CAG Finds Fault with Deficiencies in Service Tax Administration
THE CAG conducted a performance audit to evaluate the adequacy of provisions of the Finance Act, 1994, Service Tax Rules and related instructions in ensuring proper levy, assessment and collection of service tax on Banking and other Financial Services.
CAG found procedural deficiencies in registration of assessees, receipt of returns, scrutiny of returns, ambiguities/inadequacy in rule provisions and non-compliance. While the total financial implication of this audit intervention was 1923.30 crore, the direct additional revenue which could come to the Government was 264.50 crore. Observations with money value of 90.55 crore had been accepted by the department and 21.52 crore recovered.
Findings and recommendations:
++ 1142 service providers who had provided Banking and other financial services and were liable to pay service tax but were not on the departmental registration lists. 65 of these potential assessees were liable to pay service tax of Rs. 92.12 crore.
++ Department may liaise with statutory authorities such as the RBI to obtain information regarding non-banking financial companies to bring them under the service tax net.
++ The information furnished by the department showed that 6 per cent of service tax returns were received late and 14 per cent of the returns were not received at all. CAG found, through cross verification of service tax returns with income tax returns and other records, instances of evasion of service tax totalling Rs. 28.93 crore. It is recommended that the monitoring mechanism for receipt and scrutiny of returns may be streamlined.
++ CAG found instances of non-compliance to rules and provisions on incorrect valuation, incorrect/excess availing and utilisation of CENVAT credit, non-remittance of service tax, etc. resulting in revenue impact of Rs. 251.38 crore.