The Institute of Chartered Accountants of India ( ICAI ) has reportedly asked the govt to bring back audit and certification provisions relating to GST annual returns.
The Institute said that doing away with audit and certification provisions would disrupt compliance.
“Doing away with the audit will lead to large-scale disruption of compliance resulting in demand notices and the taxpayers will be burdened with tax, interest, and penalties that could have been avoided had there been a system of audit to identify the lapses in time. Litigation would also increase due to errors that would be left unresolved until the departmental audit is conducted,” ICAI said.
ICAI suggested that amendments made to the Central GST Act through the Finance Act last year should be withdrawn and the requirement of getting annual accounts audited and reconciliation statements certified by a chartered accountant be reinstated in law because a GST audit by a chartered accountant ensures taxpayer compliance and helps in plugging revenue leakages.
The revenue is recognized differently in accounting and GST law. While financial statements are prepared on an ‘accrual system’, GST follows a vastly different ‘time of supply’ based system of tax payment. Even the financial statements are prepared differently on the basis of applicable standards depending upon the nature of the entity.
“Thus, it is essential that the reconciliation statement be certified by a chartered accountant who is proficient in both accounting aspects as well as GST law,” ICAI said.
This self-certified statement is for reconciling the value of supplies declared in the return furnished for the financial year, with the audited annual financial statement. Self-certification puts the responsibility on taxpayers to furnish true and accurate details in their annual returns. The idea was to encourage voluntary compliance and to improve the ease of doing business. The change is applicable for Financial Year 2021 and beyond.
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