GST Expense Breakup In Tax Audit Report

Order under Section 119 of the Income-tax Act, 1961 states that

Section 44AB of the Income-tax Act, 1961 (‘the Act’) read with rule 6G of the Income-tax Rules, 1962 (‘the Rules’) requires specified persons to furnish the Tax Audit Report along with the prescribed particulars in Form No. 3CD. The existing Form No. 3CD was amended vide notification no. GSR 666(E) dated 20th July, 2018 with effect from 20th August 2018. However, the reporting under clause 30C and clause 44 of the Tax Audit Report was kept in abeyance till 31st March, 2019 vide Circular No. 6/2018 dated 17.08.2018, which was subsequently extended to 31st March, 2020 vide Circular No. 9/2019. Vide circular no. 10/2020 dated 24.04.2020, it was further extended to 31st March, 2021. In view of the prevailing situation due to COVID-19 pandemic across the country, it has been decided by the Board that the reporting under clause 30C and clause 44 of the Tax Audit Report shall be kept in abeyance till 31st March, 2022.

Thus, note that reporting was kept in abeyance if tax audit report was filed before 31.03. 2022.Hence for F.Y 2021-22 reporting of the above-mentioned clauses is mandatory now from 01.04.2022 subject to any change and extension as and when notified by the Income tax Department of India.

This article shall provide details for Clause no 44 of tax audit report

Break-up of total expenditure of entities registered or not registered under the GST

This clause requires reporting of the following details irrespective whether the assessee is registered or not under GST.

1)Total amount of expenditure incurred during the year:-

This shall include all expenditure incurred during the year including capital expenditure as it does not specify whether only revenue expenditure debited to profit and loss account.

Although clarification would be required as to which type of expenditure should be included Eg: – Depreciation -Is it considered as an incurred expenditure? Because in further bi- furcation there is an issue to reflect it as Non-GST Registered expense

1.1) Expenditure in respect of entities registered under the GST: –

• Bifurcation of Total amount expenditure incurred from GST registered entities

This shall include further bifurcation of amounts relating to: –

1.1 a) Exempted goods/services from GST:-

• Expenditure which are classified as Exempt supply under GST.

As per sec 2(47) of CGST Act Exempt supply means supply of any goods and services or both which attracts: –

• Nil rate of tax

Goods or services on which GST rate of 0 % is applicable are called NIL rated goods or services. Such goods or services, on which GST rate of 0% is applicable, are listed in schedule 1 under GST rate schedule

• Wholly exempt under Section 11 of CGST Act or under Section 6 of IGST Act
• Non-taxable supply defined under section 2(78) of CGST Act

Exempt supply cannot include activities included in Schedule III (Specifies activities which are neither supply of goods nor supply of services) of CGST Act except where: –

• Supply under RCM
• Sale of land
• Sale of building (except construction of complex where supply is made before obtaining completion certificate)

Please note exempt supplies shall not include zero rated supplies.

Zero rated supplies are the ones which are executed Under Section 16 of the IGST Act.

Zero rated supply means any of the following supplies of goods or services or both, namely

• export of goods or services or both; or
• supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit.

1.1 b) Entities falling under composition scheme

Amount of expenditure incurred from Vendors registered under Composition scheme.

If you do not know whether the vendor was registered under composition scheme then you may by go on GST Portal-Search by GSTIN -Enter the GSTIN -Get the details required

1.1 c) Relating to the other registered entities

Amount of expenditure not incurred from Composition scheme registered vendors and expenditure incurred is not exempted under GST

1.1 d) Total Payment to Registered entities

Amount of payment done towards GST registered entities towards amounts mentioned in 1.1 a ,1.1 b and 1.1 c

So, the Closing creditors balance reflecting as on 31.03.22 shall include during the year expenditure payment pending payment pending to GST/Non-GST Registered entities and opening balance payment pending if any.

1.2) Expenditure relating to entities not registered under GST

Expenditure incurred from Non GSTIN Vendors and expenses like Employee benefit expenses

It would be beneficial if we get further clarification from Department as to what exact details are required.

Please share your views on this clause or if any information or analysis is missed out, please do provide