As per a recent update, the Institute of Chartered Accountants of India has requested the Central Government to bring back the audit and certification provisions associated with GST annual returns.
The institute said the scrapping of audit and certification provisions would hamper compliance. As per the official statement, ICAI said “Eliminating audit would lead to massive disruption in compliance resulting in demand notices and burdening taxpayers with taxes, GST interest and penalties, which could have been avoided had there been a system of audit to identify defaults in a timely manner. Litigation will also increase due to errors which will be left unresolved till the departmental audit is conducted,”.
The ICAI recommended that the modifications made to the Central GST Act via the Finance Act last year need to be drawn. On the other hand, it suggested that the certification by a chartered accountant of annual accounts audited and reconciliation statements need to be reinstated in law. The reason behind it is that a GST audit by a CA ensures taxpayer compliance and eliminates any revenue leakage risks.
Accounting and GST law recognize revenue differently. Financial statements are prepared as per ‘accrual system’, whereas GST follows a very different type of ‘time of supply’ based system of GST payment. It needs to be noted that, even the financial statements are composed differently depending on the nature of the entity based on the applicable standards.
“ICAI further added that Thus, it is necessary that the reconciliation statement be attested by a Chartered Accountant who is proficient in both the accounting aspects and the GST Law,.”
This self-attested statement is to harmonize the value of supplies announced in the return submitted for the financial year with the audited annual financial statement. It puts an obligation on the taxpayer to provide true and accurate details while filing the annual return. Its purpose was to promote voluntary compliance and improve the ease of doing business. The change is applicable for the fiscal year 2021 and onwards.
