CHAPTER 1 INTRODUCTION

1.1 GENERAL INFORMATION ABOUT THE SECTOR Management consulting refers to both the industry and the practice of helping organisations to improve their performance, primarily through the analysis of existing organisational problems and development of plans for improvement. Organisations may draw upon the services of management consultants for a number of reasons, including gaining external (and presumably objective) advice and access to the consultants' specialized expertise. As a result of their exposure to and relationships with numerous organisations, consulting firms are also said to be aware of industry "best practices", although the transferability of such practices from one organisation to another may be limited by the specific nature of situation under consideration. Consultancies may also provide organisational change management assistance, development of coaching skills, technology implementation, strategy development, or operational improvement services. Management consultants often bring their own proprietary methodologies or frameworks to guide the identification of problems, and to serve as the basis for recommendations for more effective or efficient ways of performing work tasks.

1.2 INDUSTRY PROFILE (a) Origin and development of Industry Management consulting grew with the rise of management as a unique field of study. The first management consulting firm was Arthur D. Little, founded in 1886 by the MIT professor of the same name and was incorporated in 1909. Though Arthur D. Little later became a general management consultancy, it originally specialized in technical research. Booz Allen Hamilton was founded by Edwin G. Booz, a graduate of the Kellogg School of Management at Northwestern University, in 1914 as a management consultancy and the first to serve both industry and government clients. The first wave of growth in the consulting industry was triggered by the Glass - Steagall Banking Act in the 1930s, and was driven by demand for advice on finance, strategy, and organisation. From the 1950s onwards consultancies not only expanded their activities considerably in the United States but also opened offices in Europe and later in Asia and South America. After World War II, a number of new management consulting firms formed, bringing a rigorous analytical approach to the study of management and strategy. Work carried out at McKinsey, Boston Consulting Group, AT Kearney,Booz Allen Hamilton, and the Harvard Business School during the 1960s and 1970s developed the tools and approaches that would define the new field of strategic management, setting the groundwork for many consulting firms to follow. In 1983, Harvard Business School's influence on the industry continued with the founding of Monitor Group by six professors. The industry experienced significant growth in the 1980s and 1990s, gaining considerable importance in relation to national gross domestic product. In 1980 there were only five consulting firms with more than 1,000 consultants worldwide, whereas by the 1990s there were more than thirty firms of this size.
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An earlier wave of growth in the early 1980s was driven by demand for strategy and organisation consultancies. The wave of growth in the 1990s was driven by both strategy and information technology advice. In the second half of the 1980s the big accounting firms entered the IT consulting segment. The then Big Eight, now Big Four, accounting firms (PricewaterhouseCoopers; KPMG; Ernst and Young; Deloitte Touche Tohmatsu) had always offered advice in addition to their traditional services, but from the late 1980s onwards these activities became increasingly important in relation to the maturing market of accounting and auditing. By the mid-1990s these firms had outgrown those service providers focusing on corporate strategy and organization. While three of the Big Four legally divided the different service lines after the Enron scandals and the ensuing breakdown of Arthur Andersen, they are now back in the consulting business. The industry stagnated in 2001 before recovering after 2003, with a current trend towards a clearer segmentation of management consulting firms.

(b) Present Status of Industry Management consulting has grown quickly, with growth rates of the industry exceeding 20% in the 1980s and 1990s. As a business service, consulting remains highly cyclical and linked to overall economic conditions. The consulting industry shrank during the 20012003 period, but grew steadily until the recent economic downturn in 2009. Since then the market has stabilized. Currently, there are three main types of consulting firms. Large, diversified organizations, Medium-sized management consultancies and Boutique firms which have focused areas of consulting expertise in specific industries, functional areas, technologies, or regions of the world.
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Traditionally, the consulting industry charged on a time and materials basis, billing for staff consultants based upon the hours worked plus out-of-pocket expenses such as travel costs. During the late 1990s and early 2000s, there was a shift to more results-based pricing, either with fixed bids for defined deliverables or some form of results-based pricing in which the firm would be paid a fraction of the value delivered. The current trend seems to favour a hybrid with components of fixed pricing and risk-sharing by both the consulting firm and client. The use of management consultancy is becoming more prevalent in non-business fields including the public sector; as the need for professional and specialist support grows, other industries such as government, quasi-government and not-for-profit agencies are turning to the same managerial principles which have helped the private sector for years. An industry structural trend which arose in the early part of the 21st century was the spinoff or separation of the consulting and accounting units of the large diversified professional advisory firms most notably Ernst & Young, PwC and KPMG. For these firms, which began operation as accounting and audit firms, management consulting was a new extension to their organisation. But after a number of highly publicized scandals over accounting practices, such as the Enron scandal, these firms began divestiture of their management consulting units, to more easily comply with the tighter regulatory scrutiny that followed. In some parts of the world this trend is now being reversed where the firms are rapidly rebuilding their management consulting arms as their corporate websites clearly demonstrate. Over the years, as the Indian industry started maturing, the Indian consulting industry also started expanding, not only in terms of size, but also in terms of the service offerings. Over

