CA Abhas Halakhandi
Article explains Clause 44 of Tax Income Tax Audit Report as applicable to Assessment Year in view of Recent ICAI Guidance Note on Tax Audit under Section 44AB of the Income-tax Act, 1961 AY 2022-23. Clause 44 deals with Break-up of total expenditure of entities registered or not registered under GST. Clarification in brief is as under-
| Break-up of total expenditure of entities registered or not registered under the GST | ||||||
| S. No | Total Amount of expenditure incurred during the year | Expenditure in respect of entities registered under the GST | Expenditure relating to entities not registered under GST | |||
| Relating to the goods or services exempt from GST | Relating to the entities falling under composition | Relating to the other registered entities | Total Payment to Registered entities | |||
| 1 | 2 | 3 | 4 | 5 | 6 | 7 |
–
|
S.No. |
POINTS | CLARIFICATIONS | REASONS |
| 1. | Head wise Expenditure or Total Expenditure | Total Expenditure including Purchases to be reported | Wording used i.e. ‘Break Up of TOTAL EXPENDITURE |
| 2. | Depreciation, Bad Debts Etc. | Not to be reported in any Column of the 3 to 7 | These are not Outgoing/Non-Cash expenses |
| 3. | Salary/Remuneration to Employees | Not to be reported in any of the Columns 3 to 7 | As covered by Sch-III of CGST Act,2017 and treated neither supply of goods nor services |
| 4. | Expenditure relating to Goods or Service exempt from GST
(Column 3) |
Following Rate & Exemption Notifications needs to be considered for ascertaining Exempt Supplies:-
NNo.1/2017,2/2017,11/2017, 12/2017 – CT(R ) NNo.1/2017,2/2017,8/2017, 9/2017- IT(R ) Following to be Reported :- Alcoholic Liquor Petroleum crude, high speed diesel oil, motor spirit, natural gas and aviation turbine fuel |
As per Section 2(47) of CGST Act,2017-
exempt supply cover goods & services with nil rate of tax or which may be wholly exempt from tax under the Integrated Goods and Services Tax Act, and includes non-taxable supply;” “non-taxable supply” means a supply of goods or services or both which is not leviable to tax under this Act or under the Integrated Goods and Services Tax Act” |
| 5. | Expenditure relating to Entities falling under Composition Scheme
(Column 4) |
General practice of small & medium Taxpayer not to mention GSTIN of Composition Supplier in Accounting Software, hence a suitable remark by Tax auditor may be given in this regard. | |
| 6. | Expenditure relating to other registered entities
(Column 5) |
Value of Inward supplies other than Supplies from Composition Dealers and Exempt supply from Registered Dealers, are to be mentioned here | |
| 7. | Total Payment to Registered Entities
(Column 6) |
The word ‘payment’ should harmoniously be interpreted as ‘expenditure’ as the combined heading of columns (3), (4), (5) is ‘Expenditure in respect of entities registered under GST’.
Sum Total of Column (3), (4) &(5) should be reported in Column (6) |
|
| 8. | Expenditure relating to entities not registered under GST(Column 7) | Inward supplies received from unregistered person should be reported here.
Total of Column (6) and (7) shall tally with Column (2) except to the extent of expenditure mentioned in SN 2 and 3 |
|
| 9. | Capital Expenditure | Since, the word used is ‘expenditure’, it is necessary that the capital expenditure should also be reported. Separate reporting of Capital Exp. Recommended for ease of reconciliation | |
Following Disclosures may be given by Tax Auditor
– Regarding the view taken by Assessee to the meaning of ‘Total Expenditure & method for filling appropriate Columns.
– If the assessee is not in a position to give the details as required in clause 44, an appropriate disclosure/disclaimer may be made by the auditor in Form 3CA/3CB. Where the assessee has provided reason for not being able to provide details, the same may be reported, if found appropriate.
Hi for clause 44 of Tax Audit report
-Purchase by SEZ Unit as Zero Rated will be shown under Nil Rated (Relating to the goods or services exempt from GST collum 3) or under collum. 5(Expenditure relating to other registered entities)
clause 44 – Tax Audit – FY 221-22 regarding GST Total Amount of expenditure incurred during the year Does this will include the expenditure which is accrued at year end for Financial Statements ?