This refers to using src/main/kotlin instead of src/main/java.

This works just fine in java-library modules, whether the module in question is the dependent or the dependency.

For Android modules, the source dir needs to be added like this:

android {
  sourceSets {
    androidTest.java.srcDirs += 'src/androidTest/kotlin'
    main.java.srcDirs += 'src/main/kotlin'
    debug.java.srcDirs += 'src/debug/kotlin'
    release.java.srcDirs += 'src/release/kotlin'
    test.java.srcDirs += 'src/test/kotlin'
  }
}

This isn't hooking into the KotlinCompile task or anything like that, so it is included in the configuration when ModuleCheck tasks run.

The src/main/kotlin files are invisible to the parser, so anything which is only used inside that directory will be reported as unused. And if the Android module is a library, then anything which is declared inside that directory won't be counted.