the period, specialist consulting advice was being sought by clients in India and this opened the opportunity for a number of specialist organizations to draw on their specialist knowledge base and resources to meet the demand for specialist consulting services.

Latest Trends in Consulting Industry Fast Growth The business world is desperate for consulting help. With excess staff being cut down, most organizations lack the technical, strategic and project management skills to handle the benumbing rate of technological and market change. The consulting industry is trying its best to accommodate the demand. Big consulting firms are inhaling new employees, gulping up smaller firms and merging with peers. One stop for all your solutions In addition to a boom in the number of consulting firms, the size of individual firms is growing in response to another industry trend: one-stop shopping. Providers that can't compete on size will still try to offer one-stop shopping by outsourcing a chunk of a client's project to another firm while maintaining responsibility for the overall project. Knowledge management tools, best practices databases and the Internet make it possible for consultants to draw upon the knowledge of every

consultant in the organizationas many as 27,000 people in a firm like PriceWaterHouse Coopers, for example. Shortage of people The greatest threat to the growth of consulting firms is their inability to get enough qualified people. Some firms are already devising creative solutions such as launching their own accredited MBA programs - geared toward the specific needs of consultants. Smart people are continuing to gravitate toward the consulting profession, especially with its heightened demand and visibility, not to mention inflated salaries. In a down economy, highly successful companies will invest more in customers, not less. Companies will compete for customer share, not market share. Companies will realize customer satisfaction doesn't translate to loyalty and will stitch their customer channels together. And finally, companies will shift to a long-term focus. Only one thing is for sure the only thing that is constant in the consulting industry like any other industry is change!

(c) Future of Industry Over the decades, the management consulting industry has responded creatively to the changing needs of clients, leading to the growth of a thriving industry. The insights of

history provide guidance as consultants seek the innovations to meet the future needs of clients. Milan Kubr, an authority on the management consulting industry, reminds us that Consultants are inventors and creators of their own markets and their future. In the early years of the industry, consultants built highly flexible businesses on two market realities: the rise of management as a science, and evolving economic conditions. As inventors and creators of our own markets and future, management consultants will continue to rely on the delivery of knowledge and general economic conditions. We can benefit from examining our past to understand the types of expertise our clients need from us. This is our source of value, and as history indicates, this changes as our clients needs change. The consulting industry could begin to look more like the film industry, with different firms and individuals collaborating on a specific project, and then going their separate ways, will be because of the client pressure. Clients want greater specialization and a clearer view of what consultants do.

Types of services to be important in the future:

According to Czerniawska one among many consultancy services is about change management, organizational change.

Clients are looking for more than just completed consulting engagements; they are looking for help with organization-wide change.

There are people working on change but for the most part, they are niche consultants, independent consultants, coaches or mentors. It's small scale and fragmented.

Strengths and Weaknesses of Indian Consulting The major strengths of Indian consulting organizations include professional competence, low cost structure, diverse capabilities, high adaptability and quick learning capability of Indian consultants The major weaknesses of Indian consulting organizations, which has hindered the export growth of consulting sector in the country, are low quality assurance, low local presence overseas, low equity base, lack of market intelligence, low level of R&D

CHAPTER 2 PROFILE OF THE ORGANIZATION

2.1 ORIGIN OF THE ORGANIZATION Arthur Young was born in Glasgow, Scotland. He graduated in law, but became interested in banking and investment. In 1890, he moved to the US to pursue his career in accounting. In 1906, he formed an accounting firm, Arthur Young & Company, with his brother Stanley. Alwin C Ernst was born in Cleveland, USA. After leaving school he worked as a bookkeeper. Then, in 1903, he and his brother Theodore started Ernst & Ernst, a small public accounting firm. Both Arthur Young and AC Ernst were innovators and appreciated the importance of quality in their work. Ernst pioneered the idea that accounting information could be used to make business decisions and make a difference to clients organizations. He inspired his people to deliver better service to clients. Young also positioned himself as a business advisor as much as an accountant. Both men understood the importance of their people. In 1920, Ernst & Ernsts operating philosophy stated: The success of Ernst & Ernst depends wholly upon the character, ability and industry of the men and women who make up the organization. Young supported the development of professionals. In the 1920s he originated a staff school and, in the 1930s, the firm was the first to recruit from university campuses.

