GST AUDIT - SEC.35(5) -Rule 80(3) -Form GSTR 9C

Let us understand the GST
BASIC CONCEPTS OF GST AUDITS & RECONCILIATIONS

What is Audit?
Section 2(13): “Audit” means :
examination of records, returns and other documents maintained or
furnished by the taxable person under this Act or rules made there under or
under any other law for the time being in force to verify, inter alia, the
correctness of
- turnover declared,
- taxes paid,
- refund claimed and
- input tax credit availed, and
to assess his compliance with the provisions of this Act or rules made there
under.

Kinds of Audit under GST?
Audit by tax
authorities
Special Audit
Annual Audit
by CA/CWA
CAG Audit

Sec. 35(5) Annual Audit
Every registered taxable person whose turnover during a financial year
crosses the threshold limit shall get his accounts audited by
Chartered Accountant or
Cost Accountant
Audited Accounts and reconciliation – Sec-44(2)
Contents of the audit report
Time limit – Filed along with Annual return. – 31st December

Rule -80(3) Annual Return
(3) Every registered person whose aggregate turnover during a
financial year exceeds two crore rupees shall get his accounts
audited as specified under sub-section (5) of section 35 and he shall
furnish a copy of audited annual accounts and a reconciliation
statement, duly certified in form GSTR-9C.
(6) “aggregate turnover” : means the aggregate value of all taxable supplies (excluding
the value of inward supplies on which tax is payable by a person on reverse charge
basis), exempt supplies, exports of goods or services or both and inter-State supplies
of persons having the same Permanent Account Number, to be computed on all India
basis but excludes central tax, State tax, Union territory tax, integrated tax and cess;

FAQS – APPLICABILITY OF GST AUDIT
1) Question: I am registered entity in 3 states and my
aggregate turnover is more than Rs 2 crore but my
standalone turnover in each state is less than Rs.2 Crore.
Whether I am required to do GST audit in the present
situation?

Answer : Lets answer the above question analysing the section and rules applicable ,
Section 35(5) commences with the expression “every
registered person whose turnover during a financial year
exceeds the prescribed limit”
Rule 80(3) uses the expression “every registered
person whose aggregate turnover during a
financial year exceeds two crore rupees”.

2.Question: Whether turnover means turnover as per accounts
or turnover declared in GST returns?
The turnover definition speaks of value of the supplies :
• The term ‘value’ is defined u/s 15 of the Act read with Rule 27 to 35 of CGST Rules
• Late filing fees for delay in submission of annual return is computed as percentage to
turnover in the State
• Example – Inter state branch transfers do not form part of turnover reflected in accounts.
However, it is a supply liable to tax under GST legislation

3.Question: Whether value of supply would mean taxable value
of the supply or invoice value of supply ?
Rule 32 prescribes presumptive valuation for following suppliers and hence their turnover
as per accounts would be much higher than the turnover as per the GST returns:
• Forex dealers and money changers [Rule 32(2)]
• Air travel agents [Rule 32(3)]
• Life insurance companies [Rule 32(4)]
• Dealers in second hand goods [Rule 32(5)]
Whether one has to take actual turnover or presumptive value for considering threshold
limit? • In GSTR 1 Return (Row No. 4 – taxable outward supplies), the assesse is obliged to
declare value as per Invoice raised and also taxable value of such invoice

4. Question: Does turnover of April to June 2017 will be
included for calculating turnover limit under section 35(5) ?
Answer: For the financial year 2017-18, the GST period comprises of 9 months
whereas the relevant section 35(5) uses the expression financial year;
Therefore, in the absence of clarification from government, also to avoid any cases
of default, it is reasonable to understand that to reckon the turnover limits
prescribed for audit i.e., Rs. 2 crores one has to reckon the turnovers for the whole
of the financial year which would also include the first quarter of the financial year
2017-18.

