The Goods and Services Tax (GST) regime in India has undergone several changes since its implementation on July 1, 2017. One of the notable changes has been the amendment to Section 44 of the Central Goods and Services Tax (CGST) Act. This section governs the filing of annual returns and reconciliation statements under GST, a critical compliance requirement for taxpayers. Let’s delve into the nuances of this amendment and its implications.
Table of Contents
Understanding Section 44
Section 44 of the CGST Act pertains to the filing of annual returns by registered taxpayers. The primary objective of this provision is to ensure transparency, enable the government to cross-verify the data filed in various GST returns, and assess tax liabilities and credits claimed by taxpayers.
Before the amendment, Section 44 required all registered persons (excluding specified categories such as Input Service Distributors, casual taxable persons, and non-resident taxable persons) to file an annual return in Form GSTR-9, along with a reconciliation statement in Form GSTR-9C. The reconciliation statement had to be certified by a chartered accountant or a cost accountant for taxpayers with an aggregate turnover exceeding the specified threshold.
Section 44. Annual return. –
2[(1)] Every registered person, other than an Input Service Distributor, a person paying tax under section 51 or section 52, a casual taxable person and a non-resident taxable person shall furnish an annual return which may include a self-certified reconciliation statement, reconciling the value of supplies declared in the return furnished for the financial year, with the audited annual financial statement for every financial year electronically, within such time and in such form and in such manner as may be prescribed:
Provided that the Commissioner may, on the recommendations of the Council, by notification, exempt any class of registered persons from filing annual return under this section:
Provided further that nothing contained in this section shall apply to any department of the Central Government or a State Government or a local authority, whose books of account are subject to audit by the Comptroller and Auditor-General of India or an auditor appointed for auditing the accounts of local authorities under any law for the time being in force.]
3[(2) A registered person shall not be allowed to furnish an annual return under sub-section (1) for a financial year after the expiry of a period of three years from the due date of furnishing the said annual return:
Provided that the Government may, on the recommendations of the Council, by notification, and subject to such conditions and restrictions as may be specified therein, allow a registered person or a class of registered persons to furnish an annual return for a financial year under sub-section (1), even after the expiry of the said period of three years from the due date of furnishing the said annual return.]
1. Substituted by s. 111 of The Finance Act, 2021 dated 28-03-2021 and brought into force w.e.f. 01.08.2021 vide Notification no.29/2021- central tax dated 30.07.2021 for:
“Section 44. Annual return.
(1) Every registered person, other than an Input Service Distributor, a person paying tax under section 51 or section 52, a casual taxable person and a non-resident taxable person, shall furnish an annual return for every financial year electronically in such form and manner as may be prescribed on or before the thirty-first day of December following the end of such financial year.
[Provided that the Commissioner may, on the recommendations of the Council and for reasons to be recorded in writing, by notification, extend the time limit for furnishing the annual return for such class of registered persons as may be specified therein:
Provided further that any extension of time limit notified by the Commissioner of State tax or the Commissioner of Union territory tax shall be deemed to be notified by the Commissioner.]
(2) Every registered person who is required to get his accounts audited in accordance with the provisions of sub-section (5) of section 35 shall furnish, electronically, the annual return under sub-section (1) along with a copy of the audited annual accounts and a reconciliation statement, reconciling the value of supplies declared in the return furnished for the financial year with the audited annual financial statement, and such other particulars as may be prescribed.
[Explanation.- For the purposes of this section, it is hereby declared that the annual return for the period from the 1st July, 2017 to the 31st March, 2018 shall be furnished on or before the [31st January, 2020] and the annual return for the period from the 1st April, 2018 to the 31st March, 2019 shall be furnished on or before the 31st March, 2020.]”
2. Renumbered as sub-section (1) (w.e.f. 1st October, 2023 vide Notification No. 28/2023-C.T., dated 31st July, 2023.) by s. 144 of The Finance Act 2023 (No. 8 of 2023).
3. Inserted (w.e.f. 1st October, 2023 vide Notification No. 28/2023-C.T., dated 31st July, 2023.) by s. 144 of The Finance Act 2023 (No. 8 of 2023).
Difference Between Old and New Section 44 of the CGST Act
The amendment to Section 44 brought significant changes to its framework. Below is a comparison between the old and new provisions:
Aspect | Old Section 44 | New Section 44 |
Annual Return Requirement | Mandatory for all registered persons, except those under specified categories. | Continues to be mandatory, but turnover thresholds for exemptions have been relaxed. |
Reconciliation Statement (GSTR-9C) | Required certification by a chartered accountant or cost accountant for taxpayers above the turnover threshold. | Self-certification option introduced, eliminating the need for external certification. |
Exempt Categories | Limited exemptions such as Input Service Distributors and non-resident taxable persons. | Expanded exemptions and clarified requirements for composition taxpayers and smaller businesses. |
Compliance Cost | Higher due to mandatory auditor certification. | Reduced due to self-certification and simplified filing processes. |
Focus on Digitization | Basic emphasis on digital filing. | Enhanced digitization with user-friendly tools for reconciliation and filing. |
The Amendment to Section 44
The amendment to Section 44 introduced significant changes aimed at simplifying compliance requirements for taxpayers. The key modifications are as follows:
- Optional Reconciliation Statement Certification: The requirement for certification of the reconciliation statement (Form GSTR-9C) by a chartered accountant or cost accountant has been relaxed. Taxpayers now have the option to self-certify the reconciliation statement, thereby reducing compliance costs and easing procedural burdens.
- Streamlining of Categories Exempted: The amendment further refined the categories of registered persons who are exempt from filing annual returns. For instance, composition taxpayers file Form GSTR-9A, which has tailored requirements suited to their simplified tax structure.
- Focus on Digitization: The updated Section 44 reinforces the emphasis on a fully digital filing process. Taxpayers can utilize the GST portal’s integrated tools to file returns, reconcile statements, and resolve mismatches in data, promoting a user-friendly compliance environment.
- Threshold for Filing: Small taxpayers have been granted relief by increasing the turnover threshold for mandatory filing of the annual return. This change ensures that businesses with minimal resources are not burdened by extensive compliance obligations.
Implications of the Amendment
The amendment to Section 44 of the CGST Act has several implications for businesses and tax administrators alike:
- Reduced Compliance Burden: With the self-certification option for GSTR-9C, businesses save costs associated with hiring external auditors while taking direct responsibility for accuracy in reporting.
- Encouragement for Small Businesses: By increasing the turnover threshold, small and medium enterprises (SMEs) are afforded flexibility and are encouraged to remain compliant without undue stress.
- Enhanced Accountability: While the self-certification provision reduces reliance on third-party professionals, it places greater onus on taxpayers to ensure the correctness of their returns and reconciliation statements.
- Promotion of Digital Compliance: By streamlining the filing process and making it digital-first, the GST framework aligns with India’s broader vision of leveraging technology for governance.