Both firms were also quick to enter the global marketplace. As early as 1924, they allied with prominent British firms: Young with Broads Paterson & Co and Ernst with Whinney Smith & Whinney. These alliances were the first of many for both firms, which opened offices around the world to service their international clients. AC Ernst and Arthur Young never met in life, but died within days of each other in 1948. However their philosophies lived on and, in 1989, were brought together when the firms they started combined to create Ernst & Young. The new organization quickly positioned itself on the leading edge of rapid globalization, new business technologies and continuous business change. AC Ernst and Arthur Young would surely be proud of the result a global organization of 152,000 people sharing their ideals and passion to help clients improve their businesses around the globe. Key dates for Ernst & Young

1849 - Harding & Pullein founded in England. Joined by Frederick Whinney 1859 Whinney made a partner 1894 Arthur Young starts his first firm, Stuart and Young, in Chicago Harding & Pullein renamed Whinney, Smith & Whinney

1864 Thomas Clarkson starts a trustee and receivership firm in Toronto 1903 Alwin and Theodore Ernst form Ernst & Ernst in Cleveland, US 1906 Arthur and brother Stanley form Arthur Young & Company in Chicago 1924 Arthur Young allies with Broad Paterson & Co, England Ernst & Ernst allies with Whinney, Smith & Whinney

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1939 Clarkson allies with Woods Gordon & Co to expand into management consulting

1944 Clarkson Gordon & Company allies with Arthur Young & Co 1979 Ernst & Whinney forms and becomes the fourth largest accountancy firm in the world Arthur Youngs European offices join several large local European firms

1989 Arthur Young merges with Ernst & Whinney to create Ernst & Young 2000 Ernst & Young unveils a new, integrated global organization 2006 Ernst & Young integrates its Americas Area 2008 Ernst & Young integrates its EMEIA and Far East Areas

2.2 SERVICE PROFILE OF ORGANIZATION E&Y India provides the following services to its clients: 1. Advisory Performance Improvement Risk IT Advisory for financial services

2. Assurance Accounting compliance and reporting Climate change and sustainability services Financial accounting advisory services Fraud investigation and dispute services

3. Transactions
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 4. Tax

Lead advisory Restructuring Operational transaction services Transaction support Transaction tax Valuation and business modeling

Cash tax planning Country tax advisory Cross border advisory Customs and international trade Global compliance and reporting Global mobility Performance and reward Personal taxes Tax accounting Tax performance advisory Transactions taxes VAT, GST and other Sales taxes

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2.3 MARKET PROFILE OF ORGANIZATION Ernst & Young is a global leader in assurance, tax, transaction and advisory services. Worldwide, our 141,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities achieve their potential. Ernst & Young operates from 8 cities* in India (www.ey.com/india) with a work force of over 7500** people, who work towards the firms vision of being the trusted business advisor that contributes most to the success of people and clients by creating value and confidence. Global Tax Advisory Services, Risk Advisory Services, Transaction Advisory Services and Business Advisory Services are the core services offered by the firm in India. E&Y India serves to the following industries: Automotive Government and Public sector Oil and Gas Technology Power and utilities Telecommunications Consumer Products Media and Entertainment Private Equity
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Financial Services Real Estate

CHAPTER 3 DISCUSSIONS ON TRAINING

3.1 WORK PROFILE The work profile during the training period included of the following roles and responsibilities to be performed:
1. Initial updation: This include checking the service tax amount and entity name

(since there are several entities under Ernst & Young, and the audit was being done only for one entity Ernst & Young Pvt. Ltd.) on vouchers and updating the same in excel sheets and mark excel serial nos. on vouchers to ensure that the vouchers are filed in serial no. . 2. Submission of report for missing and incomplete vouchers. 3. Updation of missing and incomplete vouchers and ensure that they are filed according to the serial nos. with other vouchers. 4. Last stage updation of filed vouchers with excel sheets to ensure that the vouchers are properly filed according to the month and year and in serial no. and submitting the final report of missing vouchers amount to the manager. One such report for the amount of missing vouchers amount year wise and city wise is given below:

