Tax Audit: 5 Important GST Related Clause

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Tax audit report filed in Form 3CD includes various clauses requires the assessee to report details related to GST compliance.

The details required in the tax audit report related to GST are:

  • Clause 4 – Reporting GST Registration Numbers
  • Clause 27(a) – Reporting tax credit (ITC) Movement
  • Clause 39 – Reporting service tax Audit related details
  • Clause 41 – Reporting GST demand and refund orders details
  • Clause 44 – Break up expenses in GST and non GST
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Clause 4 – Reporting GST Registration Numbers held by the assessee

If assessee are liable to pay any indirect taxes like excise duty, service tax, sales tax, GST, customs duty, etc. Then they must furnish the registration numbers allotted for the same which ensures proper compliance.

Key Points

  • In case of multiple GST registrations, all such registration must be reported.
  • If GSTIN is obtained but cancelled during the year, then also you must report them in clause 4.

Clause 27(a) – Reporting Tax Credit (ITC) Movement

The assessee must report the amount of CENVAT credits availed or utilized during the financial year, specify how these credits are reflected in the Profit & Loss account and mention the treatment of any outstanding CENVAT credits in the accounts.

Important Points

The following points must be considered while reporting GST ITC under Clause 27(a):

  • The reporting should be made as per audited books of account not as per GST credit ledger as coming in portal.
  • The opening balance reported should reconcile with the audited FS and last year tax audit report.
  • In case the books and GST credit ledgers are matching without any reconciling item, the reporting can be made directly by downloading the credit ledger ‘csv’ file from GST Portal. The ‘Credit’ will be ITC ‘Availments’ and ‘Debits’ will be ‘ITC Utilization’.
  • GST cash ledger balances are not required for reporting.

Clause 39 – Reporting Service Tax Audit Related Retails

Clause 39 requires reporting if an audit was conducted under Section 72A of the Finance Act, 1994, related to the valuation of taxable services. If any of disqualification or disagreement on any matter /item /value/quantity as may be reported or identified by the auditor.

Points To Note

Key points to consider while reporting in clause 39:

  • Reporting is required only for service tax audits under the Finance Act, 1994, not for GST audits carried out by the GST department under section 65 or 66 of the CGST Act, 2017.
  • The deadline period of passing any new GST audit order under service tax law has been lapsed and hence no reporting is required in this clause.

Clause 41 – Reporting GST Demand and Refund Orders Details

Under this clause you need to furnish the details of demand raised or refund issued during the financial year under any tax laws other than Income tax Act 1961 and Wealth Tax 1957 along with details of relevant proceedings.

Points To Remember

The key points are:

  • Reporting is required to be made for GST demand orders (Form DRC-07) and refund order (RFD-06) issued during the year whether or not the same pertains to current financial year.
  • The amount of demand to be reported must include ‘Interest’ and ‘Penalty’ amount.
  • Auditor shall also check the legal confirmation given by legal Counsel along with the ‘Status of litigation’.
  • Assessee need to report the summary details of proceedings in remark column.

Clause 44 – Break up Expenses in GST and Non-GST

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

Key Points

Separate Line Items: Reporting to be made for Capital and Revenue Expenditure separately.

Capital Expenditure: The reporting for Capital Expenditure shall be matched with Fixed Assets reporting in Clause 18 and the audited Financial Statements.

The total amount of Expenditure incurred during the year shall be calculated as:

Column 3 to 6

Expenses incurred for GST related vendors shall be calculated as under:

  • If the expenses as per books are reconciled with GSTR-2B , then the expenses which are mapped with the same are GST registered expenses.
  • For expenses not in GSTR-2B but related to GST-registered persons (e.g., delayed GSTR-1 or composition suppliers), report them in Columns 3, 4, and 5 as appropriate.
  • RCM supplies where suppliers are not registered in Column 7, not to be reported in column 3 to 6.
  • Exempt supplies shall also include services exempt from GST like interest on loan (coming under Finance Cost) electricity expenses, fuel expenses etc.
  • If details for exempt, composition, or ineligible ITC are not maintained, make an appropriate remark in Form 3CA/3CB.

Column 7

It is the residual Column and any supply not reportable in Column 3 to 6 shall be reported here.

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