ICAI raises concerns over increase in the GSTR-9C limit to Rs 5 crore

The GST Council surprised its taxpayers by raising the GSTR-9C threshold limit from Rs 2 crore to Rs 5 crore at its meeting held on 14th March 2020. The move applies to FY 2018-19 only. The due date also was extended for FY 2018-19 to 30th June 2020 for all the taxpayers. Earlier, the Institute of Chartered Accountants of India (ICAI), that represents chartered accountants in practice and profession across India had raised a concern.

Just a day before the 39th GST Council meeting, the ICAI promptly wrote a letter to Shri M Ajit Kumar, chairman of the Central Board of Indirect Taxes & Customs (CBIC). In its letter dated 13th March 2020, the chairman of ICAI’s indirect tax wing, CA. Rajendra Kumar P asserted the importance of filing both GSTR-9 and 9C. 

He stated that the tax professionals have played a pivotal role in the GST compliance and always nudged their taxpayer clients for a timely and accurate filing of the GST returns. He justified his statement by giving an example of how their mindful and genuine reporting in GSTR-9C led to an increase in the payment of tax dues via form DRC-03.

The low payment of taxes or excess tax credit claims may have gone unnoticed or unreported without GSTR-9C requirement. In cases where both GSTR-9 and 9C were being filed together, there were more GST collections noticeable through form DRC-03. Accordingly, the reconciliation statement in GSTR-9C was filed by a CA after making necessary correction in the annual return in GSTR-9.

Also Read: How to resolve issues while filing GSTR-9 and GSTR-9C

Another viewpoint was put down in the letter. According to the recent statistics, close to 7% of the GST registered taxpayers are businesses with an annual aggregate turnover of below Rs 5 crore. This proportion was 2% back in 2018 when the GST Council decided to introduce the new GST returns system. The taxman is at risk of avoidable tax evasion when a huge taxpayer base is being kept out of the scope of a primary verification or the scrutiny.

Further, from the revenue standpoint, the letter stated that taxpayers tend to correct GSTR-9 for the mistakes and will not spill its effects in the GSTR-9C. Hence, CA Rajendra Kumar P further suggested for the inclusion of the certification-cum-reconciliation statement within the form GSTR-9 itself, instead of a separate form. He believes that it can ease compliance while maintaining revenue collection.

While the requisition is sensible, it must be noted that the GST auditors also face difficulty in submitting the GSTR-9C online. They do not have separate login access on the GST portal for uploading the certified document and usually depend upon their clients for the same. An exclusive request for the same is made by the ICAI with the CBIC, in its letter dated 3rd March 2020. 

The ICAI has also asked to bring the GST audit requirement at par with the income tax audit requirement. The government had raised the upper limit for income tax audit to Rs 5 crore with a condition. A person should not have cash receipts or cash payments exceeding 5% of the total receipts or payments during the year. The letter suggests extending the same condition to the GST audit as well. 

On closely examining the viewpoints of ICAI, the GST Council seem to have wisely restricted the waiver to only one fiscal, i.e. 2018-19. Also, the Council waived the late fees for those taxpayers with an annual turnover below Rs 2 crore for both the financial years 2017-18 and 2018-19. It will further motivate the interested taxpayers to come forward and submit GSTR-9, mostly for minimising any future litigations. All the necessary notifications by the CBIC is due, as on 18th March 2020. 

Amidst these announcements, the CBIC has exempted all the foreign-based airline companies operating in India from the GSTR-9C requirement. More such reliefs are expected in the upcoming GST Council meeting planned to be held in April 2020.

For any clarifications/feedback on the topic, please contact the writer at annapoorna.m@cleartax.in