## CARO 2020 – Clause (vii): Reporting on Statutory Dues
Under Paragraph 3, Clause (vii) of the Companies Auditor's Report Order, 2020, the auditor has reporting obligations under two sub-clauses.
### Clause (vii)(a) – Undisputed Statutory Dues
The auditor must report whether the company regularly deposits undisputed statutory dues to the appropriate authorities:
Category
Dues Covered
Direct Taxes
Income Tax
Indirect Taxes
GST, Customs Duty, Excise Duty, VAT, Service Tax
Social Security
Provident Fund (PF), Employees' State Insurance (ESI)
Others
Cess, any other statutory dues
Reporting trigger: If arrears are outstanding for more than 6 months from the date they became payable, as on the last day of the financial year, the auditor must indicate the extent of those arrears.
### Clause (vii)(b) – Disputed Statutory Dues
Where dues have not been deposited due to a dispute, the auditor must report:
The amounts involved
The forum where the dispute is pending
> Critical rule: A mere representation/letter to the concerned Department does not constitute a dispute. Only formal proceedings before a recognized forum qualify.
Worked example
### Example 1
Example 1 – Clause (vii)(a):
A company has GST dues of ₹50 lakhs outstanding as of 31 March 2024. These became payable on 1 September 2023 (more than 6 months prior). The auditor must report under Clause (vii)(a), indicating the extent of arrears — ₹50 lakhs outstanding for more than 6 months.
Example 2 – Clause (vii)(b):
A company disputes an income tax demand of ₹20 lakhs and has filed an appeal before the Income Tax Appellate Tribunal (ITAT). The auditor must report under Clause (vii)(b): amount = ₹20 lakhs, forum = ITAT.
However, if the company merely wrote a letter to the Income Tax Officer contesting the demand, this does NOT qualify as a dispute — the auditor cannot treat it as such.
⚠️ Common exam mistakes
Treating a mere letter/representation to the tax department as a 'dispute' — only formal proceedings before a recognized forum qualify
Forgetting the 6-month threshold: arrears must be outstanding for MORE than 6 months to trigger reporting under (vii)(a)
Measuring the 6-month period from year-end instead of from the date dues became payable
Omitting cess or 'any other statutory dues' — the list is illustrative, not exhaustive
Reporting maximum dues during the year instead of arrears outstanding as on the last day of the financial year
Bare-Act text Paragraph 3, Clause (vii)(a) and (vii)(b) · Companies Auditor's Report Order, 2020 (CARO 2020) · click to expand
Whether the company is regular in depositing undisputed statutory dues including Goods and Services Tax, provident fund, employees' state insurance, income tax, sales-tax, service tax, duty of customs, duty of excise, value added tax, cess and any other statutory dues to the appropriate authorities and if not, the extent of the arrears of outstanding statutory dues as on the last day of the financial year concerned for a period of more than six months from the date they became payable, shall be indicated. Where statutory dues referred to in sub-clause (a) have not been deposited on account of any dispute, then the amounts involved and the forum where dispute is pending shall be mentioned (a mere representation to the concerned Department shall not be treated as a dispute).