CBEC issues guidelines for detailed manual scrutiny of ST-3 Returns w.e.f.
August 1, 2015
CBEC issues guidelines for detailed manual scrutiny of ST-3 Returns w.e.f.
August 1, 2015
Background:
The
Central Board of Excise and Customs (“CBEC” or “the Board”) vide Circular No.
113/07/2009-ST dated April 23, 2009 had laid down the procedure for carrying
out detailed scrutiny of Service Tax Returns (“ST-3 Returns”) and had
circulated a Return Scrutiny Manual for Service tax. However, with the
introduction of Point of Taxation Rules, 2011 which shifted the liability of
payment of Service tax from receipt basis to accrual basis and advent of
Negative List based comprehensive taxation of services in July, 2012, the CBEC
has unveiled the revised guidelines for detailed scrutiny of ST-3 Returns to be
followed by the Revenue with effect from August 1, 2015 vide Circular No.
185/4/2015-ST dated June 30, 2015 (“the Circular”).
In
terms of the Circular, the detailed scrutiny programme typically supplements
the audit programme. The two processes of audit and scrutiny are, in fact,
complementary to each other. The Board has further clarified vide the Circular
that, "Even after the introduction of GST, it may be appreciated
that the basic principles of scrutiny of returns and reconciliation of records
would remain the same."
Gist of the guidelines for detailed manual scrutiny:
We are
summarising herewith the gist of the guidelines issued vide the Circular for
ease of understanding:
a.
Commencement of detailed manual scrutiny of ST-3 Returns from August 1, 2015
onwards;
b.
Preliminary scrutiny to be done by range officers;
c.
Main focus on small assessees whose total tax paid (Cash + Cenvat) during
Financial Year 2014-15 is less than Rs. 50 Lakhs, though on the direction of
Chief Commissioner, scrutiny of ST-3 Returns can be made for assessee whose
monetary limit exceeds even Rs. 50 Lakhs;
d. The
purpose of detailed manual scrutiny of returns is to ensure the correctness of
the assessment made by the assessee which includes checking the taxability of
the service, the correctness of the value of taxable services, effective rate
of tax after taking into account the admissibility of an exemption
notification, abatement, or exports, if any etc.;
e. In
doing this, the proper officer must rely mainly on assessment-related documents
like agreements/contracts and invoices. Detailed financial records should not
be called for in a routine manner;
f.
Reconciliation of information furnished in the ST-3 return with ITR Form Nos.
4, 5, 6 and 26AS and any third party information made available;
g.
Scrutiny process of an assessee should be completed in a period not exceeding 3
months;
h. In
no event should an assessee be subjected to both audit and detailed manual
scrutiny;
To
view the full Circular, please click on the link below:
Hope
the information will assist you in your Professional endeavours. In case of any
query/ information, please do not hesitate to write back to us.
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