ICAI urges government: Bring back the provision for auditing GST yearly returns.

The Institute of Chartered Accountants of India (ICAI), which develops accounting rules, has asked the government to reinstate the audit and certification procedures for Goods and Services Tax (GST) annual returns, claiming that doing so will disrupt compliance.

The purpose of this self-certified statement is to reconcile the value of supplies stated in the financial year’s return with the audited yearly financial statement. Self-certification requires taxpayers to provide genuine and accurate information in their annual return. The goal was to increase the ease of doing business by encouraging voluntary compliance. The adjustment will take effect in FY21 and thereafter.

In a letter to the finance ministry, the ICAI suggested that the amendments to the Central GST Act made through the Finance Act last year be repealed, and that the requirement of having annual accounts audited and reconciliation statements certified by a chartered accountant be reinstated in law because GST audit by a chartered accountant ensures taxpayer compliance and helps plug revenue leakages.

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“Removing audit will result in widespread disruption of compliance, resulting in demand notices, and taxpayers will be burdened with tax, interest, and penalties that could have been avoided if a system of audit had been in place to identify time lapses.” Litigation would also rise as a result of errors that would go uncorrected until a departmental audit was completed, according to the ICAI’s suggestion.

Revenue is recognised variably in accounting and GST law, according to the accounting rule maker. While financial accounts are created using a ‘accrual method,’ GST is paid using a ‘time of supply’ based approach. Depending on the type of the company, financial statements are prepared differently on the basis of appropriate standards.

Who doesn’t have to pay a late fee if they file their tax return after the due date?

 “A chartered accountant who is knowledgeable in both accounting issues as well as GST law must certify the reconciliation statement,” the ICAI urged the ministry. A copy of the ideas has been seen by Mint. At the time of publication, an email submitted to the finance ministry seeking comment on the article had gone unanswered.

Following the implementation of the GST, tax authorities gradually reduced the return filing requirements and offered an amnesty programme to defaulters who wanted to improve their compliance record. Simultaneously, laws relating to tax credits have been increasingly tightened in order to combat tax avoidance.