Accounts Notes: AUDIT OF INDIRECT TAX

Friday, 25 March 2011

AUDIT OF INDIRECT TAX

 Conducted on behalf of Government.
 For detecting and preventing tax evasion.
 It is for use for -
Government Industry & Service providers Consumers
(i) Increased Revenue (i) awareness of changes (i) Better Tax compliance with reduced tax rates
(ii) Less cost of administration (ii) Tax planning (ii) Faith of general public
(iii) Complete self-assessment (iii) Corporate governance
(iv) Tax awareness (iv) Good internal controls
(v) Broader Tax Base

Methodology : Evaluation of Internal Control.
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Information (historical) of the company.
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Audit planning by audit team.
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Conduct of Audit
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Report on Indirect tax audit.

SCOPE OF INDIRECT TAX AUDIT
• Non-availment of short/excess availment of Export Incentives.
• Goods imported duty with free or payment at concessional rates, subject to conditions classified incorrectly or without complying with the conditions.
• Transfer Pricing issues.
• Applicability of central excise and availability of exemption on the activity and the products.
• The valuation of goods not removed in normal course using valuation methods not in line with the central excise valuation rules.
• The utilization of goods procured on concessional duty for specific uses/for genral uses.
• The availing of inadmissible cenvat credit and mis-utilisation of credit.
• The passing on of duty suffered on imported goods and of locally manufactured goods in excess of actuals.
• The structural rigidity built into the method of production or marketing and distribution.
• The authorization levels of the indirect tax function, not specifically set out in line with general authorization for the organization.
• Procedural non compliance which could lead to demands and losing of benefits.
• The liability under service tax on services provided being ignored.