An attempt to summarize the crucial aspects of maintaining records under GST is made. Apart from this, the presentation includes all types of audits proposed under GST regime. The system of return filling that the Group of Ministers are finalising together with GSTN officials and stakeholders is also included in the presentation. It also includes issues that may arise during filling of annual return and reconciliation statement.

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3 A’s of GST
Speaker – CA Sandesh Mundra
Audit
Annual
Return
Accounts

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Contact - 9426024975
Prepared by Sandesh Mundra & Associates
1
Maintenance of Accounts and records under GST

3. Prepared by Sandesh Mundra & Associates
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• For Production/manufacture/Inward /outward supply of goods or services or both
• Stock of goods – Separate details for goods stolen, destroyed, return of, free samples etc.
• Input tax credit availed/Output tax payable and paid
• Advances received, paid and adjustments
• Goods or services imported or exported
• Supplies attracting payment of tax on reverse charge
Accounts /Records for every Principal and Additional place

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• Names and addresses of suppliers/customers
• Premises and description where goods are stored
• Register of tax invoice, credit note, debit note, and delivery challan issued or
received during any tax period
• For warehouse/godown operators – Unregistered
• Details electronically in Form GST ENR-01
• Separate records for goods transported, delivered and stored (all branches)
Accounts /Records for every Principal and Additional place

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• For agent – Authorisation received, purchase/sales made, tax paid and
accounts with principal.
• For manufacturers - Monthly production accounts with quantitative details of
inputs/services/finished products/waste and by-products
• For service providers - Quantitative details of goods used in provision of
service and details of input services utilized and services supplied
• For works contractors - Name and addresses of principal and suppliers, details
of goods/services received/utilized, description of payment received for each
contract
Accounts /Records for every Principal and Additional place

6. Prepared by Sandesh Mundra & Associates
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Issues in maintaining books as per provisions
• Books related to every additional place to be maintained therein
• If goods/services not accounted then the officer can initiate proceedings u/s
73,74
• Maintenance of accounts for scrap and wastage might be difficult for
industry having huge amount of normal loss

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Issues in maintaining books as per provisions
• Any entry not to be erased, effaced or overwritten, and all incorrect entries,
otherwise than those of clerical nature, shall be scored out under
attestation and thereafter the correct entry shall be recorded and where the
registers and other documents are maintained electronically, a log of every
entry edited or deleted shall be maintained
• Every agent to maintain particulars of authorisation received by him from
each principal
• A works contractor is supposed to maintain project wise accounts

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 Books of Accounts shall be retained
until expiry of 72 months from the
due date of furnishing of annual
return for the year pertaining to such
accounts and records.
Period of Retention of accounts and records

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2

10. Prepared by Sandesh Mundra & Associates
Email – Sandesh.mundra@smaca.in
Contact - 9426024975
Every
Registere
d Person
ISD
TDS
Deductor
TCS Collector
Casual
Taxable
Person
Non-
Resident
Taxable
Person
Other
than
File
Annual
Return
On or
Before
31st Dec
of Next FY
In
Form
GSTR-9
Who to file?

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Form of Annual Return for
Composition Tax Payer is
FORM GSTR – 9A
Form GSTR 9A

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Form of Annual Return
for person collecting
tax at source u/s 52 is
FORM GSTR – 9B
Form GSTR 9B

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Form 9C is like Form 3CA of
tax audit
Form 9D is like Form 3CD
of tax audit
Form GSTR 9C and 9D

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Suggest format for Form GSTR 9
Annual return not
merely a compilation
of all returns but is a
return on the basis of
audited/unaudited
final figures

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October VS December
Time limit for declaring details of debit note/ credit note and for taking
input tax credit to lapse in October, whereas annual return can be
furnished by end of December. Where any discrepancies are noted during
the course of the GST audit post September, it appears that no recourse
would be available to the auditee.

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Some more relevant points
Circular No. 42/16/2018-GST dated 13.04.2018 – Form PMT - 01
• Wrong carry forward of credit to be paid back by credit/cash.
• If in any appeal/proceedings, tax becomes payable then, tax arrears of
earlier regime to be recovered as per the provisions of CGST Act
• Tax/Interest/Penalty/Late fees on non/short payment/wrong utilization of
credit to be paid in cash .

