Revised GSTR-9C Requirements: An Overview of Changes from FY 2020-21

The GSTR-9C is a critical annual GST reconciliation statement. In 2021, it underwent substantial changes. Previously, businesses with an annual turnover exceeding Rs. 2 crore were required to file it, involving an audit by a chartered or cost accountant. From the financial year 2020-21 onwards, this requirement changed. Now, businesses with an annual turnover over Rs. 5 crore must file GSTR-9C, and it is to be self-certified by the businesses themselves, removing the need for an external audit.

This article details the amendments to the Central Goods and Services Tax (CGST) Act, the updated format, and the rules governing Form GSTR-9C.

Latest Updates 53rd GST Council Meeting As of June 22nd, 2024, the GST Council recommended exempting taxpayers with an aggregate annual turnover below Rs. 2 crore from filing GSTR-9/9A for FY 2023-24. This was formally notified via CGST notification 14/2024 dated July 10th, 2024.

Previous Applicability and Format of GSTR-9C

Before the recent amendments, specific businesses were mandated to have their financial statements audited under Section 35(5) of the CGST Act. Following the GST audit, the auditor would identify any differences, prepare a reconciliation statement between the audited financial statements and the GSTR-9 (GST annual return) filed by the business for the relevant financial year.

This form was known as GSTR-9C, governed by Section 44 of the CGST Act and CGST Rule 80. The auditor who performed the audit, or another eligible chartered/cost accountant, had to certify the form. A separate GSTR-9C had to be prepared for each GSTIN registered under a particular PAN. Upon certification, the business was required to file both GSTR-9 and GSTR-9C on the GST portal by December 31st of the subsequent financial year.

Taxpayers could settle any additional liabilities identified in this form using Form DRC-03. They would select ‘Reconciliation Statement’ from the dropdown in Form DRC-03 and make payments exclusively through the electronic cash ledger.

The GST department utilizes the information in Form GSTR-9C to detect significant inconsistencies in taxpayer reporting and compliance. Should unresolved discrepancies be found, the department could issue notices to the taxpayer.

The previous format of GSTR-9C consisted of two parts: Part-A contained the reconciliation statement, detailing any discrepancies, while Part-B included the auditor's or CA/CMA's certification.

Part-A was further structured into five sections:

| Part No. | Particulars ||---|---|| Part-I | Basic details such as GSTIN, financial year, trade and legal names, and whether an audit was required under any other law. || Part-II | Reconciliation of the turnover derived from the audited annual financial statements for a specific GSTIN with the turnover reported in Form GSTR-9. || Part-III | Reconciliation of GST-rate-wise tax liability and payment as reported in Form GSTR-9 and as derived from the audited financial statements for a specific GSTIN, along with any differences. || Part-IV | Reconciliation of the input tax credit availed and utilized as reported in Form GSTR-9 and as derived from the audited financial statements for a specific GSTIN, along with any differences. || Part-V | The auditor's recommendation regarding any additional unreconciled liabilities. |

Part-B offered two certification options: one for the auditor who performed the audit, and another for a CA/CMA certifying GSTR-9C based on the audit observations.

Amendments by Union Budget 2021 and Subsequent Notifications

The Union Budget 2021 introduced two significant changes to Sections 35 and 44 of the CGST Act. Specifically, Section 35(5) of the CGST Act was removed, and Section 44 was amended. These legislative changes were approved with the enactment of the Finance Act, 2021.

Key changes to the CGST Act include:

• The mandatory GST audit by a CA/CMA has been abolished for FY 2020-21 and all subsequent financial years.
• All applicable taxpayers must now submit a self-certified reconciliation statement, aligning values between audited financial statements and annual returns.
• Certain taxpayers may be exempted from the annual return and reconciliation statement requirements via a CBIC notification.
• Section 44 will not apply to Central or State government departments already audited by the Comptroller and Auditor-General of India (CAG).

The GST Council confirmed these changes during its 43rd meeting on May 28th, 2021. The CBIC officially notified these amendments on July 30th, 2021, through Central Tax notifications 29/2021 and 30/2021, confirming the applicability of Sections 110 and 111 of the Finance Act, 2021. Additionally, Rule 80(3) and Part-B of the CGST Rules were modified to specify the new applicability threshold and update the format.

Consequently, Form GSTR-9C is now applicable to taxpayers whose annual aggregate turnover for the relevant financial year exceeds Rs. 5 crore. The form's format has been adjusted for FY 2020-21 to accommodate self-certification.

GSTR-9C Applicability from FY 2020-21 Onwards

Exemptions for Form GSTR-9C continue for input service distributors, taxpayers under TDS and TCS provisions, casual taxable persons, and non-resident taxable persons. Additionally, government departments and taxpayers with an aggregate annual turnover of Rs. 5 crore or less are now also exempt.

