Govt strengthening audit norms

Audit to be extended to importers and service firms with Rs 1 cr turnover

The government is tightening the noose on companies and tax evaders to improve its revenue collections.

The revenue department is working on strengthening the audit norms for large companies in case of both direct and indirect tax.

As a first step, the audit is proposed to be extended to importers and service sector companies with a turnover of over Rs 1 crore.

So far, audit has been confined to Central excise and there are nearly 10,000 service sector companies with a turnover of Rs 1 crore a year or more.

In addition, the government is considering the introduction of risk management assessment system for large companies in the private sector which included oil companies or services like brokerage.

"While there are fewer chances of evasion in services owned and provided by state-owned companies there are services like brokerage where there could be a scope for evasion.

"The risk management assessment system would be adopted for such services," a senior revenue department official said.

The government has already introduced provisions in the Taxation (Laws) Amendment Bill that provide for provisional attachment of property of persons on whom notices for customs or excise-related offences have been served.

The Bill has also proposed to vest powers on the Customs department to arrest persons committing certain offences.

The revenue department is preparing a software to enable online selection of companies for scrutiny in case of corporate tax. Officials said that the Directorate of Income Tax (Systems) was working out a software which would recognise certain financial or accounting ratios.

"The idea is that depending on the information of the financial parameters provided by the individual companies, the software would at random be able to pick out companies where the tax paid is lower or where there appears to have been evasion," an official said.

In preparation for the online scrutiny, the revenue department, had with effect from December last year, introduced an annexure to the audit return form 3CD, as per which companies are required to submit information about financial parameters like their paid-up capital, reserves and surplus, gross turnover, gross profit, commissions received and paid.

Officials said that the department was also considering introducing an audit manual for Customs.

There is already a manual for Central Excise. The audit manual for services would also be expanded as it presently covers only around 16 services.