Frequency Norms of Audit for Service Tax Assessees

i. Taxpayers with Service Tax payment above Rs.3 crores (Cash + CENVAT) (MANDATORY UNITS) – to be audited every year.

 

ii. Taxpayers with Service Tax payment between Rs.1 crore and Rs.3 crores (Cash + CENVAT) – to be audited once every two years.

 

iii. Taxpayers with Service Tax payment between Rs.25 lakhs and Rs.1 crore (Cash + CENVAT) – to be audited once every five years.

 

iv. Taxpayers with Service Tax payment upto Rs.25 lakhs (Cash + CENVAT) – 2% of taxpayers to be audited every year.

 

The Audit selection guidelines, therefore, would apply to the non-mandatory taxpayers, forming part of the discretionary workload.  These taxpayers should be selected on the basis of assessment of the risk potential to revenue.  This process, which is an essential feature of audit selection, is known as Risk Assessment.  It involves the ranking of taxpayers according to a quantitative indicator of risk known as a “risk parameter”.  It is also suggested that the taxpayers whose returns were selected for detailed scrutiny, may not be taken up for Audit that year, to avoid duplication of work.  Similarly, the taxpayers who have been selected for Audit, may not be taken up for detailed scrutiny of their ST-3 Returns during that year