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Some more relevant points
Circular No. 33/07/2018-GST dated 23.02.2018
• Carried forward disputed credits (for which any appeal/assessment
proceeding is pending) should not be utilised
• Blocked credit should not be carried forward and if carried forward should
not be utilised.
• If amount of above credits is more than Rs. 10 Lakhs then, undertaking on
this account to be submitted by assesse.

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Late fee on late filling of annual return
Section 47(2) Any registered person who fails to furnish the return
required under section 44 by the due date shall be liable to pay a late
fee of one hundred rupees for every day during which such failure
continues subject to a maximum of an amount calculated at a quarter
per cent. Of his turnover in the State or Union territory.

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Why there was a need of reconciliation?
• In the system of self assessment, why Govt. felt the need of
asking reconciliations from assesse in the first place?
• Are assesse being questioned for glitches faced because of
revenue system failure?

20. Prepared by Sandesh Mundra & Associates
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Tedious exercise
Accountings standards not in sink with GST.
• Non reporting of ineligible purchases in GST Vs booked in accounts
• Non reporting of WIP in returns but claiming credit in Tran 1 Vs different
methodology for booking WIP in books
• Credit claimed by job-worker but stock booked in accounts of principal
• Taxes paid in finance lease and shown as input service in returns but booked as
capital asset in books
• Machinery purchased on hire purchase capitalized but credit not claimed
• Accounting Vs Time of supply

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Validity……???????
• Madras High Court Judgement in case of Firm Foundations & Housing Pvt.
Ltd Vs Principal Commissioner – When tax is to be discharged on account of
point of taxation taxability cannot be determined as per books of accounts
maintained as per accounting standards

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Issues in reconciliation of turnover in annual return
For transactions on which Service tax and VAT was levied, different
taxable turnover shown in earlier regime returns. In GST, single
return to be filed. Any implications?

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Issues in reconciliation of turnover in annual return
Duplication of turnover because of Section 142(11)(c). How to
reconcile?

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Turnover in GSTR-3B
is Rs. 2 Lakhs
Turnover in GSTR-1 is
revised as Rs. 3 Lakhs
ITC availed on
common supplies was
reversed at the time
of filing GSTR-3B
No table in GSTR-1 for
ITC reversal
At the time of Annual
Return
How such reversal
will be treated since
turnover has been
changed
Will there be any difference in
monthly adjustment of ITC
against annual adjustment?
 Mr. A was supplying both taxable as well as exempt supplies. Details of
transaction are as below.
Issues in reconciliation of turnover in annual return

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What will be the treatment of
ITC of Krishi Kalyan Cess
availed in FORM TRAN-1,
which was subsequently
reversed?
Issues in reconciliation of turnover in annual return

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RCM from URD was
covered u/s 9(4). The
same has been deferred
from 13.10.2017 till Jun
2018. What will be the
treatment of such
transactions in annual
return?
Issues in reconciliation of turnover in annual return

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FORM TRAN – 1 is again opened
for identified tax Payers
How to report the transaction of
ITC claimed through such revised
TRAN-1
Issues in reconciliation of turnover in annual return

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How to report in
FORM GSTR-9
Ineligible Credit
Blocked Credit
• Shown in GSTR-3B
• Not Shown in GSTR-3B
What if such
Credits are
taken in FORM
TRAN-1
Issues in reconciliation of turnover in annual return

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Return of July to
December not
filed
Can annual
return be filed
in such case?
Issues in reconciliation of turnover in annual return

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 How the refunds claimed will be adjusted in
annual return?
Issues in reconciliation of turnover in annual return

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 Credit note was received from the supplier and such
ITC was deducted at the time of receipt of credit note.
What will be the consequences if the supplier has not
shown such credit note in his return?
Issues in reconciliation of turnover in annual return

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 If any barter or exchange transaction appeared in the books,
which was not reported while filing GSTR-1 or GSTR-3B, where to
report such transactions?
Issues in reconciliation of turnover in annual return

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• Mr. A migrated from old regime to GST. In august, Mr. A
came to know that his registration is cancelled due to
some reasons. In September, he again applied for fresh
registration.
• Portal allowed him to file returns (GSTR-3B as well as
GSTR-1) from the month of September.
• What will the treatment of sales and purchases of July &
August, which were not reported in any of the returns.
Issues in reconciliation of turnover in annual return

