Manual scrutiny of Service Tax Returns
Service tax has generated good amount of revenue for Government in recent past. Due to this The Rate of Service Tax was also hiked from 12.36% to 14%. The Government is also trying to bring more & more under the Service tax net. This not only increases the tax collection but also help in broad base of tax.
CBEC (Central Board of Excise & customs) recently introduced circular No. 185/4/2015 where it declared that it would manually scrutinize the service tax returns (ST3) filed by the assesses. The Scrutiny will be carried by Superintendent & assisted by officers.
Criteria for selection of Scrutiny: The Criteria for selection of scrutiny for F.Y 2014-15 will be assessees who have paid Service tax below 50 lakhs.
This does not mean that if you have paid service tax below 50 lakhs your case is automatically selected for the scrutiny. The CBEC has drawn risk parameters & risk tools which will govern in selection of cases for the scrutiny.
The Scrutiny will be conducted in 2 steps
- Preliminary online scrutiny: Here the officers check for arithmetic correctness of the tax computation & whether it is timely paid is checked. Whether return is submitted timely & identification of non filers & stop filers will be checked. The Preliminary scrutiny is done online.
- Detailed Manual Scrutiny: The Purpose of the scrutiny is to ensure the correctness of the assessment made by the assessee. This includes whether CENVAT credit properly availed, reverse charge mechanism, abatement, exemption, correctness of value of taxable service etc.
The Entire process of Scrutiny will be conducted in 3 months.
Conclusion: It is very important to note that Government is mainly interested in collection of service tax, but harassing assessee in the name of collection of tax is not correct. The Scrutiny will not only create difficulties for small assessee but will also not create a good image for the department. The CBEC already has Service Tax Audit for assessee who the department thinks is evading tax or likely to evade tax. With this additional burden of scrutiny of returns the assessee & the CA will definitely get frustrated.