5. Question : If entities required to be audited under any other
statutes like Companies Act, Income-tax Act, Co-operative
Societies Act, etc., are still required to get audit done under
sec.35(5) ? Does the auditor can be same or different for audit
under different statutes?

Answer : Combined reading of the section 35(5), 44(2) along with forms notified, give
rise to two situations, first being entities not required to be audited under any other
statute in which case audit has to be carried out in terms of Section
35(5) and reconciliation statement to be drawn under Section 44(2) duly certified.
The second situation being entities required to be audited under any other statutes like
Companies Act, Income-tax Act, Co-operative Societies Act, etc., When the records of the
entity is audited under any other statute, the reconciliation statement can be drawn up
by the same auditor, who also certifies the same if auditor happens to be Chartered
Accountant. Alternatively, the reconciliation statement can be drawn up and certified
by another Chartered Accountant or Cost Accountant.

Section 44(2) – Submission of Annual Return
-Every registered person required to get his accounts audited under Provisions of Section
35(5)
• Shall furnish electronically, the annual return
• along with audited annual accounts; and
• A reconciliation statement, reconciling value of supplies declared in a return furnished for
the financial year with the audited annual financial statements; and
• Such other particulars as may be prescribed
• Section 44(2) requires the auditee to furnish a reconciliation statement in Form GSTR 9C
reconciling annual return with audited annual financial statement

GSTR-9C – NN – 49/2018 -13th September 2018
“FORM GSTR-9C”
Rule 80(3)
“PART – A”
Reconciliation
Statement
“PART – B”
CERTIFICATION

“PART – B”
CERTIFICATION
Certification in cases where the
reconciliation statement (FORM GSTR-
9C) is drawn up by the person who had
conducted the audit
Certification in cases where the
reconciliation statement (FORM GSTR-
9C) is drawn up by a person other than
the person who had conducted the audit
of the accounts

“PART – A” Reconciliation Statement
PART PARTICULARS PURPOSE
I Basic Details • Capturing Basic Details
II Reconciliation of turnover declared
in audited Annual Financial
Statement with turnover declared
in Annual Return (GSTR9)
• Find Unreconciled Turnover, reason
thereof and additional Liabilities
III Reconciliation of Tax Paid • Reconciliation of rate wise liability and
amount payable thereon ,
• Reasons for un-reconciled payment of
amount,
• Additional amount payable but not
paid (due to reasons specified under
Tables 6,8 and 10 above)

“PART – A” Reconciliation Statement
PART PARTICULARS PURPOSE
IV Reconciliation of Net
Input Tax Credit (ITC)
availed as per Books of
accounts with ITC
Claimed in GSTR-9
• Reasons for un-reconciled difference in ITC
• Reconciliation of ITC declared in Annual Return
(GSTR9) with ITC availed on expenses as per
audited Annual Financial Statement or books of
account
• Tax payable on un-reconciled difference in ITC
(due to reasons specified in 13 and 15 above)
V Auditor's
recommendation on
additional Liability due
to non-reconciliation

• GSTIN Wise Trial
Balance &
Financial
Statement .
• Schedule I –
Extended
Procedure –
Stock transfer –
Eway Bill / DC
• Cross Charge /
ISD

It may be noted that nothing contained in this publication should be regarded
as our opinion and facts of each case will need to be analysed to ascertain
applicability or otherwise of the topics covered in this publication. Appropriate
professional advice should be sought for applicability of legal provisions based
on specific facts. We are not responsible for any liability arising from any
statements or errors contained in this publication.
CA RAMANDEEP SINGH BHATIA
National Empanelled Faculty for GST IDTC New Delhi
Faculty National Academy of Customs & Indirect Tax & Narcotics (NACIN)
FCA, DISA, B.COM , CS. (EXE), CERT. IFRS, CERT. IDT, CERT. CBA
caramandeep.bhatia@gmail.com
facebook.com/ca.ramandeepbhatia
Twitter.com/@caramandeep

GST AUDIT - SEC.35(5) -Rule 80(3) -Form GSTR 9C

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