Computerized Desk Audit
Maharashtra Sales Tax Department (MSTD) has been selecting cases for Issue Based Audits (IBA) based on various audit parameters for the periods from 2008-09 onward. Most of the audit parameters are generated from the analysis of sales and purchase annexures. As MSTD started taking electronic annexure of sales and purchases from all dealers for the periods 2011-12 onward, the number of cases of Issue Based Audits (IBA) has increased substantially.
There is an administrative cost for conducting such audits. The time and efforts required for verifying an issue is the same irrespective of amount of tax involved in the issue. Due to scarcity of resources and heavy workload these cases are resulting in ex-parte orders. All these cases are also resulting in heavy workload of verification by Appellate authorities. For every audit issue the dealers are required to appear before audit authorities for compliances in relation to the issues and thus increasing their cost of compliance. But from the feedback of IBA cases, it is observed that in most of the cases the additional tax liability is clear and acceptable to dealers and it can be discharged by them if properly communicated. Such direct compliance can be easily possible if the audit parameters along with tax liability are made available to dealers on the Mahavat website.
The CDA scheme:
To counter these issues, MSTD has innovatively integrated the CDA output of SAS Enterprise BI Tools with direct Mahavat Web-site compliance and created a win-win situation for MSTD and dealers by saving administrative cost for MSTD as well as cost of compliance for dealers. Thus for providing an opportunity to dealers willing to pay tax on undisputed discrepancy, CDA has been implemented on 5-08-2014 by MSTD for the period 2011-12. Now for most of the audit issues dealers will not be required to visit MSTD office and this has increased the transparency in the working of MSTD.
Using Business Intelligence and Data warehouse (BIDW) Solution, MSTD has generated CDA reports (along with legal intimation in recently notified Form 604A) for selected dealers highlighting their tax liability against 11 audit parameters. MSTD has identified these 11 audit issues as actionable for the period 2011-2012 which dealers can comply directly on web-site. The audit issues selected are such that the taxes are clear and recoverable. By necessary amendment, MSTD has also created an incentive for dealers to accept the tax liability found in CDA such that if the admitted tax liability is less that 10 % of taxes already paid before intimation for the said year, then no interest u/s. 30(4) is payable by dealers.
These audit issues are informed to dealers by e-mails and also they are informed through SMSs. The dealers can also download the CDA report in HTML format along with the legal notice in Form 604(A) from Mahavat portal through their log in IDs. Once the dealer downloads the CDA report he is given an acknowledgment for successful delivery of intimation of CDA findings. The Compliance Web Form is accessible only after download or view of CDA report on web-site by dealer to ensure the proper service of intimation in Form 604A.
If the dealer pays additional tax with applicable interests and files a revised return for the complete year, then he has to directly submit the compliance, by entering details of tax and interest paid chalans and revised returns in ‘Compliance Web Form’, on Mahavat portal. The submission of compliance Web Form within 30 days of intimation is treated as full compliance in relation to admitted audit parameters’ additional tax liability.The dealer also gets acknowledgment for successful submission of Web Compliance Form and thereafter BIDW system analyses the Payment responses from dealers and generates the closure reports in Form 605 which will be again made available to dealers on Mahavat portal for download. Thus audit parameters are getting closed without the visit of taxpayer to MSTD Office in cases where parameters are acceptable to dealers.
The CDA audit issues in full assessment cases are informed to respective assessing officers and such cases are not selected for direct web-site compliance by dealers under CDA scheme because once the online compliance is made by dealers on web-site we are ensuring them the closure of audit for that financial year.
For supervising authorities the BI System generates Dashboards and summary reports for showing performance of these audit parameters for different locations of Maharashtra. In case of non-acceptance of tax liability due to error in uploading of data by dealers or otherwise, the dealers are given chance to put forward their submissions to designated officers in Issue based assessments.
In the first phase of implementation up to 24-09-2014, department is able to close more than 23500 cases with recovery of more than Rs. 100 Crore revenue. The success rate in CDA compliance is 61.47 % in terms of audit issue closures. In some of the parameters the dealers have not accepted the liability as their suppliers have now filed the revised returns along with payment of taxes. In some cases their suppliers have also filed supplementary annexure J1. Thus we are able to reduce the work load of the MSTD officers in the cases where we were able to communicate the additional tax liability to dealers.
During the implementation of CDA for the period 2011-12, it is observed that the e-mail IDs of the dealers are not updated and in more than 50000 cases and in such cases we are not able to communicate the tax liability to the dealers. We are still in a position to close more than 25000 cases through CDA Web compliance if we are able to properly communicate the tax liability to dealers.
To counter this challenge the department has also used the facility of SMSs by customizing the message informing the dealer, on his all available mobile numbers, the tax liability along with TIN and financial year. It is also noticed that the small dealers are not comfortable with the electronic notice; hence we have also decided to issue printed intimations in form 604A to dealers who have not viewed the CDA on Mahavat website. Being the first year of implementation and to encourage online compliance, the CDA Compliance window for the period 2011-12 is kept open till the dealers receive notices for verification in non-compliance cases.
In more than 3000 cases it is also noticed that the dealers have admitted and paid the taxes but they have not submitted the CDA compliance due to non payment of interest portions. In some of the cases, where dealers have incorrectly submitted their annexure J2, the audit parameters were not accepted as there is no provision for revision of annexures. In few cases dealers have not accepted the parameters as they had reduced retention amount before claiming ITC in returns like in works contract cases. It is also noticed that the dealers are reluctant to accepted CST Asked to pay parameter as they expect to receive CST declarations. All such cases will have to be verified in Issue Based assessments.
The Way forward:
The department has decided to adopt the concept of real-time audit from the financial year 2015-16. To achieve this objective MSTD has to implement CDA schemes for the periods of 2012-13 and 2013-14 within a period of next six months so as to recover the tax on clearly actionable parameters.