Whether the company is regular in depositing undisputed statutory dues to the appropriate authorities.
Statutory dues covered include:
Goods and Services Tax (GST)
Provident Fund (PF)
Employees' State Insurance (ESI)
Income Tax
Sales Tax / Service Tax / Duty of Customs / Duty of Excise / VAT
Cess
Any other statutory dues
If not regular: report the extent of arrears outstanding as on the last day of the financial year for a period of more than six months from the date they became payable.
#### Sub-clause (b): Disputed Dues
Where statutory dues have not been deposited on account of any dispute:
Report the amounts involved
Report the forum where the dispute is pending
> Critical rule: A mere representation (objection letter) to the concerned department shall NOT be treated as a dispute for this purpose.
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### Six-Month Rule (Sub-clause a)
Only arrears outstanding for more than 6 months from when they became payable need to be disclosed. Dues outstanding for fewer than 6 months do not require specific disclosure under this clause.
Worked example
### Example 1
Q (MTP 3 / PYP Sep 24): PQ Limited, turnover ₹807 crores, has outstanding GST dues of ₹10 lakhs since June 2023. Management says they filed an objection letter with GST authorities but no response has been received. What are the auditor's reporting responsibilities under Clause (vii) of CARO 2020? (Financial year: 2023-24, i.e., year ending 31 March 2024)
Sub-clause (a) Analysis:
GST of ₹10 lakhs has been outstanding since June 2023.
As of 31 March 2024 (year-end), it has been outstanding for ~9 months — more than 6 months from when it became payable.
Therefore, the auditor must report this as an undisputed arrear under Sub-clause (a).
Sub-clause (b) Analysis:
Management's 'objection letter' to the GST department is a mere representation → does NOT qualify as a dispute under CARO.
Since no formal dispute exists (no forum such as GST Appellate Authority, Tribunal, or Court), Sub-clause (b) does not apply here.
Conclusion: Report under Clause (vii)(a) — GST dues of ₹10 lakhs outstanding for more than 6 months.
⚠️ Common exam mistakes
Treating a company's objection letter or reply to a demand notice as a 'dispute' — CARO explicitly states a mere representation does NOT constitute a dispute.
Reporting only dues outstanding at year-end without checking the 6-month threshold — only arrears outstanding for MORE THAN 6 months from when payable need disclosure under (a).
Forgetting Sub-clause (b) entirely when there is a genuine dispute — both sub-clauses are independent reporting requirements.
Limiting the dues check to GST only — the clause covers PF, ESI, income tax, customs, excise, and ALL other statutory dues.
Bare-Act text Paragraph 3, Clause (vii) · Companies Auditor's Report Order, 2020 · click to expand
Clause (vii)(a): 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; Clause (vii)(b): 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).