Goods and Service Tax Act, 2017 was implemented in July 2017. The idea of introducing Annual return was to correct any mistakes occurred in the periodical returns filed. Section 44 of the CGST Act, 2017 provides for furnishing Annual return in Form GSTR-9 while sub-section 5 of section 35 of CGST Act, 2017 provides for furnishing reconciliation statement in Form GSTR-9C.
1 EXTRACT OF SECTION WHICH DEALS WITH ANNUAL RETURN
Section 44 – Annual return — “(1) Every registered person, other than an Input Service Distributor, a person paying tax under section 51 or section 52, a casual taxable person and a non-resident taxable person, shall furnish an annual return for every financial year electronically in such form and manner as may be prescribed on or before the thirty-first day of December following the end of such financial year.
Provided that the Commissioner may, on the recommendations of the Council and for reasons to be recorded in writing, by notification, extend the time limit for furnishing the annual return for such class of registered persons as may be specified therein: Provided further that any extension of time limit notified by the Commissioner of State tax or the Commissioner of Union territory tax shall be deemed to be notified by the Commissioner
(2) Every registered person who is required to get his accounts audited in accordance with the provisions of sub-section (5) of section 35 shall furnish, electronically, the annual return under sub-section (1) along with a copy of the audited annual accounts and a reconciliation statement, reconciling the value of supplies declared in the return furnished for the financial year with the audited annual financial statement, and such other particulars as may be prescribed.”
2 EXTRACT OF SECTION WHICH DEALS WITH RECONCILLIATION STATEMENT
Section 35(5) – Reconciliation Statement – “Every registered person whose turnover during a financial year exceeds the prescribed limit shall get his accounts audited by a chartered accountant or a cost accountant and shall submit a copy of the audited annual accounts, the reconciliation statement under sub-section (2) of section 44 and such other documents in such form and manner as may be prescribed
Provided that nothing contained in this sub-section shall apply to any department of the Central Government or a State Government or a local authority, whose books of account are subject to audit by the Comptroller and Auditor-General of India or an auditor appointed for auditing the accounts of local authorities under any law for the time being in force”
From the above we can construe that filing GSTR-9 (Annual Returns) is mandatory for every registered person irrespective of their turnover during the financial year. And GSTR-9C (Reconciliation Statement) shall be filed by registered persons if their turnover during the financial exceeds the prescribed limits and the accounts shall be audited by chartered accountant or cost accountant.
3 THE FINANCE BILL, 2021
The Hon’ble Finance Minister presented the Union Budget 2021-22 on February 01, 2021. The Finance Bill seeks to omit sub-section 5 of section 35 of CGST Act, 2017 and to substitute section 44 of CGST Act, 2017.
3.1 EXTRACT OF CLAUSE 102 OF FINANCE BILL 2021
Section 44 of CGST Act, 2017 is sought to be substituted by the following:
“Every registered person, other than an Input Service Distributor, a person paying tax under section 51 or section 52, a casual taxable person and a non-resident taxable person shall furnish an annual return which may include a self-certified reconciliation statement, reconciling the value of supplies declared in the return furnished for the financial year, with the audited annual financial statement for every financial year electronically, within such time and in such form and in such manner as may be prescribed:
Provided that the Commissioner may, on the recommendations of the Council, by notification, exempt any class of registered persons from filing annual return under this section:
Provided further that nothing contained in this section shall apply to any department of the Central Government or a State Government or a local authority, whose books of account are subject to audit by the Comptroller and Auditor-General of India or an auditor appointed for auditing the accounts of local authorities under any law for the time being in force.”
4 ANALYSIS
This omission of subsection 5 of section 35 of CGST Act, 2017 and subsection 2 of section 44 of CGST Act, 2017 seeks to remove the requirement to have the accounts audited by a chartered accountant or cost accountant along with the requirement to for filing reconciliation statement prescribed under subsection 2 of section 44. i.e., GSTR-9C is no longer required to be filed.
The mandatory requirement of auditing and attesting the annual accounts is being replaced with the filing of annual return, which may include a reconciliation statement to be self-certified.
Originally the due date for furnishing GSTR-9C for FY 2019-20 was December 31, 2021. The due date was later extended to February 28, 2020. The due date for furnishing GSTR-9C for the FY 2020-21 as it stands now is December 31, 2021.
The Finance Bill is yet to receive the presidential assent. Upon receipt of the same, the Bill would be enacted, and the amendments will come into force. We would have to wait for clarity from GST Council to determine the FY from which GSTR-9C would no longer apply.
5 CONCLUSION
The GST Act, 2017 was implemented by subsuming various taxes and services both at central and state level. The erstwhile legacy taxes had their own way of monetary mechanism, which was wide, varied and tangential to each other. The GST as a mechanism was expected to be self-assessment based where major reliance was placed in the India Inc. itself.
As a part of Union Budget 2021, the government per basis of request from various quarters, have waived off the attestation by rescinding sub-section 5 of section 35 of CGST Act, 2017 and has now sought registered persons for self-attesting process instead.
This is nothing but a welcome move. We, however, need to await the contours of the return format being changed to accommodate the self-certification process.
Though there will not be any requirement to file GSTR-9C based on the proposed amendments to CGST Act, 2017, the requirement for filing GSTR-9C for FY 2019-20 and FY 2020-21 needs to be examined.
Based on the present circumstances, it is expected that GSTR-9C for FY 2019-20 would continue and will not be done away with. Further, CBIC has tweeted about the continuation of existing provisions for FY 2019-20 in respect of GSTR-9C. It is unclear whether GSTR-9C would be required to be filed for FY 2020-21. We would have to wait for an official communication on this matter after the Finance Bill receives presidential assent.