GSTR 9C: Reconciliation of Turnover Declared in Audited Annual Financial Statement

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  • Last Updated on 24 June, 2022

What details are required to be furnished in part II of GSTR 9C? 

Part II consists of reconciliation of the annual turnover declared in the audited Annual Financial Statement with the turnover as declared in the Annual Return furnished in FORM GSTR-9 for this GSTIN. Part II comprises 4 clauses namely Clause 5, Clause 6, Clause 7, and Clause 8.

Part Description of Part Clause Description of clause
Reconciliation of turn- 5 Reconciliation of Gross Turnover
over declared in audited
6 Reasons for un-Reconciled differ-
Annual Financial State-
II ence in Annual Gross Turnover
ment with turnover de-
7 Reconciliation of Taxable Turnover
clared in Annual Return
8 Reasons for un – Reconciled differ-
(GSTR9)
ence in taxable turnover

How to furnish the details in clause 5 of GSTR 9C?

Clause 5 deals with the reconciliation of gross turnover. It has in total 16 sub-clauses.

Sub- Description of sub-clause
clause
5A Turnover (including exports) as per audited financial statements
for the State/uT (For multi-GSTIN units under same PAN the turn-
over shall be derived from the audited Annual Financial Statement)
5B unbilled revenue at the beginning of Financial Year
5C unadjusted advances at the end of the Financial Year
5D Deemed Supply under Schedule I
5E Credit Notes issued after the end of the financial year but reflected
in the annual return
5F Trade Discounts accounted for in the audited Annual Financial
Statement but are not permissible under GST
5G Turnover from April 2017 to June 2017
5H Unbilled revenue at the end of Financial Year
5-I Unadjusted Advances at the beginning of the Financial Year
5J Credit notes accounted for in the audited Annual Financial Statement but are not permissible under GST
5K Adjustments on account of supply of goods by SEZ units to DTA Units
5L Turnover for the period under composition scheme
5M Adjustments in turnover under section 15 and rules thereunder
5N Adjustments in turnover due to foreign exchange fluctuations
5-O Adjustments in turnover due to reasons not listed above
5P Annual turnover after adjustments as above
5Q Turnover as declared in Annual Return (GSTR9)
5R Un-Reconciled turnover (Q – P)

How reconciliation of gross turnover is done? 

Clause/s Description Amount in INR
5A Turnover (including exports) as per audited finan- Manual
cial statements for the State/UT (For multi-GSTIN
units under same PAN the turnover shall be derived
from the audited Annual Financial Statement)
5P Annual turnover after adjustments made in Clause Auto
5B to 5O
5Q Turnover as declared in Annual Return (GSTR9) Manual
5R Un-Reconciled turnover (Q – P) AT 1
For the purpose of Clause 5Q, annual turnover as declared in the Annual Return (GSTR 9) may be derived from Table 5N, 10 and 11 of Annual Return (GSTR 9).

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How to furnish the details in clause 5A of GSTR 9C? 

CLAUSE 5A: Turnover (including exports) as per audited financial statements for the State/UT (For multi-GSTIN units under same PAN the turnover shall be derived from the audited Annual Financial Statement)

Details to be included: 

    1. Turnover (including exports) as per audited financial statements FOR the State/UT.
    2. In the case of entity having multiple GSTIN units under same PAN, the turnover for the State/UT shall be derived from the audited Annual Financial Statement.
    3. It is worthwhile to note that ‘Turnover in State/Union Territory’ has been defined in section 2(112) of the GST Act, 2017, which is not be taken for the purpose of Clause 5A as because the base for reconciliation is made the turnover as reported in the annual financial statements.
    4. In simple words, GSTIN-wise turnover has to be segregated from the turnover reported in the audited Financial Statements. Prima facie, it appears that Profit and Loss Account does not re-flect the turnover GSTIN was, therefore, it has been clarified in the instructions that the reference to audited Annual Financial Statement includes reference to BOOKS OF ACCOUNT in case of persons/entities having presence over multiple States.

Various scenarios have been shown in the tabular form:

Name of the Entity Business units in GST Aggregate Audited Turnover FOR State GST
Regis- Turnover Financial as per audited FS Audit
tration State-
ments
ABC Ltd Maharashtra GSTIN Available Ascertain the turn- Yes
over FOR GSTIN
Delhi GSTIN Above 2 Available Yes
crore from the

total turn-

Haryana GSTIN Available Yes
over of the audited
Uttar Pradesh GSTIN Available Financial Statements Yes
PQR Enterprises Delhi -Unit 1 GSTIN Available Ascertain the turn- Yes
over FOR GSTIN
Delhi -Unit 2 GSTIN Above 2 Available Yes
crore from the

total turn-

Delhi -Unit 3 GSTIN Available Yes
over of the audited
Haryana GSTIN Available Financial

Statements

Yes
XYZ Associates Bihar GSTIN Above 2 Available Turnover as shown Yes
crore in audited Financial
Statements

Important points to remember:

Annual Financial Statements constitutes of four elements namely Profit & Loss account, Balance Sheet, Cash Flow Statement and Notes to Accounts.