Therefore, GSTR-9C is mandatory for taxpayers with an annual aggregate turnover exceeding Rs. 5 crore in the relevant financial year. These taxpayers are required to self-certify or voluntarily prepare a reconciliation statement, without an audit, and file it with the tax authority by December 31st of the year following the relevant financial year.

The following table summarizes the applicability thresholds and due dates for annual returns and reconciliation statements for FY 2020-21:

| Name of the Form | Applicability - AATO* limit for FY 2020-21 | Due Date for FY 2020-21 ||---|---|---|| GSTR-9 | > Rs. 2 crore | December 31st, 2021 || GSTR-9C | > Rs. 5 crore | December 31st, 2021 || *Annual aggregate turnover during FY 2020-21. | | |

The filing deadline for Form GSTR-9C for FY 2023-24 is December 31st, 2024.

Summarized Changes to Form GSTR-9C

(Applicable for FY 2020-21 and subsequent years)

Changes in Part-A: Reconciliation statement:

| Reference to Part and/or Table No. | Particulars | Changes Made ||---|---|---|| Part-II – Tables 5B to 5N | Reconciliation of the annual turnover as per audited annual financial statement with the turnover declared in Form GSTR-9 | These tables are optional for GSTR-9C filing for FY 2020-21. Any adjustments can be made in Table 5O. Other fields in Table 5 remain mandatory. || Part-III and Table No. 9 | Reconciliation of GST rate-wise liability and the amount payable | A new row, ‘K-1’ for other GST rates not previously listed, is inserted below ‘K’ -0.10%. || Part-III and Table No. 11 | Any additional amount to be paid but not yet paid (due to reasons specified under Tables 6, 8, and 10) | A new row ‘others’ is inserted below 0.10% to accommodate other unlisted GST rates. || Part-IV | Reconciliation of Input Tax Credit (ITC) | These tables are optional for GSTR-9C filing for FY 2020-21. || Part-V | Auditor’s recommendation on any additional Liability due to non-reconciliation | Heading changed to “Additional Liability due to non-reconciliation.” A new row ‘others’ is inserted below 0.10% for other unlisted GST rates. || Verification | Verification of the registered person | Replaced with the following declaration: "I hereby solemnly affirm and declare that the information given herein above is true and correct, and nothing has been concealed therefrom. I am uploading the self-certified reconciliation statement in Form GSTR-9C. As applicable, I am also uploading other statements, including financial statements, profit and loss account and balance sheet, etc." || Instruction - Serial No. 7 | Part V – Additional Liability due to non-reconciliation | Instructions revised to remove auditor references: "Part-V consists of the additional liability to be discharged by the taxpayer due to non-reconciliation of turnover or non-reconciliation of the input tax credit. Any refund mistakenly considered and repaid to the government must also be declared here. Finally, any other pending demand to be settled by the taxpayer must be declared in this Table." |

Part-B – Certification has been entirely removed.

Responsibilities of CFOs/Finance Heads for Self-Certified GSTR-9C

While the removal of the GST audit and CA/CMA certification might seem to simplify compliance, it places increased responsibility on the Finance Heads of applicable businesses to ensure accurate reporting in Forms GSTR-9 and GSTR-9C.

Every Chief Financial Officer (CFO) or Finance Head must ensure their teams are fully aware of the changes to the GSTR-9 and GSTR-9C formats. They should organize training sessions for their teams to understand the implications of removing the GST audit and external certification.

The government does not intend to reduce its verification measures despite the audit removal. It may intensify scrutiny and impose penalties for non-compliance or reporting errors. Businesses must accurately report any unreconciled figures in GSTR-9C without omissions. Companies can reference observations from statutory auditors regarding GST compliance when preparing GSTR-9C.

There is a constant concern regarding the suspension of GST registrations due to significant data discrepancies across GST returns – specifically between GSTR-1 versus GSTR-3B versus books, and GSTR-3B versus GSTR-2A versus books. This ground for GST registration suspension was introduced in January 2021.

Therefore, finance leaders must assign dedicated team members to perform these reconciliations before the statutory deadline for adjusting and correcting GST data for a given financial year. The deadline is the due date for filing GSTR-1 and GSTR-3B for October of the subsequent year (or November 30th, whichever is earlier).

Such actions enable businesses to prepare and submit accurate GST annual returns and reconciliation statements, minimizing the likelihood of receiving GST demand notices. This proactive approach helps avoid paying additional tax dues via Form DRC-03 during or after filing GSTR-9 and GSTR-9C.

CFOs must establish robust systems within their organizations for annual GST reconciliation across all PAN-India entities. Even though reporting occurs at the GSTIN level, finance leaders must ensure data consistency between annual returns and income tax returns, which can be achieved through automation and technology-enabled solutions.