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Tax auditors must split total expenditure by supplier GST status, but vendor masters often lack reliable registration type.
Tag each vendor as regular registered, composition, exempt supply or unregistered, then total the purchase and expense ledgers by tag.
Vendor master with GSTIN and registration type, purchase register, expense ledgers, and GSTR-2B for cross-checking supplier status.
A clause 44 table that adds back to total expenditure, with unclassified items listed for the auditor.
Clause 44 of Form 3CD asks the tax auditor to break your total expenditure for the year into payments to GST-registered suppliers, split into exempt supplies, composition dealers and other registered suppliers, and payments to unregistered suppliers. To fill it, your vendor master must record each supplier’s GST status reliably.
It is a disclosure clause. It does not create a tax, but a wrong split invites questions.
Is clause 44 actually required?
Clause 44 was added to Form 3CD in 2018, then kept in abeyance by a series of CBDT circulars, the last of which (Circular No. 5/2021) deferred it up to 31 March 2022. Tax audit reports filed after that date are expected to report it. For FY 2025-26, audited in 2026, Form 3CD under the 1961 Act still applies. From tax year 2026-27, the report moves to Form 26 under Section 63 of the Income-tax Act 2025.
What does the clause ask for?
| Column | What it means | Vendor data needed |
|---|---|---|
| Total expenditure | All expenses in the year, revenue and capital | Ledger totals |
| Registered: exempt supplies | Paid to registered suppliers for goods or services exempt from GST | GSTIN, nature of supply |
| Registered: composition | Paid to suppliers under the composition scheme | GSTIN, registration type |
| Registered: others | Paid to other registered suppliers | GSTIN |
| Total registered | Sum of the three registered columns | Calculated |
| Unregistered | Paid to suppliers without GST registration | Confirmation of no GSTIN |
Why do the purchase register, vendor master and GSTR-2B disagree?
- Vendor master is stale. A supplier moved from composition to regular, but the master was never updated.
- GSTIN missing. The vendor was set up for a one-off purchase without a GSTIN field.
- Invoices not in GSTR-2B. A registered vendor did not file GSTR-1, so the purchase looks unregistered on the portal while the invoice shows a GSTIN.
- Mixed supplies. One vendor supplies both taxable and exempt goods.
GSTR-2B is a useful cross-check: a supplier whose invoices appear there is registered. It cannot tell you about unregistered suppliers, who never appear.
Worked example: ₹1,40,00,000 across 38 vendors
Nair Distributors had annual purchases and expenses of ₹1,40,00,000 from 38 vendors.
| Category | Vendors | Amount |
|---|---|---|
| Registered, others (regular) | 29 | ₹1,12,40,000 |
| Registered, composition | 3 | ₹9,60,000 |
| Registered, exempt supplies | 2 | ₹4,80,000 |
| Unregistered | 3 | ₹10,00,000 |
| Not yet classified | 1 | ₹3,20,000 |
| Total | 38 | ₹1,40,00,000 |
Check: ₹1,12,40,000 + ₹9,60,000 + ₹4,80,000 + ₹10,00,000 + ₹3,20,000 = ₹1,40,00,000.
The ₹3,20,000 line is a transport vendor with no GSTIN in the master and invoices that show none. The accountant must confirm with the vendor whether it is unregistered, or registered and simply missing from the master, before the auditor can complete the clause.
How do you keep vendor GST status current?
- Make GSTIN and registration type compulsory fields when creating a vendor.
- Check a new vendor’s GSTIN on the GST portal before the first payment.
- Re-check composition and regular status once a year, before the tax audit.
- Flag vendors whose invoices are missing from GSTR-2B for two months running.
What to read next
- Tax audit Form 3CD reconciliation items
- Tax audit Form 3CD for CA firms
- My CA asked for tax audit documents: what records should I keep ready?
- Related: reconciliation software India
Content authored by practitioners with experience at Amazon India, Intuit QuickBooks, and the Tata Group. Meet the team →