Audit of service tax assessee under service tax
Generally service tax liability is computed by an assessee on own will or can say under self assessment method. But sometimes it is necessary on the department to ensure that service tax liability computed by assessee on its own is correct and as per the provision of act. And for this service department conduct the audit of service tax records maintained by the assessee. This type of audit is called departmental audit.
Apart from departmental audit, one more audit is prescribed in act which is conducted on the basis of total service tax paid by the assessee by the comptroller and auditor general of India (CAG)
Frequency Norms of Audit for Service Tax Assessees
Director General of Audit, New Delhi has prepared Service Tax Audit Manual, 2010. As per the guidelines, tax payers whose annual service tax payment (including cash and CENVAT) was Rs.3 crores or more in the preceding financial year may be subjected to mandatory audit each year.
- Taxpayers with Service Tax payment above Rs.3 crores (Cash + CENVAT) – to be audited every year.
- Taxpayers with Service Tax payment between Rs.1 crore and Rs.3 crores (Cash + CENVAT) – to be audited once every two years.
- Taxpayers with Service Tax payment between Rs.25 lakh and Rs.1 crore (Cash + CENVAT) – to be audited once every five year.
- Taxpayers with Service Tax payment up to Rs.25 lakh (Cash + CENVAT) – 2% of taxpayers to be audited every year.
Reason for audit by service tax department
- To ascertain the correctness of claim of CENVAT Credit,
- To ascertain the correct valuation of taxable services,
- To ascertain whether reverse charge or joint charge mechanism complied or not.