Frequency Norms Of Audit For Service Tax Assessees

Service tax refers to a tax on the services provided or that are going to be provided by a person. There are certain characteristics of this tax like there must be two parties involved in the process namelyservice provider and service recipients. The administration of the tax is done by the central Excise Department and the governance of the tax is done by the Finance Act, 1994.

The liability of service Tax arises on the rendering of selected services; it is not that each and every kind of service is going to be taxed. The rate of service tax that is currently prevailing is that of 10% of the value of the service rendered plus education cess at the rate of 2% and secondary and higher education Cess at the rate of 1%, the collective rate of service tax is 10.30%.

The Assessee providing service need to collect service tax from the recipients which are to be deposited to the government and for the proper governance there has been certain norms laid down for the audit of service tax assessee.

Frequency norms generally states that an Assessee whose payment of service tax in the preceding year including CENVAT along with the cash payment has exceeded an amount of Rs 3 Crore are liable to audit every year and it has also been said that CAAP (Computer Assisted Audit Program) are to be used in the purpose of the audit of the said assessee.

Other norms related to the audit of the service tax assessee are that any assessee whose payment of service tax is less than 3 crore but greater than 1 crore is liable for audit in one year of every two year, here the limit of 3 crore includes the amount of the CENVAT credit availed

Frequency norms for small assessee whose payment of service tax is less than 1 crore but more than 25 lacks taking into consideration both the cash payment and the amount of cenvat credit availed are liable to audit once in every five years.

These are the general frequency norms related to the audit of the assessee for the payment of the service tax and the major objective that’s there behind the audit purpose is to look forward that assessee is working along with the provisions laid down in the Finance Act, 1994 chapter V and other rules that are there in it.

There are various provisions laid down for the audit of the assessee who is going to be audited every year that is whose payment of service tax is greater that Rs 3 crore as they are not going to be audited ordinarily as the selection of the assessee is based on the risk assessment. It is generally found that the audit of the head office of the assessee along with all the units are to be done together and should cover a prescribed period as laid down but should be done up to the previous month completed before the audit.