Service Tax Audit

Service tax audit is governed by the Central Board of Indirect Taxes and Customs (CBIC) and is carried out under Section 72A of the Finance Act, 1994. It applies to service providers whose annual taxable turnover exceeds the prescribed threshold. The audit aims to assess the correctness of service tax liability, the appropriateness of input tax credit claims, and the fulfillment of other statutory requirements.

Focus of Service Tax Audit

The key focus areas during a service tax audit include

Taxable Services Verification

Taxability and Valuation
Input Tax Credit
Payment and Returns
Records Maintenance

Books And Records For Services Tax Purposes

For service tax purposes in India, businesses are required to maintain specific books and records to facilitate compliance with the tax regulations and enable a smooth audit process. The following is a list of essential books and records that businesses should maintain:

Invoice Records

Copies of all invoices issued for taxable services provided, containing details such as invoice number, date, name and address of the service recipient, description of services, taxable value, and service tax amount charged.

Payment Records

Records of all service tax payments made, including challans, bank statements, and proof of electronic funds transfer.

Input Service Tax Credit Records

Records of input tax credit availed on input services and goods used for providing taxable services, along with relevant invoices and supporting documents.

Service Tax Returns

Copies of filed service tax returns, including Form ST-3 or any other applicable return form, along with acknowledgment receipts.

Accounts and Financial Statements

Financial records, such as ledgers, trial balance, profit and loss account, and balance sheet, detailing the transactions related to taxable services.

CENVAT Credit Records

Records of CENVAT credit availed and utilized on excise duty paid on inputs or capital goods used in providing taxable services.

Register of Input Services

A register that records the receipt, usage, and inventory of input services used for providing taxable services.

Register of Taxable Services

A register containing details of all taxable services provided, classified under the relevant service tax categories

Agreements and Contracts

Copies of agreements or contracts with clients or service recipients, outlining the terms and conditions of service provision and service tax liability.

Receipt Vouchers

Records of all receipts, including advance payments, along with receipt vouchers issued for the same. Documents related to Exemptions or Abatements: Records of documents supporting claims for exemptions or abatements from service tax liability.

Record of Export Services

Documentation related to export of services, including invoices, shipping bills, and evidence of receipt of foreign currency.

Register of Import Services

A register of import services received, including details of the import services provider and the service tax paid

Other Supporting Documents

Any other relevant supporting documents and records related to service tax transactions and compliance.

Maintaining accurate and up-to-date books and records is not only a legal requirement but also essential for effective tax management, smooth service tax audits, and timely compliance with service tax regulations. Businesses should retain these records for the prescribed period as per the tax laws and be prepared to furnish them during audits or when requested by the tax authorities.