Last updated: May 4th, 2020 9:00 PM

Reporting of GAAR, GST Details in Tax Audit Report Deferred

In view of the prevailing situation due to Covid-19 pandemic across the country, the Central Board of Direct Taxes (CBDT) announced that the Companies will not be required to undertake General Anti-Avoidance Rules (GAAR) and Goods & Services Tax (GST) reporting under the Tax Audit Form till March 31, 2021. The CBDT plans to give businesses time to prepare for the tax audit reports that require two key disclosures. Accordingly, the CBDT suspended the due date for reporting compliance under clause 30C and clause 44 of the Tax Audit Report (Form 3CD) till March 2021.

Applicability

According to the Income Tax Act, 1961, every person carrying on business is required to get his accounts audited, if his total sales, turnover or gross receipts, in business exceed or exceeds Rs.10 million or Rs.20 million if they have opted for presumptive taxation. In the case of a person carrying on the profession, he is required to get his accounts audited, if his gross receipt in profession exceeds, Rs.5 million in any previous year.

Section 44AB of the Income Tax Act

The Section 44AB of the Income Tax Act, 1961 read with Rule- 6G of the Income Tax Rules, mandates specified persons to submit the Tax Audit Report along with the prescribed particulars in Form 3CD.

Tax Audit Report in Form 3CD

Tax Audit Report in Form 3CD was revised in July 2018 inter alia to incorporate the following two clauses:

• Clause 30C pertaining to General Anti-Avoidance Rules (GAAR)
• Clause 44 pertaining to Goods & Services Tax (GST) transactions

Brief introduction of Clause 30C and Clause 44 of the Form 3CD is as follows:

Clause 30C – Reporting of GAAR

Clause 30C mandates the organization to provide details of transactions designed to avoid taxes. If an assess entered into an impermissible avoidance arrangement, he/she is required to provide the details of nature of impermissible avoidance arrangement and amount of tax benefit in the previous financial year arising, in aggregate, to all the parties to the arrangement.

Clause 44 – Reporting of GST

The taxpayer need to provide the beak-up of the total expenditure of entities registered or not registered under the GST:

• The total amount of Expenditure incurred during the year expenditure Relating to goods or services exempt from GST
• Expenditure relating to entities falling under the composition scheme
• Expenditure relating to other registered entities
• Total payment to registered entities
• Expenditure relating to entities not registered under GST

The format of the Tax Audit Form 3CD is as follows:

The Amended Tax Audit Form

The Central Board of Direct Taxes (CBDT) deferred for the third time the requirement for the organization to include General Anti-Avoidance Rules and Goods & Services Tax reporting under the tax audit form till 31 March 2021. Initially, reporting was to be made by 20 August 2018 but then the board deferred the implementation of the change in income tax audit form (Form 3CD) till 31 March 2019. Further, in May 2019, the CBDT again postponed its implementation till 31 March 2020. Now considering the COVID 19 pandemic, The CBDT announced that the reporting requirements under clause 30C and clause 44 of the Tax Audit Reports are kept in abeyance till March 2021. This means that the Tax Audit Reports need to be furnished till March 2021; the tax auditors need not to provide details under the clause 30C and 44 of the Tax Audit Reports.