Clause 44 of Form 3CD – Break up of Total Expenditure

• Auditing and Assurance
• ||
• August 22, 2022

CBDT had introduced the new clause, i.e., Clause 44 for Form 3CD, updated in the tax audit form.

Under this clause, a break up of total expenditure needs to be provided, including purchases made during the year. This clause is abeyance until 31st March 2022 vide CBDT Circular No. 5/2021 dated 25.03.2021. However, this clause is now applicable for the Assessment year 2023-24, i.e., the Financial year 2022-23. Therefore, let us understand the reporting requirement of this clause. Firstly, Let’s recapitulate about tax audit and its applicability. All assessees who are liable to tax audit as per section 44AB shall require to fill out Form 3CA or 3CB along with Form 3CD. Form 3CA or Form 3CB is a report that an auditor needs to sign considering the opinion provided for a tax audit. However, Form 3CD is a statement of particulars, which is quite comprehensive and contains all the details concerning various tax provisions.

Now coming to clause 44; newly inserted by CBDT. Under this clause, the assessee requires to provide details of expenses in the following format:

Let’s understand the reporting requirement under each column:

Column 1: Serial number.

Column 2: Total Amount of expenditure incurred during the year:
The assessee requires to mention the amount of all expenditures incurred during the year, including purchases made during the year. However, there might be some confusion about whether the expenditure of capital nature is to be reported or not. Therefore, since the word used is ‘expenditure,’ it is advised that the capital expenditure may also be registered separately in Column no. 2 in the format prescribed.

Column 3: Expenditure relating to goods or services exempt from GST:
Under this column, all expenses exempt from GST must be reported here.

Column 4: Expenditure relating to entities falling under the composition scheme:
Reporting under this column applies to transactions entered with the Composition scheme as per section 10 of the CGST Act, 2017. Generally, while accounting transactions, small and medium taxpayers do not mention GSTIN on those invoices where input is ineligible as per section 17(5) or in case of purchase from persons registered under composition levy. Thus, reporting such expenditure may be categorized as “Expenditure relating to entities not registered under GST.”

Column 5: Expenditure relating to other registered entities:
Under this column, assessees must report the amount of all inward supplies from registered dealers, other than supplies from composition dealers, and exempt supplies from registered dealers. Possibly, the assessee may have both inward supplies (i.e., taxable and exempt) from the same registered person; thus, exempt inward supplies must be reported under column 3. Finally, the only value of taxable inwards supplies should be reported under column 5.

Column 6: Total payment to registered entities:
Under this column, the assessee must report the “Total payment made to registered entities.” Therefore, a question may arise whether we must report the total payment made to the registered person during the year or the total expenditure booked in the books of accounts. However, considering the harmonized interpretation of the column heading, i.e., “Total Payment to registered entities,” we should report the total amount of columns 3, 4, and 5, which is the value of expenditure booked as per books of accounts.

Column 7: Expenditure relating to entities not registered under GST:
Under this column, the assessee must report the amounts of inward supplies of goods or services received from the unregistered person during the year. It should be ensured that the total of Columns 6 and 7 should tally with the amount reported in column 2.

Written by – Suraj Kumar

At AJSH, we assist our clients in dealing with internal audits; government audits of various corporate matters (company incorporation), statutory audits, ROC compliance, and company winding-up) in India by providing them adequate support and guidance from our end. If you have any questions or wish to know more about Clause 44 of Form 3CD, kindly contact us.