Section 44AB of the Income Tax Act,1961 requires specified persons to furnish Tax Audit Report in Form 3CD. While Form 3CD requires taxpayers to furnish basic details like GSTIN, balance lying in Electronic Credit Ledger etc., one of the clauses in Form 3CD relates to furnishing details of total expenditure in Tax Audit Report from registered and unregistered persons under GST. Vide this Outlook, we intend to apprise you regarding reporting of such details in Form 3CD.

• Clause 44 requires an assessee to disclose breakup of total expenditure incurred during the year from entities registered or unregistered under GST. The reporting under Clause 44 of Form 3CD was exempted till March 31, 2022. However, similar extension was not given for FY 2021-22 and the following reporting has now become mandatory:

44. Break-up of total expenditure of entities registered or not registered under the GST:

• Doubt may arise whether such details need to be reported separately for each nature of expenditure akin to Table 14 of GSTR-9C – Expense wise reconciliation of ITC availed. Regarding this, the Guidance Note issued by ICAI provides that head-wise / nature-wise expenditure details are not required and only bifurcation of total expenditure needs to be given.

• Another issue may arise that whether Clause 44 using expression ‘expenditure’, will cover capital expenditure or not. The Guidance Note clarified that the above Table should capture capital expenditure as well.

• Here, it is relevant to note that Table 5 of GSTR-3B requires registered person to report value of exempt, nil-rated and non-GST inward supplies received during relevant tax period. Taxpayers duly disclosing such details can rely on the same to furnish abovementioned figures. 

NITYA Comments: Data exchange has become common between Direct and Indirect Tax wings of Government. Reporting of expenses from registered and unregistered persons may open another gate of litigation. Department may rely on above figures and seek reconciliation of total ITC claimed by assessee vis-à-vis expenditure incurred. 

Further, Income Tax law does not link admissibility of any expenditure based on nature of supplier (registered or unregistered). Hence, above reporting does not appear to have any sound justification and will only over-burden taxpayers.

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