Reinstatement Audit Provisions Under GST Laws: Representation related to deletion of GST Audit
KARNATAKA STATE CHARTERED ACCOUNTANTS ASSOCIATION (R)
Date : 5th March, 2021
Smt NirmaJa Sitharaman
Hon’ble Chairperson, GST Counci1
15, Safdarjung Road
New Delhi – 110001
SUBJECT: REPRESENTATION SEEKING REINSTATEMENT Of AUDIT PROVISIONS UNDER GST LAWS
The Karnataka State Chartered Accountants Associations(R) (in short ‘KSCAA’) is an Association of Chartered Accountants registered under the Karnataka Societies Registration Act in the year 1957. KSCAA is primarily formed for the welfare of Chartered Accountants and represents before various regulatory authorities to resolve the problems/ hardships faced by Chartered Accountants and the business community.
At the outset, we congratulate and applaud the sincere efforts of the Union Government and your goods selves for undertaking and laying down a progressive optimistic and growth-oriented Union Budget 2021-22 which has all enables to transform India into a truly Atmanirbhar Bharat, amidst an unprecedented situation with global an domestic economic slowdown caused by Covid-19 pandemic.
In the past, we have written to your good selves many times populating various issues, challenges, and hardships being faced by taxpayers and Chartered Accountants and suggested possible solutions on the same. Herein, we present before your good selves for your kind consideration, one important amendment brought in by Finance Act, 2021 which can be detrimental to the interest of the taxpayers under GST law as well as the interest of the revenue.
One of the changes proposed in the budget vide Section 101 & 102 of the Finance Act, 2021 is the deletion of sub-section (5) of Section 35 of the CGST Act 2017 and substitution of Section 44 of the CGST Act, 2017. Before this amendment was proposed, it was mandatory for every registered person whose Aggregate turnover exceeded Rs. 2 crore in a financial year to get his accounts audited as specified under Section 35(5) of the CGST Act, 2017 and furnish a Reconciliation Statement (GSTR-9C) duly certified by a Practicing Chartered Accountant or Cost Accountant. However as per the proposed amendment as mentioned above going forward this Reconciliation statement is expected to be self-certified by the registered person, thereby obliterating the requirement of certification on the veracity of the same by practicing Chartered Accountants or Cost Accountants.
As per the Extract of the minutes of the meeting of GST Council that proposed this amendment the basis of the decision seems to be on the wrong understanding that a substantial part of the GST liability discharged by the registered taxpayers vide DRC-03 at the time of filing annual returns is paid by them suo motu, and that additional tax revenue based on auditor’s recommendations has been very less. What the GST Council did not take note of, or appreciate is the fact that the tax so paid vide DRC-03 by the taxpayers and shown along with GSTR-9 is a natural concomitant of the reconciliation and related value-add professional work being performed by the professionals in respect of GST audit. In more cases, the tax professionals would have advised the taxpayers to accept additional liabilities and pay through GSTR-9 instead of GSTR-9C so that the GST Officer can at best invoke Section 73 of the CGST Act, 2017(regarding interest) and not Section 74 (regarding 100% Penalty). Invoking Section 74 against the dealer is completely negated because of the voluntary compliance by the dealer. Therefore we are of the considered view that, unless the GST Audit and other related works are actually performed by professionals, it is very unlikely that any non-compliances or mistakes would get identified at an early stage and registered persons are accordingly advised for payment of applicable taxes.
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