Levy & Collection of Service Tax on Works Contract report by CAG

 

  • Comptroller and Auditor General of India (CAG) releases report on “Levy & Collection of Service Tax on Works Contract” containing results of performance audit of 33 selected Commissionerates, including examination of records relating to 237 assessees, for the period 2010-11 to 2013-14

 

  • States that Works Contract Service (WCS) is one of top 10 revenue contributing services, with revenue collection of Rs 7434 Cr in 2013-14 which is 4.80% of overall service tax collection, and Performance Audit was conducted “to seek an assurance that the indirect tax administration is adequately placed to safeguard the interests of revenue.”

 

  • Identifies 425 works contractors who had executed works contracts, but had neither registered with the Dept. nor paid service tax of Rs 447.76 Cr; Observes delays in submission of returns involving late fee of Rs 1.70 Cr in 1857 cases under 17 Commissionerates, 145 cases of non / short-payment of service tax of Rs 44.74 Cr, 34 cases of irregular availing / utilization of CENVAT credit involving an amount of Rs 22.59 Cr, 14 cases of incorrect availing of exemptions involving an amount of 17.81 Cr, and 44 cases of incorrect application of tax rate and non / short payment of interest of Rs 8.84 Cr

 

  • Accordingly, recommends making inter-departmental coordination obligatory mainly with Commercial Tax Dept. for identification of unregistered service providers and broadening of tax base in particular with VAT records through the Regional Economic Intelligence Committee meetings; States that ‘Tax 360o’ program started within Dept. of Revenue is a step in right direction and results thereof should be reflected in periodical report such as Monthly Technical Reports (MTRs)

 

  • Audit recommends CBEC to consider designing a tool to correlate service tax payments from the ST‐3 return filed either by service provider or recipient involving liability under reverse charge mechanism; Monitoring mechanism to watch non / late filers should be strengthened keeping in view determination of service tax payments through self-assessment, also suggests automatic levy of late fee on belated filing of returns

 

  • Lastly, asks CBEC to review the requirement of submission of records and to ensure that the rule may be adhered to strictly, or else to revise the provision accordingly : CAG Report on WCS