Clause 44 of Form 3CD and the new Tax Audit Form 26: Applicability, Format and GST Reporting

Clause 44 of tax audit report (Form 3CD), or Section VI (GST Reconciliation and Indirect Tax) in the new Form 26, is an important reporting requirement for enterprises this year. The disclosure focuses on GST-related expenditure classification and vendor-wise reporting under the revised tax audit structure, which includes Clause 44 Form 26 reporting requirements.

Key Takeaway

• Clause 44 tax audit requires disclosure of expenses based on GST classification.
• Businesses must categorise expenses based on vendor GST registration status.
• Form 3CD Clause 44 applies up to FY 2025-26. From April 1, 2026, similar disclosures are reported under Section VI of Form 26.
• Proper reporting supports GST reconciliation, audit accuracy, and regulatory compliance.

What is Clause 44 of Tax Audit?

Clause 44 of tax audit was introduced in Form 3CD to gather GST-related expenditure details incurred during the financial year. The reporting requirement helps tax authorities compare expenses with GST compliance records and vendor registration data.

The main focus of Clause 44 is as follows:

• GST-registered vendors 
• Unregistered vendors
• Expenditure subject to GST
• Vendor-wise classification

Note on Form 3CD vs. Form 26: Clause 44 under Form 3CD applies to tax audits conducted up to FY 2025–26. From April 1, 2026, Form 26 replaces the earlier tax audit reporting framework, with GST-related expenditure disclosures covered under Section VI (GST Reconciliation and Indirect Tax).

Clause 44 of Tax Audit Report Applicability

The applicability of Clause 44 of tax audit report (Current Schedule VI of Form 26) generally extends to taxpayers who are required to undergo a tax audit under Section 44AB of the Income-tax Act. Let’s explore where the disclosure is mainly applicable:

• Companies that are covered under tax audit
• Partnership firms under the tax audit
• Businesses with GST-related expenditure
• Taxpayers maintaining audited books of accounts

The reporting requirement applies even when certain expenses are not directly liable for GST.

Businesses should classify expenditure based on vendor GST registration status and GST applicability. 

Common areas covered include:

• Purchases
• Professional fees
• Rent expenses
• Contract payments
• Operational expenditure

What is Covered in Clause 44 Tax Audit

Clause 44 reporting requirements focus on the breakup of total expenditure disbursed during the financial year. It applies to both revenue and capital expenditures.

The disclosure broadly divides expenditure into the following categories.

This classification helps organise GST-related expenditure reporting. Key reporting areas include:

• Vendor Classification GST Audit
• Total expenditure breakup
• GST applicability tracking
• Expense reconciliation

Format of Clause 44 Reporting

The reporting format under Clause 44 tax audit India is generally presented in a tabular structure within Form 3CD or revised audit reporting formats.

Here’s the Clause 44 reporting format:

Note: Businesses should ensure that the financial records, vendor masters, and GST returns remain aligned before finalising disclosures. Incorrect vendor mapping may lead to reconciliation mismatches during scrutiny or audit reviews.

How to Prepare Clause 44 Step-by-Step Guide

Preparing for a Clause 44 tax audit India requires meticulous data extraction from your ERP or accounting software. Here’s a step-by-step guide for that:

Step 1: Collect Financial and GST Records

Start by gathering your Trial Balance, Profit & Loss statements and Purchase Register.
Download your GSTR-2B and GSTR-3B reports to identify which of your vendors are registered. Also, calculate your total expenditure for the financial year, including both revenue and capital expenses.

Step 2: Classify Expenses by GST Status

Separate expenses into different GST categories, such as composition dealers, registered vendors, exempt supplies, and unregistered vendors, before reporting.

Step 3: Prepare Clause 44 Reporting Table

Fill the Clause 44 table by placing your categorised data into the correct columns. Column 2 holds the total expenditure, while Columns 3, 4, and 5 cover exempt, composition, and regular registered purchases, respectively. Report expenditure relating to unregistered persons separately in Column 7.

Step 4: Reconcile Data with GST Returns

Compare Clause 44 figures with GSTR-3B and purchase records to identify mismatches. (Note: Non-supply items such as depreciation,  salaries, and bad debts are generally excluded from reporting.)

Step 5: Verify and Finalise Disclosures

The auditor must verify the working sheets with GST returns and financial statements. If proper classification data is unavailable, an appropriate disclaimer may be added in the tax audit report.

Key Changes in TDS/TCS Reporting Under Form 26

From April 1, 2026, Form 26 requires detailed reporting of TDS and TCS transactions. This includes tax deducted and deposited against each payment category, along with compliance status, whether TDS was deducted on time, deposited within due dates, and whether any shortfall or default exists. For TCS, similar disclosures cover tax collected at source and amounts remitted to the government.

Both sets of disclosures require reconciliation with the corresponding TDS/TCS returns filed and the figures reflected in the income tax return, reducing mismatches during assessments.

Conclusion

Clause 44 remains an important GST reporting requirement for businesses undergoing tax audits. With the introduction of Form 26 from April 2026, GST expenditure disclosures and TDS/TCS reporting, and reconciliation processes are expected to become more structured. This transition strengthens GST expense reporting tax audit compliance while improving transparency and reporting accuracy.