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Explanation of Clause 44 (3 CD) of Tax Audit Report

The break-up of total expenditure of any entity which is registered in GST or not will be shown here. What is the total amount of expenditure, how much is the expenditure in respect of those goods or services which are exempted from GST or which have adopted the composition scheme, all these details have to be mentioned here.

How will expenditure be reported –
  • GSTIN-wise
  • Entity-wise or
  • Branch-wise?

Expenditures of all the branches of the entity which have multiple GST registration numbers will be consolidated and reported here.

What will be included in the expenditure?
  • Total expenditure will include both Revenue and Capital expenditure.
  • Only Business Expenses are to be reported, Personal expenses will not be included.
  • Business Expenses will be included even if they are not deductible or disallowed.
  • Non GST & Nil Rated Supply will be included in Exempted.
  • Even if a person is not registered under GST, he will have to furnish the total expenditure in the prescribed table.
  • Salary, Partners remuneration, Interest paid to partners on capital or director remuneration are not seen as good and are also not seen as services,
  • Interest Expenses will be treated as exempt supply.
  • The heading of Column 6 refers to the total 'payment' to registered entities. The word 'payment' should be interpreted as 'expenditure' as the combined heading of Column (3), (4), (5) is 'expenditure in respect of entities registered under GST'.
  • In case of multiple GST registrations of an entity, there is possibility of inter-supply branch, which gets eliminated in consolidated financials. This report can be prepared for the entity as a whole or for one of its branches, as may be audited and the information in these columns will have to be filled accordingly by consolidating the expenditure made under various GST registrations.

Does expenditure include all those transactions which are considered supply of goods or services under GST?

Expenditures like salary which are incurred due to employer-employee relationship are not considered expenditure and bad debts, depreciation and provisions are not supply of goods or services under GST.

Will expenditure be reported in Clause 44 with_without GST?

If an assessee has claimed ITC on expenditure then it will not be considered as expenditure and if ITC has not been claimed or it is a case of ineligible ITC then it will be included in the Statement of Profit & Loss and will be considered as expenditure. Tax auditor can provide appropriate note in this respect in the tax audit report.

Do expenditures made on non-supplies have to be reported here?

Expenditures that are not directly related to the supply of goods or services such as bonus to employee will not be reported.

Thus, making a working paper of total expenditure can prove beneficial.
Description * Amount (Rs.)
Total value of expenditure in P&L for the year XXXX
Add: Total value capital expenditure not included in P&L for the year XXXX
Less: Total value of non-cash charges considered as expenditure XXXX
Less: Total value of expenditure excluded for being transactions in securities and transactions in money XXXX
Less: Total value of expenditure excluded by virtue of Schedule III to the CGST Act, 2017 XXXX
Balance being value of expenditure for clause 44 XXXX
* Details of all deductions & additions must be maintained for each sub-entity (GSTIN-wise) of the legal entity.

Here 2 approaches are mentioned-

Conservative Approach:

Expenditure should be disclosed because the heading does not say that only expenditure on supply has to be reported, rather it says that expenditure will also be disclosed.

Another Approach:

The main objective of introducing this clause is to match these figures with the GST return in which there is no need to disclose non-supplies. Thus there is no need to disclose expenditure incurred on non-supplies.

The Assessee will have to give all the following details in Clause 44.
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 the goods or services exempt from GST;

Relating to the entities falling under the composition scheme;

Relating to the other registered entities;

Total Payment to Registered entities.


Is there a requirement to maintain the records mentioned in Clause 44 under GST?

Section 35: Accounts and other records.

Every registered person must maintain records at his principal place of business which present true and correct accounts:-

  • Production or manufacture of goods;
  • Inward and outward supply of goods or services or both;
  • Stock of goods;
  • Input tax credit availed;
  • Output tax payable and paid; and
  • Such other particulars as may be prescribed.

Is there a requirement to maintain the records mentioned in Clause 44 under GST?

Rule 56: Maintenance of accounts by registered persons.
  • Every registered person will have to maintain true and correct accounts of the goods or services imported other than the particulars mentioned in Section 35(1).
  • Every registered person who is claiming Input-tax credit will have to maintain an account.
  • Every registered person doing work contract work will have to maintain separate accounts for all the work contracts in which the name and address of the supplier from whom the goods or services chargeable to tax have been received under this Act will have to be mentioned.
  • Every registered person doing work contract work will have to maintain separate accounts for each works contract, in which the name and address of the supplier from whom the goods or services have been received.
Reporting in 3CB or 3CA:-
  • If the required details as per clause 44 are not made separately by the assessee and in its absence, we cannot comment.
  • These are not included in total expenditure like Depreciation, Bad debt, Salary etc. Which is not considered supply in GST
  • If the details are partially correct then

“The Assessee have confirmed that total expenditure  Rs._________ Incurred .they have partially kept the required details according to Clause 44 for inward supplies. Out of Total Expenses  Assessee has maintained Detailed for Amount Rs ……………..   the for Balance client cannot determine the Detail breakdown of expenditure."

"Hence, the figures reported under the said Clause 44 are reasonably accurate to the extent of the data maintained and submitted to us for verification.”

4) Client Unregistered under GST:-

The total expenditure incurred during the year amounting to Rs._____ We have been informed by the assessee that the information required under this clause has not been maintained by it in absence of any disclosure requirements under the Companies/LLP/IT Act.

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