The closure of accounts for March 2018 would entail extra burden on professionals in consulting firms and corporates. GST has mandated that every registered person whose turnover during a financial year exceeds Rs 2 crore shall get his accounts audited by a chartered accountant or a cost accountant, and submit a copy of the audited annual accounts and reconciliation statement to the department. It is codified that the process of filing would be electronic; however, nothing can be certain especially keeping in view the past performance of GSTN. We can only wish that GSTN comes up with online and offline tools without technical glitches soon, which would enable taxpayers in timely filing of tax returns.
Under the erstwhile central excise and service tax laws, there was no requirement for annual audit of accounts and furnishing annual reconciliation statement by an assurance firm. Some state VAT legislatures like Maharashtra, Gujarat, Karnataka, Andhra Pradesh and Madhya Pradesh required audit of records by a chartered accountant and filing of VAT audit reports with the department on an annual basis.
Reconciliation between the tax records and audited statement of accounts was generally sought at the time of assessment, audit or investigation by the tax department as there was no statutory requirement to furnish such annual reconciliation statements under the erstwhile laws.
GST audit is expected to be a detailed and comprehensive task, as the government intends to pass on higher responsibility and accountability on the professionals. This audit would require examination of records, returns and other documents maintained under GST or under any other law for the time being in force to verify the correctness of turnover, taxes paid, refunds and input tax credit. This audit would also be aimed at ensuring overall compliance with the provisions of GST and rules made thereunder.
Several other factors would add to the riskometer of assurance firms and corporates. Some of these factors would be more than 300 notifications over a period of nine months changing the basic structure of GST every now and then, suspension of vendor invoice matching mechanism, preparedness level of the accounting software in initial months, complex transactions like stock transfers, free samples, import of services from related parties, supplies without consideration, issuance of delivery challans to job workers, non-issuance of e-way bills, etc, which may not even appear in financial records.
Examination, review and reporting by auditors would be a time-consuming process, so trade and industry need to focus on pain areas and resolve the same before accounts are handed over to the auditor. In parallel, the auditor needs to start the job early and should equip itself with a professional team that is well-groomed on GST aspects so as to ensure prudence and diligence in audit and reporting thereof.
The government has still not notified formats for audit form, annual return and reconciliation statement, which needs to be submitted by December 31, 2018, for the year ending March 2018. Legitimately speaking, GST has given nine months to every taxpayer to prepare accounts, get them audited, reconciled, and then be filed with relevant forms to the department.
This being the first year of implementation, the pressure on trade and industry would be high especially when law has evolved and many changes were made since its implementation. Businesses are fishing in an unknown territory, and with the passage of time, it is getting darker and they are operating without night vision glasses. The government needs to be reminded of the Vishal Garg vs Union of India case, where the High Court of Punjab and Haryana directed the government to ensure that the forms etc which are to be prescribed for the audit report and for e-filing the returns should ordinarily be made available on the first day of April of the assessment year.
Audits under GST are inbound and time at hand is less. A three-way partnership between the auditor, auditee and the government is a must to win this battle, as the economy cannot suffer yet another mayhem after demonetisation and GST.
By Rajat Mohan