Frequency Norms of Audit for Service Tax Assessees

As per the Service Tax Audit Manual,2010 prepared by Director General of Audit, New Delhi:

Mandatory audit each year

Tax payers whose annual service tax payment (including cash and CENVAT) was Rs.3 crore or more in the preceding financial year may be subjected to mandatory audit each year, preferably  by using Computer Assisted Audit Program (CAAP) techniques.

Frequency of audit for other taxpayers

Tax paid	Frequency of audit
Rs 1 Crore to Rs 3 Crores	Once in 2 Years
Rs 25 Lakhs to Rs 1 Crores	Once in 3 Years
Less than Rs 25 Lakhs	2% of Taxpayers every

These taxpayers should be selected on the basis of assessment of the risk potential to revenue with a process known as Risk Assessment.

Risk Assessment means Ranking of taxpayers according to a quantitative indicator of risk known as a “risk parameter”.

Note:

1.         Taxpayers whose returns were selected for detailed scrutiny, may not be taken up for Audit that year, to avoid duplication of work.

2.         Taxpayers who have been selected for Audit, may not be taken up for detailed scrutiny of their ST-3 Returns during that year.