Annual Returns & Reconciliation

GST Annual Returns & Reconciliation refer to the process by which businesses in India must file an annual return for Goods and Services Tax (GST) purposes. This filing provides an overview of all transactions, taxes paid, and the reconciliation of GST liabilities with the actual books of accounts. Here's an overview of both concepts

1. GST Annual Returns (GSTR-9 and GSTR-9C)

The GST Annual Return is a consolidated summary of all GST-related transactions during the financial year. There are two key forms under the GST system:

a) GSTR-9 (Annual Return):

Who needs to fileIt is mandatory for taxpayers who are registered under GST, except for:

• Taxpayers whose turnover is less than Rs. 2 crore (under specific conditions).
• Input Service Distributors (ISDs).
• Composition scheme taxpayers.
• Non-resident taxable persons, etc.

ContentIt covers details of:

• Outward and inward supplies (sales and purchases).
• GST paid and claimed (ITC – Input Tax Credit).
• Taxable value and GST paid.
• Reconciliation of GSTR-3B (monthly returns) with the annual return.

Due DateTypically, the GSTR-9 must be filed by 31st December of the subsequent financial year.

b) GSTR-9C (Reconciliation Statement):

Who needs to fileGSTR-9C is required for taxpayers whose aggregate turnover exceeds Rs. 5 crore in the financial year.

ContentIt consists of two parts:

• Part A: Reconciliation of financial statements with the GST returns filed (reconciles the profit and loss statement with GST returns).
• Part B: Certification by a chartered accountant or cost accountant regarding the correctness of the reconciliation and the financial statements.

Due DateSame as GSTR-9, usually 31st December.

2. GST Reconciliation

Reconciliation in the context of GST is the process of matching and ensuring that the business’s financial records (books of accounts) align with the details provided in the monthly/quarterly returns and the annual returns.

Types of GST Reconciliation:

a) GSTR-3B and GSTR-9 Reconciliation:

GSTR-3B is the monthly/quarterly return filed by taxpayers to report outward supplies and pay tax. The reconciliation between GSTR-3B and GSTR-9 involves comparing the tax liability and Input Tax Credit (ITC) claimed in both forms. It ensures that the tax paid in GSTR-3B matches the tax reported in the annual return (GSTR-9), and any differences are rectified.

b) Books of Accounts and GST Returns Reconciliation:

Businesses should reconcile their books of accounts (such as sales registers, purchase registers, etc.) with their GST returns. This ensures that every transaction is recorded in both the books and the GST returns. Any discrepancies must be addressed, including:

• Missing invoices.
• Errors in reporting sales and purchases.
• Mistakes in calculating GST liabilities.
• Incorrectly claimed ITC.

c) GST ITC Reconciliation:

The reconciliation of Input Tax Credit (ITC) involves checking if the credit claimed in GSTR-3B matches the credit available in GSTR-2A/2B. Any discrepancy must be investigated and rectified, such as non-reporting by suppliers or mismatch in claimed ITC.

d) Auditor’s Role in Reconciliation:

For businesses with an annual turnover exceeding Rs. 5 crore, GSTR-9C requires a chartered accountant or a cost accountant to verify the reconciliation between financial statements and GST returns. The auditor will assess whether the reported transactions, GST liabilities, and ITC are in accordance with the GST laws and ensure that the tax return is accurate.

3. Importance of GST Annual Returns & Reconciliation

• Compliance with GST Law: Ensures that the business complies with GST regulations by filing the correct tax returns.
• Avoids Penalties: Non-compliance can lead to penalties, interest, or legal actions. Proper reconciliation ensures that businesses avoid such penalties.
• ITC Utilization: Proper reconciliation helps ensure that businesses claim the correct amount of Input Tax Credit (ITC), preventing errors in credit claims and reducing the risk of future liabilities.
• Transparency: Annual returns and reconciliation ensure transparency, accuracy, and the completeness of tax filings.
• Auditor Certification: GSTR-9C ensures that the reconciliation is checked and certified by an auditor, providing assurance to tax authorities that the GST returns are correct.

4. Key Points to Remember:

• Timely Filing: GSTR-9 and GSTR-9C must be filed within the prescribed due date to avoid penalties.
• Matching of Data: Ensure that all data matches between the GST returns (GSTR-1, GSTR-3B) and the financial records.
• Avoid Mistakes in ITC Claims: Ensure that ITC is only claimed for valid invoices and matched with GSTR-2A/2B.
• Reconciliation: Regular reconciliation (monthly or quarterly) helps prevent errors at the year-end, making filing the annual return smoother.