The Central Board of Excise and Customs (‘CBEC’ or ‘the Board’) vide Circular No. 113/07/2009-ST dated April 23, 2009 had laid down the procedure for carrying out detailed scrutiny of Service Tax Returns (ST-3 Returns) and had circulated a Return Scrutiny Manual for Service tax. However, with the introduction of Point of Taxation Rules, 2011 which shifted the liability of payment of Service tax from receipt basis to accrual basis and advent of Negative List based comprehensive taxation of services in July, 2012, 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 (the Circular).
In terms of the Circular, the detailed scrutiny programme typically supplements the audit programme. The two processes of audit and scrutiny are, in fact, complementary to each other. The Board has further clarified vide the Circular that, “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.“
Gist of the guidelines for detailed manual scrutiny:
We are summarising herewith the gist of the guidelines issued vide the Circular for ease of understanding: