Clause 44 in the Tax Audit Report (Form 3CD) is a crucial element for businesses and auditors, as it pertains to GST reporting requirements. This clause requires a breakdown of the total expenditure incurred by entities, whether registered or not under GST. In this article, we’ll provide an analysis and overview of what is expected under Clause 44.
Clause 44 states as under:
Break-up of the total expenditure of entities registered or not registered under the GST:
| S. No. | The total amount of Expenditure incurred during the year | Expenditure in respect of entities registered under GST | Expenditure relating to entities not registered under GST | |||
| Relating to goods or services exempt from GST | Relating to entities falling under the composition scheme | Relating to other registered entities | Total payment to registered entities | |||
| (1) | (2) | (3) | (4) | (5) | (6) | (7) |
| – | Column 6+Column 7 | – | – | – | Sum of (Col 3+Col 4+Col 5) | – |
Column Wise Understanding of the Clause:
| Column No. | Particulars | Coverage | ||||||||||||||
| 1 | Serial Number |
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| 2 | The total amount of Expenditure incurred during the year |
** Details of all deductions & additions must be maintained for each sub-entity (GSTIN-wise) of the legal entity |
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| 3 | Expenditure Relating to goods or services exempt from GST |
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| 4 | Relating to entities falling under the composition scheme |
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| 5 | Relating to other registered entities |
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| 6 | Total payment to registered entities |
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| 7 | Expenditure relating to entities not registered under GST |
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Important Points:
1. Depreciation under section 32, deduction for bad debts u/s 36(1)(vii) etc. which are not expenses should not be reported under this clause in any of the Columns.
2. Schedule III to the CGST Act, 2017 lists out activities or transactions which are treated neither as a supply of goods nor a supply of services and thus expenditure incurred in respect of such activities need not be reported under this clause in any of the columns from 3 to 7. For example, Para (1) of the Schedule III covers “Services by an employee to the employer in the course of or in relation to his employment” and thus, remuneration to employees need not be reported.
3. It may be noted that any expenditure that is incurred, wholly and exclusively for business or profession of the assessee qualifies for the deduction under the Act. Registration or otherwise of the payee under the GST Act has no relevance in considering allowability of expenditure.
4. In case of multiple GST registrations of an entity, there are chances of inter-branch supply, which is eliminated at the consolidated financials. Proper reconciliation for such type of transactions may be kept on record. This report may be prepared for an entity as a whole or branch wise and accordingly the information in these columns may have to be filled up consolidating the expenditure incurred under various GST registrations.
Conclusion: Understanding Clause 44 of the Tax Audit Report is essential for accurate tax compliance. This clause sheds light on the breakdown of total expenditure and GST-related reporting requirements. Businesses and auditors must ensure that the information provided aligns with the specific columns and follows GST regulations. Proper documentation and reconciliation are key to fulfilling the requirements of this clause for a seamless tax audit process.
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DISCLAIMER: The views expressed in this article are solely those of the author and are intended for informational purposes only. This article does not constitute professional advice or recommendations from any firm. Neither the author nor any affiliated parties accept liability for any loss or damage resulting from the information contained in this article or actions taken based on it.
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