Service tax rules tightened

Officers to have access to registered premises and reports on demand

The service tax rules for audit of companies have been tightened by making the access to registered premises of the assesses and reports more rigid and discretionary for the tax officers.

In a recent amendment made by the department,  the time limit given for the assesses to submit its reports to the tax officers  which was earlier fifteen working days no longer exists. It will be the discretion of the tax officer to get the documents on demand immediately or within time limit as deemed fit by the audit party. Similarly, cost audit reports have also been included in the reports to be given to the audit officers along with income tax report and records maintained under service tax rules needed for registration of businesses.

These service tax rules for having open access to the registered premises and reports of the service tax assesses have been made applicable for businesses with turnover exceeding Rs 1 crore or professions with gross receipts exceeding Rs 25 lakhs. This is as per the requirement of section 44AB of the Income Tax Act.  It has also been made compulsory for cost audit reports for companies under section 148 of the Companies Act. Section 148 of the Companies Act specifies publication of paid up capital along with the total subscribed capital, if and when authorised and subscribed capital is published.

Earlier cost audit report was not included in service tax audit. According to officials, such amendments have been made to check these records when the assesses files the service tax returns and are required to register the firms.   They added, these amendments have been made to check proper registration of businesses and professionals under service tax rules to broaden the tax base.  

 In the interim budget for 2014-15, the service tax department has broadened the tax base, by pruning down the negative list and exemptions. Various changes have been made by levying service Tax which was till recently leviable on sale of space or time for advertisements in broadcast media has been extended to cover sales on other segments like online and mobile advertising (except in print media). Tax on services provided by radio-taxies has been levied to bring them on par with rent-a-cab services.

Certain exemptions have been withdrawn including those on services by air-conditioned contract carriage and technical testing of newly developed drugs on human participants. On the other hand, some exemptions have been expanded and few new exemptions announced as well as rationalized including those in education, agriculture, transportation and insurance sectors. Interest on delayed payment of tax has been made more stringent by enhancing rate of interest up to 30 percent if delay is more than one year. Valuation rules in respect of works contracts have been rationalized. Services by directors to body corporate and services of recovery agents have been included in reverse charge. In case of serious offences, waiver of penalty shall not be allowed under section 80.