Chartered accountants and Cost Accountants can now do service tax audit

As per rule 5A(2) of service tax rule 1994, an officer authorized by the Commissioner in this behalf shall have access to any premises registered under these rules for the purpose of carrying out any scrutiny, verification and checks as may be necessary to safeguard the interest of revenue.

This rule further specifies that every assessee shall, on demand, make available to the officer authorised under sub-rule (1) or the audit party deputed by the Commissioner or the Comptroller and Auditor General of India, within a reasonable time not exceeding fifteen working days from the day when such demand is made, or such further period as may be allowed by such officer or the audit party, as the case may be,-

  • the records as mentioned in sub-rule (2) of rule 5;
  • trial balance or its equivalent; and
  • the income-tax audit report, if any, under section 44AB of the Income-tax Act, 1961 ( 43 of 1961), for the scrutiny of the officer or audit party, as the case may be.’’

service tax Audit by CAs and CMAs

Various judicial pronouncements have been made in this regard where honorable court has held that service tax audit can not be held by CAG (SKP Securities Ltd Vs DD (RA-IDT) & Ors), service tax audit is to be conducted by Chartered Accountant or Cost Accountant and not by any officers of the department (ACL Education Centre Pvt. Ltd. & Ors. Vs. Union of India).

Now by exercising its power, central government has amended the rule vide notification number 23/2014-SERVICE TAX dated 5th December 2014 (link for notification) to include Chartered Accountants and Cost Accountants nominated under section 72A of the Finance Act, 1994 in rule 5A(2) of Service tax Rule 1994.

New Rule to include Chartered Accountants and Cost Accountants in rule 5A(2)

Every assessee, shall, on demand make available to the officer empowered under sub-rule (1) or the audit party deputed by the Commissioner or the Comptroller and Auditor General of India, or a cost accountant or chartered accountant nominated under section 72A of the Finance Act, 1994,-

  • the records maintained or prepared by him in terms of sub-rule (2) of rule 5;
  •  the cost audit reports, if any, under section 148 of the Companies Act, 2013 (18 of 2013); and
  • the income-tax audit report, if any, under section 44AB of the Income-tax Act, 1961 (43 of 1961),

for the scrutiny of the officer or the audit party, or the cost accountant or chartered accountant, within the time limit specified by the said officer or the audit party or the  cost accountant or chartered accountant, as the case may be.”

Earlier time limit of 15 days from the date of demand now also been changed.

As per the notification this rule shall come into force on 5th December 2014 which is the date of publication in the official gazette.

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