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Table 3.1: Missing vouchers amount year wise and city wise.
Delhi Missing Voucher (Amount) 1st Half 2nd Half 801,857 687,518 230,290 258,299 128,318 173,861 115,494 1,921,535 474,102 Total 801,857 917,808 386,617 289,355 2,395,637

FY FY FY FY

2007-08 2008-09 2009-10 2010-11

Mumbai Missing Voucher (Amount) 1st Half 2nd Half 16,120 218,198 49,961 6,180 240,498 49,961 Total 16,120 268,159 6,180 290,459

FY FY FY FY

2007-08 2008-09 2009-10 2010-11

Kolkata Missing Voucher (Amount) 1st Half 2nd Half 1,730 8,652 14,508 124 1,746 12,252 14,508 Total 1,730 23,160 124 1,746 26,760

FY FY FY FY

2007-08 2008-09 2009-10 2010-11

Hyderabad Missing Voucher (Amount) 1st Half 2nd Half 41,647 41,647 Total 41,647 41,647

FY FY FY FY

2007-08 2008-09 2009-10 2010-11

The above table shows the total amount of missing vouchers for four different offices of Ernst & Young namely - New Delhi, Mumbai, Kolkata, Hyderabad for four different years starting from Financial year 2007-08 to Financial year 2010-11 for 1st and 2nd half.
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3.2 TOOLS AND TECHNIQUES USED 1. MS Office: MS Excel: Used for computing the amount of vouchers, their tabular representation and for making various other reports. MS Word: Preparing final report and for submission of various other reports.
2. Internet: Various internet websites were consulted for understanding the sector as

well as for data collection. These websites include the website of service tax department, Ernst & Young, etc.

3.3 KEY LEARNINGS Service tax audit The basic objective of audit is to measure the level of compliance of the taxpayer with the provisions of Chapter V of the Finance Act, 1994 and the rules framed thereunder. It should be consistent with departmental instructions and make use of professional audit methodology and procedures. The basic principles are: The audit should be conducted in a systematic and penetrative manner. Emphasis should be on the identified risk areas and on scrutiny of records maintained in the normal course of business.

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Audit efforts should be based on materiality i.e. degree of scrutiny will depend on the nature of risk factors identified.

Recording of all checks and findings. Audit should be normally distinct from anti-evasion operation in as much as it can detect irregularities only to the extent of their reflection in the books of accounts.

If during the audit, it is seen that the guidelines in this manual are in conflict with the provisions of the Chapter V of Finance Act, 1994 and the Rules framed under Section 94 thereof or Notification/instructions because of any changes in the law and policy subsequent to the issue of this manual, the provisions of the Act/Rules/Notification and latest Circulars of the Board shall prevail over the contents of this manual.

The frequency of audit for other taxpayers would be as per following norms: Taxpayers with Service Tax payment above Rs.3 crores (Cash + CENVAT) (MANDATORY UNITS) to be audited every year. Taxpayers with Service Tax payment between Rs.1 Crore and Rs.3 crores (Cash + CENVAT) to be audited once every two years. Taxpayers with Service Tax payment between Rs.25 lakhs and Rs.1 Crore (Cash + CENVAT) to be audited once every five years. Taxpayers with Service Tax payment upto Rs.25 lakhs (Cash + CENVAT) 2% of taxpayers to be audited every year.

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Service tax credit As per Service Tax credit Rules, 2002, every service provider (output service provider) shall be eligible to avail credit of the service tax paid by him to other service providers, in respect of the services (Input service) provided by them to him. Such availment should be in relation to the rendering of service by the service provider.

