New Delhi: The revenue department recovered only around 9% of service tax arrears in 2016-17 even as the number of cases detected increased from the previous fiscal, the Comptroller and Auditor General (CAG) of India said Tuesday.
The revenue department had an opening balance of Rs2,658.31 crore in arrears to be realized in 2016-17, but with an addition of Rs6,176.31 crore during the fiscal, the total went up to Rs8,834.62 crore. However, it could realize only Rs783.33 crore, a mere 8.87% of the total recoverable, said the CAG report, Indirect Taxes - Service Tax, tabled in Parliament on Tuesday.
The department disposed of demands worth Rs4,285.29 crore in 2016-17, ending the year with a closing balance of Rs3,766 crore as arrears that could be recovered. “It can be seen that only 8.87% of recoverable arrears could be recovered by the revenue department during 2016-17. Given the significant amounts of arrears to be recovered, it is essential that the tax department specifically focuses on legacy issues even after transition to GST," said the CAG report.
According to the report, for recovery of tax dues raised but not realized, the government revenue department has powers to resort to various methods including adjustment against amounts payable, attachment and sale of excisable goods and recovery through district revenue authority. The report said the Directorate General of Central Excise and Intelligence (DGCEI) detected more cases of service tax evasion in 2016-17 than in the previous two fiscals.
As many as 8,085 cases were detected as the anti-tax-evasion drive of the DGCEI in 2016-17, up from 7,534 such cases in 2015-16 and 6,719 in 2014-15, it said. “It is observed that the number of service tax cases detected by DGCEI had increased during 2016-17 as compared to 2015-16 while the amount detected had decreased slightly," CAG said. In 2016-17, the amount detected by the intelligence unit was worth ₹ 17,846 crore, lower than ₹ 8,971 crore in 2015-16. In 2014-15, the amount detected by DGCEI as evasion of service tax stood at ₹ 0,544 crore.
The government had collected service tax of over Rs2.54 trillion in 2016-17, accounting for 29.52% of indirect tax revenue.
As per the CAG compliance audit, arrear cases having revenue implication of Rs1.18 lakh crore were pending for recovery as on 31 March 2017. Besides, the audit also found that the service tax collection from commercial training or coaching service increased from Rs880.09 crore in 2012-13 to Rs1,950.08 crore in 2015-16. It proves that the business of coaching centres is expanding day by day, the report said, adding that the average annual growth rate of service tax from this service sector over that three years was not commensurate with the growth rate projected for the sector.
“Efforts by the department to widen the tax net were inadequate as compared to the pace of growth of this sector and this had implication of revenue loss," CAG said. The CAG audit said the special cells that were mandated with the task of identifying potential assessees were non- existent/non-functional in all the selected commissionerates. “Audit detected 1,005 number of unregistered assessees out of which in 250 cases, we were able to quantify service tax liability of ₹ 6.11 crore," the report said.