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However, with the advent of Negative List based comprehensive taxation of services, the CBEC has unveiled the revised guidelines for detailed scrutiny of ST-3 Returns to be followed by the Revenue with effect from August 1, 2015 vide Circular No. 185/4/2015-ST dated June 30, 2015.
In order to put in place a strong ‘return scrutiny’ system, a two part system of return was envisaged- a preliminary scrutiny which would be online covering all the returns; and a detailed manual scrutiny of scrutiny returns, identified on the basis of risk parameters, to be done by the Division/Range offices and should be carried out in the manner outlined below-
Methodology detailed scrutiny of returns must be conducted by the Service Tax Range headed by the Superintendent and assisted by a complement of inspectors.
However, the Divisional DC/AC shall be responsible for the overall supervision of this business process in respect of his/her division.
Before return scrutiny is initiated, the assesse must be given prior intimation of at least fifteen days and the purpose of the exercise must be spelt out in an intimation letter.
To begin with, the returns for the financial year 2013-14 should be taken up for detailed scrutiny. One of the important objective of return scrutiny is to ensure validation of the information furnished in the self-assessed ST-3 return.
The Validation exercise would require reconciling information furnished in the ST-3 return with ITR Form Nos. 4, 5, 6 and 26AA and any third party information made available.
Checklist for achieving the stated objectives, the checks have been categorized as follows:-
Reconciliation for validation of the information furnished in the ST-3 return;
Taxability in respect of services which may have escaped assessment;
Classification (for the purposes of due availment of abatement/ exemption benefit);
Valuation; and
In normal circumstances Scrutiny process of an assessee should be completed in a period not exceeding three months and in no event should an assessee be subjected to both audit and detailed manual scrutiny;
Even after the introduction of GST, it may be appreciated that the basic principles of scrutiny of returns and reconciliation of records would remain the same.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances
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