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Whether any changes pertaining to earlier return
needs to be updated in subsequent GSTR 3B or in
actual GSTR 1?
Issues in reconciliation of turnover in annual return

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If invoice and advances received both fall in the
same month, then whether such details need to
be disclosed under the head of advances or as
invoice?
Issues in reconciliation of turnover in annual return

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Mr. Z migrated to GST as on 01.07.2017. However, due to
falling into the threshold of basic exemption, he
cancelled registration in December 2017.
Is he liable to file annual return for 6 months when he
was fulfilling all the compliances as a registered person?
Issues in reconciliation of turnover in annual return

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What future holds for compliances?
Fusion of both the models (simplicity of operation and design).
• Continuous facility of adding/viewing invoice
• Recipient can lock invoice after which seller can’t edit/delete
• System will draft Monthly return based on supply data uploaded and
inward supply accepted. Annexures will contain these details and
data on B2C, CN/DN, RCM purchases etc. fed by taxpayer.

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What future holds for compliances?

39. Prepared by Sandesh Mundra & Associates
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What future holds for compliances?
• Input tax credit on the basis of acceptance of invoice.
• Credit linkage to payment of tax retained (No change in
law)
• A semi-automatic process of ITC reversal through
administrative order.
• Suppliers after a certain threshold to making RC inactive
for non-filing of return by defaulting sellers.

40. Prepared by Sandesh Mundra & Associates
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What future holds for compliances?
• Provisional Credit increases revenue risk and adds to complexity
/ compliance burden and not recommended.
• Automatic reversal through filing of additional return forms will
increase burden on the tax payers
• A semi-automatic process of ITC reversal through administrative
order has minimal revenue risk with Simplicity for the tax payer.

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42. Prepared by Sandesh Mundra & Associates
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Types of audit under GST
GST
Audit
Yearly
Audit
Audit by
authoriti
es
Special
Audit

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• Every registered person
• Whose aggregate turnover exceeds two crore rupees
• Shall get his accounts audited and
• Furnish a copy of audited annual accounts and
reconciliation statement
• In FORM GSTR-9C
1. Yearly Audit

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Interpretation of aggregate turnover
To include:-
Taxable, exempt, export, not-taxable
Does not include:-
Not a supply, GST tax component and purchases on RCM basis
Points to keep in mind:-
1. Turnover from July, 2017 for 17-18 computed for one PAN on
all India basis (in one state no turnover but in other State
turnover > 2 Crore Audit is required in both States)
2. State wise audit

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Points to be kept in mind for auditing
• Scope not confined only to books of accounts
• Special attention to transactions not accounted
• Restrictions and conditions mentioned in Standards of Auditing and ICAI
guidelines to be adhered to
• No clarity for the nature of audit report like tax audit report or a certificate
like in case of VAT audits.
• For a certificate, responsibility of auditor to be substantially higher.

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Responsibility of an auditor
Lord Justice Lopes in respect of an auditor's duty of care, in the landmark case of Kingston
Cotton Mills Co. (1896):
"It is the duty of an auditor to bring to bear on the work he has to perform that skill, care
and caution which a reasonably careful, cautious auditor would use. What is reasonable
skill, care and caution must depend on the particular circumstances of each case. An
auditor is not bound to be a detective, or, as was said to approach his work with suspicion,
or with a forgone conclusion that there is something wrong. He is a watchdog, not a
bloodhound. He is justified in believing tried servants of the company in whom confidence
is placed by the company. He is entitled to assume that they are honest and rely upon their
representations, provided he takes reasonable care."

47. Prepared by Sandesh Mundra & Associates
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Year end documents
Annual Return
– GSTR 9
Audit Report
– GSTR 9C
No format
notified by
Govt. as of
now

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Earlier Proposed Audit Report Format

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Speculative Audit Report Format

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• No specific penalty prescribed for not getting the accounts audited
• As per Section 125 general penalty upto 25,000/-
Penalty for failure of audit

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2

52. Prepared by Sandesh Mundra & Associates
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Sec 65
(1)
The Commissioner or any officer
authorised by him, by way of a general or
a specific order, may undertake audit of
any registered person for such period, at
such frequency and in such manner as
may be prescribed.
Audit by tax authorities

