CA Roopa Nayak
CA Roopa Nayak
The term audit is derived from the Latin term audire, which means to
hear.
What?
It involves:
Why?
To check whether:
assessee is paying correct amount of service tax.
Selection of
Assessee
Desk Review
Documenting
Information
Visiting
Premises
Audit Report
Audit
Objection &
Audit Para
Verification
Audit Plan
Departmental
Perspective
As assessees follow the
system of self-assessment
Assessee Perspective
errors committed whether
knowingly or unknowingly
are found out by the audit.
Start
Audit Plan
Test/Assess the Control Risk
AAR/PDR
Substantive Test
Audit Report
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Above 50 Lakhs
Every Year
25 50 Lakhs
Once in 2 years
10 25 Lakhs
Once in 5 years
Upto 10 Lakhs
2% of total no. of
assessees every
year
the rule has been struck down. Rule 5A(2) must consequently be struck
down.
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Rule 5A(2) audit, was also quashed by the Delhi High Court in
the Travelite decision 2014-TIOL-1304-HC-DEL-ST.
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In the Service Tax Rules, 1994, in rule 5A, for sub-rule (2),
the following sub-rule shall be substituted, namely:-
Assessees are not aware of the fact that they are not complying with the
legal provisions till such time when they are called upon by the department
for an audit.
They should consider the uncertain nature of the law frequent amendments
by way of notification, clarifications.
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Types of errors:
Conceptual Errors: Common errors, once committed, continued to be
practiced. If no issue arises, it gets accepted over a period of time.
Systems Errors: Errors due to improper systems or weakness in internal
control, not detected or corrected.
Compliance Procedures Omissions: Procedural deficiencies like failing to
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availed.
Inquiry of instances of inordinate time gap between the bill date
and the credit date.
The registration number not mentioned on the invoices.
The system of raising of invoice much prior to or after the date of
service especially during year ends.
Lack of reconciliation system.
many more
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the service.
Failure to intimate the addition of new branches in case of
centralized registration
Failure to intimate the authorized signatories
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The available records are not complete in the sense that the service
tax payable and input service credits cannot be arrived at from the
records.
The system of reconciliation of credit figures as per accounts and
Taking legal backing for any issue is always advisable rather than following informal
or oral instructions from the department.
CENVAT Credit availed on the input services without making the payment to
the service provider within 3 months
Rule 7 of CCR 2004, CENVAT credit in respect of input service shall be allowed on
the receipt of tax invoice provided that the payment of the full value of input service
along with service tax is made within three months of the date of invoice.
CENVAT credit availed on inputs before the receipt of the material in the
premises
Rule 4(1) of CCR 2004 specifies the conditions for allowing CENVAT credit
wherein it requires the inputs/materials to be received in the factory of the
manufacturer so as to avail CENVAT credit.
Availing credit on the invoices raised on the branches which are not registered as
per STR 1994 tantamount to availing of wrong credit which may result in future
interest liability.
Input Credits not proportionately reduced for rejection of inputs/ short
payment for service provider
Proviso to Rule 4(7) to CCR provides that in case of any refund or raising of credit
notes, the assessee shall pay an amount equal to CENVAT credit availed in respect
of the amount so refunded or credited.
Credits availed for inputs not used for manufacture of excisable items and non
taxable services
As per Rule 6 of CCR 2004, the CENVAT credit shall not be allowed on input or
input services used in or in relation to the manufacture of exempted goods or for
provision of exempted services.
Claiming the CENVAT credit on inputs used for manufacture of goods cleared
for direct exports or EOU units or SEZ developers/units contended by
department
Goods cleared for direct export, EOU units or SEZ units are not considered as
exempt. (Rule 6 of CCR)
Whether the service receiver who has paid the service tax alone and not value of
services in respect of import of services received from outside India under
reverse charge mechanism can avail such credit?
No, the service receiver who has paid the service tax on import of services cannot
avail such credits of service tax paid. It has to be noted that the service tax has to be
paid along with value of services as well, in order to be eligible to avail such credits.
What is the document based on which the service receiver company which paid
service tax on security services received from an individual, can avail credit?
The Cenvat credit can be availed on the basis of payment challan by the service
receiver company
Whether Cenvat credit can be availed on the service tax paid by service receiver
on renting of vehicle for pick and drop of employees company under reverse
charge mechanism?
It is advisable not to avail such credits due to specific restriction on availing
employee related credits which is mainly intended for personal use or consumption of
employees in definition of input services under CCR, 2004
Re-compute the ST liability. If short paid make the payment of the balance
amount. If correctly discharged, share the workings with reply to the audit notice
requesting for dropping the audit para.
Irregular availment of Cenvat credit
The Cenvat credits scheme is a beneficial scheme the benefit of which cannot be
denied based on technical grounds. Accordingly all the eligible credits cannot be
denied. If any ineligible credits were availed, then should reverse to that extent.
to the department.
Payment of Service tax made under the Category of Real Estate Agent
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