Illustration :

ABC & Co. has 5 GSTIN. In both the cases mentioned below, GST Audit is required.

Situation 1 : Aggregate turnover exceeds INR 2 cr. but turnover of eachGSTIN is upto INR 2 Cr.

Situation 2 : Turnover of one GSTIN exceed INR 2 Cr. & another GSTINis upto INR 2 cr.

How to furnish the details in clause 5B of GSTR 9C? 

CLAUSE 5B: Unbilled revenue at the beginning of Financial Year

Meaning of unbilled revenue: 

  1. There may be instances where the entity recognizes the revenue in respect of supply of goods and/or services in the books of account on the accrual basis based on the applicable accounting standards against which no invoice has been issued by the closing of the last financial year.
  2. These type of revenues are popularly termed as ‘unbilled revenue’.
  3. For instance, in respect of FY 2016-17, the closing balance of unbilled revenue stands at INR 5 crores. This means that INR 5 crores is the part of the turnover for the FY 2016-17 of the entity.
  4. Certainly, sooner or later invoices against these unbilled revenues has to be issued by the entity.
  5. So, once the invoices will be issued on which GST is payable then such unbilled revenue has to be adjusted from the Turnover which is required to be shown in Clause 5A of GSTR 9C.
  6. It is worthwhile to note that since the invoice has been issued in the current FY 2017-18 it will be reflected in the annual return of FY 2017-18, however, on the contrary, as per the audited Financial Statements, these unbilled revenues were duly accounted in the last FY 2016-17 only, therefore, there will be outright mis-match in the Financial Statement Turnover vis-à-vis GST Returns turnover.
  7. Hence, in order to reconcile, the amount of invoices on which GST has been paid in current FY shall be duly added in the Turnover shown in Clause 5A as because the turnover shown in the financial statements for the period FY 2017-18 does not take into account the unbilled revenue which is already shown in the turnover of the FY 2016-17.
  8. In the instant case , if invoices of INR 5 crores has been issued on which GST is paid in regard to unbilled revenue at the beginning of the Financial year, then an amount of INR 5 crores shall be added in the turnover.
  9. In cases of telecom industry, annual maintenance contract (AMC), insurance, etc. it is often seen that the billing cycle is of 2-3 months wherein it is certain that during the closing of the Financial Year, revenues are booked at the end of the financial year as unbilled revenue in the books of account against which the invoices is issued in the next financial year.
  10. Reference can be made to Accounting Standard 9 0r Ind AS 18.

 

 Ind AS-18 ‘Revenue’  AS-9 ‘Revenue Recognition’
The definition of ‘revenue’ is broad compared to the definition of ‘revenue’ given in existing AS-9 because it covers all economic benefits that arise in the ordinary course of activities of an entity which result in increases in equity other than increases relating to contributions from equity participants. Revenue is gross inflow of cash, receivables or other consideration arising in the course of the ordinary activities of an enterprise from the sale of goods, from the rendering of services, and from the use by others of enterprise resources yielding interest, royalties and dividends.
Revenue arising from agreements of real estate development are specifically scoped out Existing AS 9 does not include the same
Requires the revenue to be measured at fair value of the consideration received or receivable Revenue is recognized at the nominal amount of consideration receivable
Specifically deals with the exchange of goods and services with goods and services of similar and dissimilar nature This aspect is not dealt with in the existing AS 9
Requires recognition of revenue from services using percentage of complete method only Completed service contract method is also permitted in case of service
Requires interest to be recognized using effective interest rate method Requires the recognition of revenue from interest on time proportion basis
Specifically provides guidance regarding revenue recognition in case the entity is under any obligation to provide free or discounted goods or services or award credits to its customers due to any customer loyalty program. Does not deal with this aspect.

Details to be added: 

  1. Unbilled revenue which was recorded in the books of account on the basis of accrual system of accounting in the last financial year and
  2. Such unbilled revenue was carried forward to the current financial year shall be declared here.
  3. In other words, when GST is payable during the financial year on such revenue (which was recognized earlier), the value of such revenue shall be declared here.

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