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Intimation
 The registered person shall be informed
by way of a notice not less than fifteen
working days prior to the conduct of audit
in such manner as may be prescribed.
Sec 65
(3)
Rule
101 (2)
 The notice shall be issued in FORM GST
ADT-01

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Period of Completion of Audit
Sec 65
(4)
Commissioner, for reasons recorded
in writing, extend the period by
further six months
Explanation.–– “Commencement of audit” shall mean date on which records and documents
are made available or actual institution of audit at the place of business, whichever is later.
Shall be completed within a
period of three months from
the date of commencement
of the audit:

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Audit Report
Section 65 (6)
Proper officer, within thirty
days to inform the
registered person, about
the findings, his rights and
obligations and the reasons
for such findings.
Rule 101 (5)
Audit Report to be
furnished in FORM
GST ADT-02

56. Prepared by Sandesh Mundra & Associates
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Consequences of Audit
Result of Audit
Tax not paid
Tax short
paid
Tax
erroneously
refunded
ITC wrongly
availed and
utilised
Intimation under section 73 or section 74 by
proper officer
Sec 65 (7)

57. Prepared by Sandesh Mundra & Associates
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Issues
Case : A notice for audit was served to M/s. ABC
Ltd, on 20.02.2020. Required information was
given by M/s. ABC Ltd, on 25.05.2020. The audit
officers visited the place of business on 26.06.2020.
What is the last date within which the audit is to be
completed?

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3

59. Prepared by Sandesh Mundra & Associates
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If Assistant
Commissioner is
of opinion
At any stage of
scrutiny, inquiry,
investigation or
any other
proceeding
That value has
not been
correctly
declared
Or credit availed
is not within
normal limits
AC with prior
approval of
Commissioner
Direct such
registered person
to get his books
of accounts
audited
By CA or Cost
Accountant, as
nominated by
Commissioner
Notice of Audit by CA or Cost Accountant
Sec
66 (1)

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Officer shall
issue
directions
To the
registered
person
In FORM GST
ADT-03
For audit of
his records
By Chartered
Accountant or
Cost
Accountant
Direction to Registered Person for Audit
Rule
102 (1)

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Submission of Report by CA or Cost
Accountant
Section 66 (2)
Audit report shall
be submitted by
CA or Cost
Accountant
Within 90 days*
To Assistant
Commissioner
* The period of 90 days can further be extender upto next 90 days by Assistant
Commissioner on application by such registered person or Chartered
Accountant or Cost Accountant.

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Section 66 (3)
The provisions of sub-section (1) shall have effect
notwithstanding that the accounts of the registered
person have been audited under any other
provisions of this Act or any other law for the time
being in force.
Special audit is additional

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Opportunity of being heard
shall be granted
In respect of material gathered
by way of special audit
Section 66 (4)

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Remuneration of Auditor
Expense of
examination and
audit of records
Including
remuneration of
such CA or Cost
Accountant
Shall be
determined and
paid by
Commissioner
Such
determination
shall be final
Sec 66
(5)

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Consequences of Audit
Result of Audit
Tax not paid
Tax short
paid
Tax
erroneously
refunded
ITC wrongly
availed and
utilised
Intimation under section 73 or section 74 by
proper officer
Sec 66 (6)

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Conclusion of Audit
 On conclusion of the special
audit, the registered person
shall be informed of the
findings of the special audit in
FORM GST ADT-04.

67. Prepared by Sandesh Mundra & Associates
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Challenges we will face for 2017-18
• VAT audit for first quarter and GST audit for next three quarters
• Lack of clarity in the GST law
• Frequent changes and more than 300+ notifications
• Failure of the matching concept – is it possible to identify if supplier has failed
to remit taxes to determine eligibility of credits
• Complex procedural compliance under GST
• Absence of / incomplete mandatory records
• Chances of high volume of procedural lapses and non-compliances
• Incorrect documents / documentation procedures
• Transitional issues

68. Prepared by Sandesh Mundra & Associates
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Contact - 9426024975
 079-40032950
 09426024975
304, Super Plaza,
Near. Prakash High School,
Sandesh Press Road, Vastrapur,
Ahmedabad - 380 054
www.smaca.insandesh.mundra@smaca.in
Sandesh Mundra & Associates
Chartered Accountants