Relaxed audit norms for excise, service tax to focus on large assessees

The Central Board of Excise and Customs has relaxed the audit norms for excise and service tax for the current fiscal by increasing the threshold limits in order to focus only on the larger assessees.

The board has, in an internal communication, stated that the norms are being revised since the existing norms yield a workload that is not in sync with the availability of audit staff.

"As a result, the stress of audit effort has shifted to quantity (ie number of audits) rather than quality," the note said.

Under the new audit norms for service tax, taxpayers paying more than Rs 50 lakh would be audited every year against Rs 10 lakh earlier.

Similarly, taxpayers paying between Rs 25 and Rs 50 lakh would be audited once in two years while those paying between Rs 10-25 lakh would be audited once in five years.

It has also been decided that only 2 per cent of the taxpayers paying below Rs 10 lakh would be audited every year.

Tax experts, like J K Mittal welcomed the board's decision to relax audit norms. "It is a positive move in the right direction," Mittal said.

Against a mandatory audit of all export oriented units last year, the board has now stipulated that only about 500 EOUs across the country should be audited mandatorily.

It has also been decided that the target would be reached if each commissionerate audits the top 25 per cent of the EOUs engaged in the manufacture of exisable goods that are registered and functioning.

Within this category, the selection might be made on the basis of the "total value of inputs and capital goods received by the EOU without payment of duty" during the last financial year, the board said.

Also, EOUs manufacturing non-excisable goods such as primary produce or software will not be audited.

The board has, however, included a clause under which the order of selection can be circumvented in case it felt that there are overarching local risk factors such as past compliance history or recent closure that apply in individual cases.

In such cases, a unit may be audited on a priority basis even though it does not figure in the top 25 per cent.