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2+1 Tips to handle Manual scrurity of service tax

Today we discuss Tips to handle Manual scrurity of service tax. Now a days service tax department is issuing notice to the small service tax payers who pay service tax amount less than  laks in a year and does not come under preview of service tax audit. In this blog will share the information how we can avoid and handle the service tax scrutiny.

How to avoid service tax scrutiny –

First we will discuss how to avoid service tax scrutiny, If notice will not come we need not to handle the scrutiny.Now a day’s service tax department is verifying the income tax return filed by an assesses with the service tax return. If there is any mismatch in income tax return and service tax return they are serving him a notice. service tax department have an access to complete income tax return filed by the assesses they verify the IT return completely with the service tax return like TDS claimed in IT return is more and service income shown in service tax return is less. An expenses where Reverse charge mechanism is applicable as shown in Income tax return but it does not shown on service tax return and also assessee not pay the service tax on same.

File Income tax return with due care to avoid service tax scrutiny–

At the time of filing the income tax return fill all the details properly. At the time of preparing the income tax financials mention the correct nature of income and expenses. Also keep in mind service tax provision while preparing the financials.

For Income part –

For service exempted income mention the head separately in financials.

For Expenses part –

For expenses part keep the expenses separate where reverse charge mechanism are applicable. Also while giving the head name of expenses critically examine the nature of expenses and check whether service tax is applicable or not.

File Service tax return with due careto avoid service tax scrutiny – 

File service tax return with the due care.

– Mentioned all the service correctly if provided any service like sponsorship service where tax is payable by the service receiver that should also be mentioned in service tax return.

– If assessee is providing taxable as well as exempted service than take cenvat credit of that expense only which directly related to that taxable income.

How to handle service tax scrutiny –

Read the service tax notice carefully and make the reply to service tax department with due care.

Documents needed at the time of Service tax scrutiny –

Keep the following documents in the file to handle the service tax scrutiny.

1) Income invoice should be made as per service tax rules like address, service tax number, and name has been correctly mentioned on the invoice.

2)  check the expense invoice before making the payment whether it is as per service tax rules or not.

3)  Keep all the Agreement with the sundry debtor and sundry creditor. if there is verbal agreement keep the communication done on E-mail

4) Keep the service tax payment challan

5) Keep the purchase and sales perform invoice in the file.

6 Reconcillation to be made of financial with service tax return if required.

How to Match service Provided of financial with service tax return –

(1) Take Income as Per  Profit and loss accounts   (A)

Add – Net advance received  as per financial ( Closing advance from customer – opening advance from customer)(B)

Total =  (A)+(B) this will be the total income as per the financial.

2) Total income as per service tax return –

In total income of service tax return take the following income  –

(A) Total Net taxable Service provided as per service tax return

(B) Export of service as per service tax return

(C) Exempted service as per service tax return

Total = Total service provided as per return (A+B+C+D)

Make the reconcillation for the Difference in service tax as per financial and return.

How to make the reconcillation of service tax return

Best way to make the reconcillation is make an reconcillation of an individual service –

Select any one service and divide in the following parts month wise as per books  –

(A) Taxable amount of service as per books

(B) Exempted service as per books

(C) Export services as per books

(D) Give the effect of Amount of advance billing done (Performa invoice done in that month minus Performa invoice transfer to the invocing )

(E) Amount of advance received  – (service tax on Amount receved but invoicing not done )

Taxable service will be total of all the items less Export services. Now cross check the figure with service tax return month wise.


This blog is made as per our experience, You can also suggest and share your experience by commenting below.


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