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ST return scrutiny How to combat

Service Tax - By: - ashish chaudhary - Dated:- 15-7-2015 Last Replied Date:- 30-12-1899 - Service Tax has been most targeted area of Central government for garnering revenue and it has been constantly undertaking measures to pluck the revenue leakage. One such measure has been taken by issuing detailed manual scrutiny norms of Service Tax Returns vide Circular No. 185/4/2015-ST. Paper writer has made an attempt to analyse new provisions in the scrutiny norms and how small taxpayers can guard the .....

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i.e. assesses whose total tax paid (cash + Cenvat) for the FY 2014-15 is below ₹ 50 Lakhs. Each Commissionerate has to select equal number of assesses for carrying out return s scrutiny from each of these three total tax paid band (Cash +Cenvat) viz. ₹ 0 to ₹ 10 lacs, ₹ 10-25 lacs and ₹ 25-50 lacs for FY 2014-15. As the assessee who are target of return scrutiny would be small assessee who may not have much knowledge of the law, it becomes very important for their .....

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Exempted services provided but not shown in ST-3 Abatement services shown net of abatement Advances from customer shown in ST-3 but not in ITR Works contract etc. not properly disclosed in ST-3 (only taxable part shown) Services provided liable under RCM but not shown in ST-3 Amount claimed as reimbursement by issuing debit note and adjusted from respective expenditure in the ITR And many more……….. Suggested to give exhaustive disclosure in ST-3. Allegation of suppression co .....

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cation of exempted service May be possible that exempted services not disclosed and to that extent difference between ST-3 and ITR During verification, dept may ask for invoices and agreement. May be possible that agreement not available or terms of agreement contradict with invoice or invoice not properly prepared or tax clause mentioned in the agreement. Could land up with problem 4 Verification of services claimed to be exported Mere receipt of consideration in foreign currency not determinat .....

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here few services are taxable rate while few are conditionally abated Condition of exemption notification to be complied with literally. Small non compliance may result in very large trouble. If by mistake credit availed with abatement, could be reversed under Rule 6 Nexus of input service to output service very important 6 Value of Taxable services This is going to be very hot area for examination. Especially after reimbursement becoming taxable Department going to check each and every conditio .....

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l goods. Exclusion clause of motor vehicle very crucial Many times assets capitalised for Income Tax but assessee treating it capital goods, avail the credit. May be possible that it may fall outside definition of capital goods under CCR Removal of capital goods on which credit availed earlier require reversal of credit based on usages. If sale of assets appear in ITR/Capital assets schedule, make sure credit availed is reversed proportionate to the time of usage. If capital goods partly used fo .....

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case of works contract where credit on input allowed under CCR but restricted in the valuation rule If item not falling in the definition of capital goods, see if could be covered in input Availment of credit on input to be shown under column I3.1.2.1 of the ST-3 return Whether time limit of one year followed in availment of credit 9 Credit on input service Most relevant and sought after area of department. Will verify each of the input service credit availed Construction, renting of vehicle, p .....

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ould be again most sought after area of department If engaged in trading as well as rendering of service, remember to reverse the credit pertaining exempted portion in trading activity Evaluate different option available to see which option is most feasible/beneficial/cost effective based on assessee profile Strictly comply with the conditions associated with each of the options. File all necessary declaration with the department wherever required Make proper disclosure in the ST-3 Return in Par .....

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but credit note issued subsequently could be eligible for set off subject to conditions set out in Rule 6(3) of STR Going to examine all credit notes to see if they comply with the conditions of Rue 6 (3) Adjustment against Rule 6(3) to be disclosed properly in the return. Can not be taken in input service Especially important to note where tax paid in one return period while credit note issued in different return period. To that extent there could be difference in the revenue of ITR and ST-3 1 .....

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rn. Will be cross examined if RCM liability paid Also see if TDS included for calculation of liability under RCM Very crucial to see exchange rate used for discharging of liability. Exchange rate as used in the books of account on the date of payment would be relevant. Not necessary to take Customs notified rate All foreign payment need not be covered by RCM. If payment made in foreign currency but place of provision falls outside India, very important to have proper documentary evidence of natu .....

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