Procedural Requirement If both the input and output services fall under same category of service, credit can be availed in respect of all such input service for which invoice or bill or challan is issued on or after 16.8.2002. If the input and output services fall under the different categories of services, credit can be availed in respect of input services for which invoice or bill or challan is issued on or after 14.5.2003. The output service provider shall be allowed to take such credit only after he makes payment against the bill to the input service provider. If the output service provider also provides either any taxable service which is exempted from payment of service tax or any service which is not at all taxable, the input services on which service tax is paid might be used both in respect of the taxable service as well as the exempted/non-taxable service, rendered by the output service provider. In such a case the following procedure have been prescribed. The output service provider shall maintain separate accounts in respect of the input service availed by him and utilized in the rendering of taxable service as well as exempted/non-taxable service. Credit can be availed only in respect of that quantum

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of input service, which is utilized by the service provider towards rendering taxable services. If the output service provider opts not to maintain such records, he can utilize service tax credit of his service tax liability, only to the extent of 35% of service tax payable on the output service. Service tax credit in respect of Telephone connection can be availed only if such telephone connection is installed in the premises where output service is provided. In support of the credit availed, the invoice or bill or challan issued by the input service provider shall be preserved. It should contain the following information: Sl. No. of the document, date of issue, description and value of the input service, the service tax paid/payable, service tax registration number and address of the input service provider. The output service provider shall maintain proper records with regard to the availment of service tax credit availed by him.

A half yearly return in the proforma in terms of Rule 5(4) of the Service Tax Credit Rules, 2002 has to be filed along with half yearly ST-3 return.

The unutilized balance of service tax cannot be claimed as refund.

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CHAPTER 4 STUDY OF SELECTED RESEARCH PROBLEM

4.1 STATEMENT OF RESEARCH PROBLEM A comprehensive study of the SERVICE TAX AUDIT.

4.2 STATEMENT OF RESEARCH OBJECTIVES: In the light of above research statement, following objectives can be formulated: To determine effective ways of carrying out service tax audit. To determine ways of reducing redundancy of vouchers in files. To minimize the amount of missing and incomplete vouchers so that maximum credit against service tax can be taken.

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CHAPTER 5 ANALYSIS
5.1 ANALYSIS OF DATA Table 5.1: Service tax revenue (All India from 2000-01 to 2009-10)
Financial Year 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Revenue Rs. Crores 410 846 1022 1515 1787 2072 2612 3305 4125 7890 14196 23053 37482 51133 60702 58319 % Growth over previous year Base Year 106 21 48 18 16 23 26 25 91 80 62 63 36 19 -3.93 No. of Services under tax net 3 6 6 18 26 26 26 41 52 62 75 84 99 100 106 117 No. of Assessees 3943 4866 13982 45991 107479 115495 122326 187577 232048 403856 774988 846155 940641 1073075 1204570 1307286 % Growth over previous year Base Year 23.41 187.34 228.93 133.70 7.45 5.91 53.34 23.71 74.04 91.89 9.18 11.17 14.08 8.78 8.53

Source: www.servicetax.gov.in (Revenue as reported by Pr. CCA and Number of

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1. The Service Tax collections have shown a steady rise since its inception in 1994. The tax collections have grown manifolds since 1994-95 i.e. from Rs. 410 crores in 1994-95 to Rs.71174.58 crores in 2010-11. 2. The target for the year 2010-11 was Rs.69400 Crores and the actual realization was Rs.71174.58 Crores, showing increase of Rs.1774.58 Crores (2.56%)
3. The total number of taxable services have also increased from 3 in 1994 to

119 as on 1st May, 2011. 4. There is a substantial growth in the assesse base from 3943 numbers in 1994-95.

Table 5.2: Zone wise service tax collection for F.Y. 2008-09 & 2009-10 (Revenue in Crores.)
SR. NO. 1 2 3 4 5 6 7 8 NAME OF THE ZONE AHMEDABAD BANGALORE BHOPAL BHUBANESHWAR CHANDIGARH CHENNAI KERALA COIMBATORE REV. 2008-09 2017.58 3455.56 1148.91 817.23 948.23 3620.48 1009.78 932.91 NO. OF REV. 2009ASSESSEES 10 62636 71836 49396 16805 43540 69191 23386 61743 1975.44 3175.00 1046.25 784.50 680.96 3335.02 907.12 765.95 NO. OF ASSESSEES 64419 77489 53346 18986 45464 70475 24158 64286

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9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

DELHI SHILLONG HYDERABAD JAIPUR KOLKATA LUCKNOW MYSORE MEERUT MUMBAI-I MUMBAI-II NAGPUR PUNE RANCHI VADODARA VISHAKHAPATNAM LTU GRAND TOTAL

10178.93 279.92 2190.72 914.59 2744.61 769.49 661.51 1145.74 20205.11 350.13 761.88 2393.24 636.26 980.57 859.48 1935.58 60958.44

144699 12399 40947 53303 51966 46490 24059 36439 178328 3810 48511 73920 24392 38576 27654 544 1204570

9895.07 299.39 2039.34 817.14 2712.79 704.90 604.49 1082.45 18440.84 315.80 725.04 2184.01 655.99 963.11 814.03 3202.84 58127.47

156811 13303 45578 56370 64996 54438 23636 45890 188843 4375 52340 83075 27303 39810 31379 516 1307286

Source: www.servicetax.gov.in As it can be seen, there is a minor variation between the revenue figures provided by the Zones
and those reported by the Pr. C.C.A.

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5.2 SUMMARY OF FINDINGS

Service Tax Service tax is, as the name suggests, a tax on Services. It is a tax levied on the transaction of certain services specified by the Central Government under the Finance Act, 1994. It is an indirect tax (akin to Excise Duty or Sales Tax) which means that normally, the service provider pays the tax and recovers the amount from the recipient of taxable service. Service tax on taxable services rendered in India are exempt, if payment for such services is received in convertible foreign exchange in India and the same is not repatriated outside India. The Cenvat Credit Rules allow a service provider to avail and utilize the credit of additional duty of customs/excise duty for payment of service tax. Credit is also provided on payment of service tax on input services for the discharge of output service tax liability.

Constitutional & Legal provisions behind levy of Service Tax in India. Constitutional Validity Article 265 of the Constitution lays down that no tax shall be levied or collected except by the authority of law. Schedule VII divides this subject into three categoriesa) Union list (only Central Government has power of legislation) b) State list (only State Government has power of legislation) c) Concurrent list (both Central and State Government can pass legislation). To enable Parliament to formulate by law principles for determining the modalities of levying the Service Tax by the Central Govt. and collection of the proceeds thereof by the

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Central Govt. and the State, the amendment vide Constitution (92nd amendment) Act, 2003 has been made. Consequently, new article 268 A has been inserted for Service Tax levy by Union Govt., collected and appropriated by the Union Govt., and amendment of seventh schedule to the constitution, in list I-Union list after entry 92B, entry 92C has been inserted for taxes on services as well as in article 270 of the constitution the clause (1) article 268A has been included.

Payment of service tax The following table shows the rate of service tax applicable at the relevant period of time. Table 5.3: Rate of service tax applicable
Sr.No. Period Rate of Service Rate of Rate Tax Education Cess of Secondary & Higher Education Cess 5% Nil Nil 8% Nil Nil 10% 2% of the S.T. Nil 12% 2% of the S.T. Nil 12% 10% 2% of S.T. 2% of S.T. 1% of S.T. 1% of S.T.

1. 2. 3. 4. 5. 6.

Till 13.05.2003 14.05.2003 to 09.09.2004 10.09.2004 to 17.04.2006 18.04.2006 to 31.05.2007 01.06.2007 to 23.02.2009 From 24.02.2009

Source: www.servicetax.gov.in

In case of Individuals or Proprietary Concerns and Partnership Firm, service tax is to be paid on a quarterly basis. The due date for payment of service tax is the 5th of the month immediately following the respective quarter ( in case of e-payment, by 6th of the month immediately following the respective quarter). For this purpose, quarters are: April to June, July to September, October to December and January to
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March. However, payment for the last quarter i.e. January to March is required to be made by 31st of March itself.

In case of any other category of service provider other than specified above, service tax is to be paid on a monthly basis, by the 5th of the following month ( in case of e-payment, by 6th of the month immediately following the respective month). However, payment for the month of March is required to be made by 31st of March itself.

The due date for payment of service tax is 6th day of the month following the relevant month/quarter, if electronically paid and in other cases, 5th day of the month following the relevant month / quarter. It is provided under section 75 of the Finance Act, 1994 that in case of delayed payments (after due date) the assessee is required to pay simple interest at the rate prescribed. Table 5.4: Rate of interest charged on delayed payments
Sr.No. 1. 2. 3. 4. 5. Period Till 11.05.2001 11.05.2001 to 11.05.2002 11.05.2002 to 10.09.2004 From 10.09.2004 to 31.03.2011 From 01.04.2011 Rate of Interest 1.5% per month 24% per annum 15% per annum 13% per annum 18% per annum

