All about Clause 44 of FORM 3CD of Tax Audit Report

Sr.No.

Analysis

• Column no.1 of the table mention of the serial number, suggests that expenditures are required to be reported in a head-wise manner.
• Additional rows can be added, however no place for filling the heading of expenditure.
• Guidance note of ICAI says, here, guidance may be taken from the heading of the table which starts with the words “Breakup of total expenditure” and hence the total expenditure including purchases as per the above format may be given.
• It appears that head-wise / nature wise expenditure details is not envisaged in this clause.

• Total expenditure including purchases, imports to be given. Capital expenditure should also be reported, separate reporting of capital expenditure will help in easy reconciliation.

• This column requires to report how much of total expenditure as reported in column (2) is related to goods or services exempt from GST.
• In other words, this column requires to disclose expenditure exempt under GST.
• For example following expenditures to be reported- Alcoholic liquor , petroleum crude, high speed diesel oil, motor spirit, natural gas and aviation turbine fuel.

• This column requires to report how much of total expenditure as reported in column (2) is related to entities falling under the composition scheme of GST.
• In other words, this column requires to disclose expenditure incurred with GST composition dealers.
• Major taxpayers don’t have this information readily available with them. However, one can use autopoulated GSTR-9 for considering the amount of purchases from composition dealers.
• Further, GSTIN of supplier may be verified on the GST portal to know the status of supplier (Composition dealer or casual taxable person etc.) However, no bulk verification facility available either on GST portal or on Income tax Portal for this.

• This column requires to report how much of total expenditure as reported in column (2) is related to entities registered with GST.
• In other words, this column requires to disclose expenditure incurred with GST registered dealers other than composition dealers.
• Purchase register or GSTR 3B ITC register may be used to compile the information as required for this column.
• Further, GSTR-2A/2B report and reconciliation thereof with ITC register to be consider for verification.

• This column requires reporting how much payment was made to GST-registered entities in the previous year.
• This column is non-editable column in Tax Audit Report; and it is total of amounts specified in column (3), (4) and (5);
• One may interpret that amount specified here should be the amount actually paid by the Assessee, however same is not the case. Here paid includes amount payable also.

• This column requires to report how much of total expenditure as reported in column (2) is related to entities not registered with GST.
• In other words, this column requires to the disclosure of expenditures incurred by unregistered persons.
• The auditor may obtain/retain the reconciliation prepared by the assessee for verification.

Transaction

Analysis

• These amounts cannot be included in amount to be reported in Column (5) – expenditure relating to registered entities as tax audit is carried out of based on PAN and not GSTIN wise.
• The same should be excluded from purchase register or GSTR 3B ITC register.
• This should not be consider as expenditure incurred under this clause.

• Many of taxpayers mention cost of material consumed instead of showing purchases in the financials.
• One has to calculate actual purchase amount considering opening stock and closing stock calculation to calculate expenditure w.r.t purchases.

• It may possible that assessee purchased materials from registered entities, however no ITC claimed.
• In this cases also reporting under this clause is required. Further, one can take stand to mention suitable observation stating that “since No ITC claimed by the assessee, hence no reporting made under this clause.”

• In most of the cases assessee did not maintain records of purchases from composite dealers.
• In this situation suitable observation should be incorporated stating that Assessee did not maintain records of purchases from composite dealers, hence such details are not provided in column (4) of clause 44.

• The same can be included in amount to be reported in Column (7) – expenditure relating to un-registered entities.
• Further, suitable observation should be incorporated stating that amounts reported in clause 44 (7) includes Import of Goods on which Assessee paid IGST.

• The same can be included in amount to be reported in Column (7) – expenditure relating to un-registered entities.
• Further, suitable observation should be incorporated stating that amounts reported in clause 44 includes Import of services on which Assessee paid GST under RCM.