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Companies rush to reconcile financial results with state wise audit, seek extension of deadline
November, 19th 2018

As the date for Goods and Services Tax (GST) audit nears, many companies and banks fear they will not be able to comply with separate audits of all the states by the end of the year as required by the GST framework because they do not reconcile their financial results with state wise returns.

Many companies have also reached out to the government and sought an extension of the deadline for filing the returns. The government has still not extended the deadline. The tax returns are to be filed for July 2017 to March 2018 period. All companies with annual revenue of at least Rs 2 crore in India have to comply.

“The regulations for filing the state returns came only about a month back and most of the companies may find it difficult to reconcile their financial results with state revenues. There was a request to the government to extend the deadline for filing these returns, but that has not happened yet,” said Pratik Jain, National Leader, Indirect Tax, PwC India

For most large companies, like the BSE 500 ones, there would be at least 30 registrations in every state across India. This would mean that they would be required to file returns in every state. Industry trackers say that in some cases the problem is that some income and expenses are common corporate ones and it’s tough to allot them to one particular state.

“Some businesses would need to devise methods to deal with input tax credits emanating from common corporate overheads such as advertising, branding etc as these may relate to the previous fiscal but may have been determined in the current fiscal year and attribution to states having a GST registration may require more efforts “ M S Mani, Partner, Deloitte India Other common expenses like audit fees paid by companies, interest on fixed deposit or scrap sales would be tough to allot. Tax experts said in many cases companies are allotting these expenses and income in states they have head offices.

Tax experts say that in many cases statutory auditors have still not prepared the financial results besides the GST framework stipulates that once returns are filed in each state, it cannot be revised. Many companies fear this could mean that if there is a mistake it could be problematic. The fear is also that the companies, who miss out on filing the returns by December 31, may be the first ones to be scrutinised by the taxman. Most companies want the government to extend the deadline of filing these returns— GSTR 9 and GSTR 9 C— to March 31, 2019.

The problem is that both central and state officials are now empowered to investigate companies on GST liabilities and claims and take action against erring entities without bothering about jurisdiction. The Central Board of Excise and Customs (CBEC) in October asked central tax officers to initiate action if they detected tax evasion based on intelligence inputs even in companies that are under state tax authority.

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