Twists and turns are not new to GST. In an expected move, the GST Council in its meeting held on September 20, 2019, announced a major relaxation in the filing of GSTR-9. All those taxpayers who had an annual turnover of Rs 2 crore or less during FY17-18 and FY18-19 may now choose not to file GSTR-9 for those years. Rest of the taxpayers must file GSTR-9 along with the certified GSTR-9C - reconciliation statement.
At this point, businesses across the country is skeptical about filing their GSTR-9. The Council is expected to simplify the form. Importantly, the decision to not file GSTR-9 can have many repercussions on the compliance status of businesses. Let us quickly walk through the top 5 reasons why you must still file your GSTR-9.
Most of the banks or financial institutions insist borrowers submit GST annual statements with the statutory balance sheet and other reports for an entire financial year. The borrowers have to give a declaration of the compliance status to their lending banks for annual renewal of their credit facilities. Similar to the submission of annual income tax returns, GST annual returns in GSTR-9 and GSTR-9C are useful documents to prove the health of your business and your compliance status. Although an independent auditor does not certify the GSTR-9 return, it is authenticated by the authorised signatory of the taxpayer. Moreover, GSTR-9 has the yearly reconciled data after giving effect to all the adjustments relevant to that year. Furthermore, this annual statement gives a window to the yearly information about sales made and ITC available to the business.
GSTR-9 provides certain operating information about every GSTIN. It includes details such as turnover, and gives a holistic picture of the business in the form of the goods traded, the volume of business, credit claimed by it. It further consists of the types of supplies, like exports, imports and the geographical distribution of its place of supplies. In addition to these, one can know the GST refund amount yet to be processed for the year, the amount of transitional credit taken forward from the previous regime and used up under GST. A further analysis into GSTR-9 can help banks and lenders decode some key information from the ITC stuck or a pending claim. It leads them to identify the variety of vendors that the business is dealing with and can counsel taxpayers for a change in that structure.
By choosing not to file GSTR-9, the taxpayers will not be spared from receiving any potential notices for discrepancies in GSTR-1 or GSTR-3B. These returns are already filed and submitted, and the department can use this information. There is a scope for a taxpayer to be called for enquiry and scrutiny as well. Hence, businesses must not assume that non-filing of GSTR-9 for a financial year will save them from any issues later. The tax authorities will continue to be vigilant and can take up any discrepancy found in the regular return. In another way, businesses should consider GSTR-9 as a last resort to correct mistakes made in GSTR-1 or GSTR-3B, except no ITC claims can be made.
Many taxpayers heaved a sigh of relief that with GSTR-9 being made optional, they may now choose to leave out yearly reconciliation. But that should not be the case. Taxpayers are still advised to compile and match data for the entire 18 months (one financial year and six months following its closure). It is essential to identify the taxes short paid or not paid or ITC excess claimed. Since a lot of adjustments done at the end of the year or in September of the following financial year, all these can impact the tax liability or ITC claims. The due date of the September returns is the deadline to make changes to the details of GSTR-1 or GSTR-3B filed during the past financial year. Following this, the annual returns would have to be filed that summarises all these changes. But in case this deadline is missed, the taxpayers will have
Lastly, the taxpayers can use GSTR-9 as crucial documentary evidence in any future litigation that could follow. The GSTR-9 compiles annual data of GST liability, ITC claimed, turnover made after considering various returns filed, including GSTR-2A. The tax authorities may become more alert for the FY18-19. The relaxation in GSTR-9 filing has been announced at a point of time when the closure of books of accounts and filing of income tax returns are still pending. Some taxpayers may be tempted to choose roundabout means to manipulate data especially turnover/sales so that they stay within the scope of Rs 2 crore for claiming the exemption from filing tax returns. These actions made have wide implications for them.
Several big businesses evaluate suppliers based on a compliance rating. Filing of GST returns on time is one of the parameters considered for better compliance rating. This compliance rating is an important criteria for shortlisting of vendors. Large businesses choose vendors objectively and prefer vendors with a higher compliance rating. It helps them ensure that their purchases are reported by their suppliers and they can easily avail input tax credit without much follow-up. Keeping consistency in the filing of the GST returns along with GSTR-9 will help taxpayers receive a perfect score to work with large businesses and keep themselves in the game.