Abolition of GST annual audit requirement could save up to ₹30K crore annually
The government’s decision to do away with the mandatory Goods and Services Tax (GST) annual audit requirement by professionals such as chartered accountants will help over 10 million firms save audit fees worth about ₹30,000 crore annually, besides reducing compliance burden, two officials with direct knowledge of the matter said.
The Budget proposes removing the mandatory requirement of getting the accounts audited and the reconciliation statement submitted by specified professionals, such as chartered accountants, in the GST regime, they said requesting anonymity.
“The Finance Bill, 2021 will amend the law, which will be notified soon after. The basic purpose of this move is to expand the GST base by reducing compliance burden and save businesses, particularly small firms, from paying auditing fees to professionals,” one official said.
In fact, the decision to this effect was already taken by the GST Council in March last year, but could not be implemented due to spread of Covid-19 pandemic and subsequent lockdown, a second official said.
Experts said self-certification would eliminate the requirement of certification from professionals, ease annual compliance, and save cost of certification. Businesses would, however, be required to ensure that the turnover declared in the GST returns reconcile with the audited financial statements, they said.
“Currently, the review is done by an independent professional who highlights the mismatches to the taxpayer. In cases wherein taxes are not paid on account of such mismatches, the report is qualified by the professional. The existing process enables the timely identification of gaps. The self-certification process may not identify such mismatches on a timely basis,” said Sunil Kumar, a chartered accountant and deputy general manager at tax research and advisory firm Taxmann.
He cautioned that the identification of such gaps by the authorities at a later stage would involve penalty and interest, in addition to the tax payable.
The first official mentioned above said the Institute of Chartered Accountants of India (ICAI) has made a representation to the government against the budget proposal.
ICAI president Nihar N Jambusaria said: “We are of the firm view that provisions relating to GST audit and certification of reconciliation statement by a chartered accountant should be retained in the GST law.”
According to Jambusaria, the GST regime has been continually evolving at a fast pace, hence taxpayers need professional guidance and handholding. “Revenue is recognised differently in accounting and GST law... For this reason, 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.”
“Audit is not an avoidable compliance; it is a preventive necessity. GST Audit by a Chartered Accountant ensures maker checker concept thereby detecting inconsistencies, lapses, errors and ambiguities, if any, in complying with the provisions of GST law. Thus, audit ensures compliance,” he said.
He dismissed the government’s argument that self-certification would be a major saving for businesses. “As on 12th Feb 2020, 12.42 lakh [1.24 million] taxpayers were required to submit GSTR-9C [the annual GST return]. Audit should not be seen as a cost to the taxpayer, rather it is an investment for him, the benefits of which are reaped over a period of time.”