The season of GST Audit comes with many ups and downs in the present scenario. However, one of the difficulty which arise in reconciliation is the credit note detail. Aggregate value of credit notes which have been taken in audited annual financial statement but not considered as credit note in CGST act (Section 34 of CGST Act) will be considered in this field

We can also explain as,

Details regarding the credit note which have been considered in audited annual financial statement but have not been considered while filing of GST return will be covered under this point.

All the adjustments made to the turnover where there is an effect of reduction due to a credit note issued have to be figure out for the purpose of reconciliation between the books of accounts and the GST returns to be filed. There could be an adjustment which has made to the receivable and payable in the books of accounts in order to reconcile the turnover. Thus, care should be taken to calculate the information of credit note that is reduced from the turnover.

We can take the help of Accounting Standard which is for ‘Revenue recognition’ for filling information in this area.

Analysis

All the information in the Credit Note register without having a GST effect should be collated and provided. Please note that due to ‘+’ sign, credit notes not conforming to section 34 will result in said amount of turnover being liable to output tax by addition to the turnover reported in books compared to that reported in GSTR 9 which is the tax paid turnover.

Examples

1. M/s XYZ and Co. supplies goods on credit to the customer Mr. A for Rs. 100,000 [applicable GST 18%]. Mr. X pays the supply value much before the credit period and in turn requests the supplier to extend a cash discount of 2%. Cash discount extended at 2% shall be a non-GST credit note which should be considered for disclosure in Part II at Table 5J.
2. Mr. P has supplied goods for Rs. 20,000 [applicable GST 12%] along with transport charges for Rs. 2,000 to M/s ABC and Co. On receipt of the goods, the customer complains that the goods are damaged. Mr. A extends a discount of Rs. 2,500 to the customer and issues a credit note without giving effect to the GST for the damage. This adjustment to the amount receivable from the customer shall be accommodated by way of a Credit Note and the same shall call for adjustment to the turnovers.

Key Points to be Consider:

• Segregation of adjustments to turnover on account of credit note with GST and without GST has to be done carefully and dealt with appropriately as discussed in the above illustrations
• Credit note issued and subsequently cancelled should be considered while considering the summary of adjustments
• Any adjustment on account of reduction in receivable not being adjusted to the turnover should not be considered for reconciliation
• Accounting/Financial Credit Note issued if any in relation to reduction in the inward supply price consideration should not be considered for filling up the information in the above Table.

Disclosures to be made by Auditors:

Auditor has to disclose the practice adopted for collating relevant information from the books of accounts and the basis for determining the adjustments eligible for reconciliation purposes. Reference to the Accounting Standard issued by the ICAI has to be made and indicated whether the Registered person has adopted or not.

Thus, this can form a crucial part for the Adjustments to be made while filing GSTR 9 i.e. Annual Return.