VAT AUDIT – EDITORIAL

Hon'ble Commissioner of Sales tax Shri B.C. Khatua and our Finance Minister Shri Jayantrao Patil, both had visited our Mazgaon Library on 29th December, 2005. The purpose was to thank the members of the Association for wholehearted co-operation in submitting the TIN applications. He frankly admitted that it was but for the collective efforts made by the tax practitioners and the Department, the target would not have been achieved.

In the said meeting when he was addressing to some other grievances, there was overwhelming demand from the members present to reconsider the provisions of section 61 for statutory audit. The request made by the members was not to drop the provision but to amend it so that persons other than chartered accountants can also conduct the same. Both of them agreed that this was represented time and again wherever they had dialogue with practitioners’ fraternity.

The Commissioner informed that he has been working as per certain set of priorities. The VAT being in and re-organization of administrative structure being initiated, he has tried level best to deal with return forms, returns branch, provisional refund/refund, refund-audit section and latest being central repository. He addressed the gathering that he wants to look into audit provisions at later date, it being a phenomenon eight months down the line after year end.

We wish to put some thoughts and feel that the Commissioner would be kind enough to step into our shoes to consider the urgency of the issue.

Though draft amendments circulated in March 2005 allowed STPs, Cost Accountants to conduct the audit, we are informed that Law and Judiciary Department decided to handover audit assignments only to the Chartered Accountant. It is very much necessary that CST should point out to the concerned Department that he himself is the regulatory body as far as performance, quality work and code of ethics that of STP’s is concerned. Under section 82 , he can very well take action against deliberate offensive audit reporters.

We are not trying to undervalue importance of brethren Chartered Accountants at any juncture, but we have to keep in mind purpose of statutory audit. It has been an open secret that audit under section 61 is nothing but outsourcing of assessment work. The audit report in form 704 calls for detailed analysis of returns filed and records kept by the dealer. It is a universal fact that with thrust on self discipline in revenue matters keeps revenue receipts at little higher risk. The ultimate goal of audit in the days of self policing seems to be that there should not be leakage of revenue and if there is any it should be reported to.

Consider the position of STP fraternity. For all these years of BST era, they had been catalysts in the assessment work. MVAT Act being more simpler and transparent, cannot they achieve the intended target? Will ever a STP who has been breathing sales tax in and out, fumble on the simplified issues under the MVAT? Will he be shortsighted to put merely rubber stamps when his career is at stake if action under section 82 is taken? To our mind – NO. At the same time with due regard let us be frank to point out that there are many slippery areas in the taxation field where even two High Courts or two benches of Supreme Court find it difficult to come to terms with same analogy though the facts of case are same.

We earnestly feel that CST should give priority to this issue, so as to end agony of our outstation counterparts. As far as Mumbai is concerned the after effects of CAs looking after statutory audit may not be much. But for outstation members the effects may be devastating if the work of sales tax consultation/retainership also gets shifted to CA’s office for the sake of dealer’s convenience. Secondly we recall that CST had culled out idea of outsourcing of TIN work when we had represented that time is too short. But the outsourcing cannot be done as blind game, but requires proper planning and minute study of cost and time implication.

When the Government considers the STP, as part and parcel of the Department why to keep them at distance in such an onerous task. History of Law and Representations Committee’s representations will show that this Association had been the light house for the Department in the hour of need.

If the CST is to consider these submissions positively, we have something to suggest. He can think of putting upper cap on number of audit assignments to be done by STP. The Department has recently developed the concept of master trainers. Those trainers can very well groom STPs for sharp performance.

We are sure that the dynamic Commissioner will think over and decide for strengthening the bond which the practitioners have with the Department.