SI. No.
Expenditure relating to entities not registered under GST
Section 44AB of the Income tax Act, 1961, requires certain classes of taxpayers to get their accounts audited. It is mandatory for them to provide statement of particulars or specific information on various subjects as prescribed under Form 3CD. The audit aims to ascertain the compliance of various provisions of the Income-tax Law and the fulfilment of other requirements of the Income tax Law.
The findings and observations from the tax audit have to be reported in Form Nos. 3CA/3CB and 3CD. One of such items in form 3CD relates to the furnishing of details of total expenditure i.e. in clause 44 of Form 3CD requiring the break up of total expenditure both for entities registered and not registered under GST.
The reporting under clause 44 of Form 3CD was kept in abeyance till 31.03. 2022. It has now become mandatory for all the reports submitted after 31.03.2022. The expenses within the scope of GST i.e., which are tantamount to ‘supply’ in section 7 of the CGST Act, 2017, are only required to be reported in clause 44 in any of the columns from 3 to 7. The manner for reporting under this clause has been discussed in detail below:
1. Column No. 1: SI. No.
The serial number for respective expenses has to be mentioned in this column.
2. Column No. 2: Total amount of expenditure incurred during the year
It seeks detail related to the total amount of expenditure incurred during the year. Now, to answer the question of whether the total amount of expenditure is to be given or the breakup of total expenditure (as mentioned in the heading) shall be given.
On this, the guidance note issued by ICAI provides that head-wise / nature-wise expenditure details are not envisaged in this clause.
Further, the guidance material states that the amount which is not in the nature of expenses shall not be quoted in Column 3 to 7. For Example: depreciation, provision for expenses, etc.
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 : Services by an employee to the employer in the course of or in relation to his employment” i.e. Salary expense.
3. Column No. 3: Expenditure Relating to goods or services exempt from GST (in respect of entities registered under GST)
Exempt supply means supply of any goods or services or both which attracts 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.
4. Column No. 4: Expenditure relating to entities falling under the composition scheme (in respect of entities registered under GST)
Levy of tax under the composition scheme is governed by section 10 of the CGST Act, 2017. In this column, value ofpurchases from persons registered under composition levy has to be reported.
5. Column No. 5: Expenditure relating to other registered entities (in respect of entities registered under GST)
Under this column, the value of all inward supplies from registered dealers, other than supplies from composition dealers and exempt supply from registered dealers, are to be mentioned.
6. Column No. 6: Total payment to registered entities (in respect of entities registered under GST)
Here, the total expenditure in respect of registered entities i.e., sum total of values reported in columns (3), (4) and (5) should be mentioned and the word ‘payment’ should harmoniously be interpreted as ‘expenditure’.
7. Column No. 7: Expenditure relating to entities not registered under GST
Here, the value of the inward supply of goods and/or services received from unregistered persons should be reported.
Illustration:
Details of expenditures appearing in the Trading and Profit & Loss A/C of X Limited
SI. No.
Amount
It also purchased a machinery of Rs. 3,00,000 during the year
Break up of the above expenditures in Clause 44 shall be done in the following manner:
SI. No.
Total payment to registered entities
Further, the guidance note 2023 requires the tax auditor to maintain a working paper of reconciliation of total expenditure as per P&L with the value of expenditure reported in clause 44 in the following manner:
Description *
Amount (Rs.)
* Details of all deductions & additions must be maintained for each sub-entity (GSTIN-wise) of the legal entity.
It is also clarified that:
Reference:
This document has been prepared in accordance with the “Guidance Note on the Tax Audit under section 44AB of the Income Tax Act, 1961- AY 2023-24” provided by ICAI.
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