Source: www.servicetax.gov.in

Service categories which are taxable under service tax

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The Table below shows the category of services which are taxable with the date of introduction of such service. Table 5.5: Categories of Services
Sr.No 1 2 3 4 5 6 Advertising Air Travel Agent Airport Services Architect ATM Operations, Management or Maintenance Auctioneers' service, other than auction of property under directions or orders of a count of or auction by Central Govt. Authorized Service Station Auxiliary to General Insurance Auxiliary to Life Insurance Banking & Other Financial Services Beauty Parlor Broadcasting Business Auxiliary Service Business Exhibition Service Business Support Service Cable Operator Cargo Handling Chartered Accountant Cleaning Service Clearing & Forwarding Agent Clubs and Associations Commercial or Industrial Construction Commercial Training or Coaching Company Secretary Construction of Residential Complex Consulting Engineer Service Category Date of Introduction 01.11.1996 01.07.1997 10.09.2004 16.10.1998 01.05.2006 01.05.2006

7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

16.07.2001 16.07.2001 16.08.2002 16.07.2001 16.08.2002 16.07.2001 01.07.2003 10.09.2004 01.05.2006 16.08.2002 16.08.2002 16.10.1998 16.06.2005 16.07.1997 16.06.2005 10.09.2004 01.07.2003 16.10.1998 16.06.2005 07.07.1997

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27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58

Convention Centre Cost Accountant Courier Services Credit Card, Debit Card, Charge Card or other payment card related services Credit Rating Agency Custom House Agent Dredging Dry Cleaning Erection, Commissioning or Installation Event Management Fashion Designer Forward Contract Services Franchise Service Foreign Exchange Broker General Insurance Health Club & Fitness Centre Intellectual Property Service Interior Decorator Internet Caf Internet Telecommunication Service Life Insurance Mailing List Compilation and Mailing Management Consultant Maintenance or Repair Service Mandap Keeper Manpower Recruitment or Supply Agency Market Research Agency On-line Information & Database Access or Retrieval Service Opinion Poll Service Outdoor Caterer Packaging Service Pandal or Shamiana Services

16.07.2001 16.10.1998 01.11.1996 01.05.2006 16.10.1998 15.06.1997 16.06.2005 16.08.2002 01.07.2003 16.08.2002 16.08.2002 10.09.2004 01.07.2003 01.07.2003 01.07.1994 16.08.2002 10.09.2004 16.10.1998 01.07.2003 01.05.2006 16.08.2002 16.06.2005 01.07.1997 01.07.2003 16.10.1998 07.07.1997 16.10.1998 16.07.2001 10.19.2004 10.09.2004 16.06.2005 10.09.2004

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59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88

Photography Port Service ( Major Ports) Port Services( Other Ports) Public Relations Service Rail Travel Agent Real Estate Agent / Consultant Recovery Agent Registrar to an Issue Rent - a - Cab Operator Sale of space or time for Advertisement, other than print media Scientific or Technical Consultancy Security Agency Share Transfer Agent Ship Management service Site Preparation Sound Recording Sponsorship service provided to anybody corporate or firm, other than sponsorship of sports event Steamer Agent Stock Broker Storage & Warehousing Survey & Exploration of Minerals Survey and Map Making T.V. & radio Programme Production Services Technical Testing & Analysis Technical Inspection & Certification Agency Tour Operator Transport of goods by Air Transport of goods by Road Transport of goods in containers by rail {other than Indian railway omitted w.e.f. 01.09.2009} Transport of goods other than water, through Pipeline or other conduit

16.07.2001 16.07.2001 01.07.2003 01.05.2006 16.08.2002 16.10.1998 01.05.2006 01.05.2006 16.07.1997 01.05.2006 16.07.2001 16.10.1998 01.05.2006 01.05.2006 16.06.2005 16.07.2001 01.05.2006 15.06.1997 01.07.1994 16.08.2002 10.09.2004 16.06.2005 10.09.2004 01.07.2003 01.07.2003 01.09.1997 10.09.2004 01.01.2005 01.05.2006 16.06.2005

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89 90 91 92 93 94 95 96 97 98 99

Transport of passengers embarking on international journey by air, other than economy class passengers Transport of persons by cruise ship Travel Agent other than Air & Rail Travel Underwriter Video Tape Production Telecommunication Renting of immovable property Works contract Content Development & Supply Asset Management Mining Services( Oil & Gas)

01.05.2006 01.05.2006 10.09.2004 16.10.1998 16.07.2001 01.06.2007 01.06.2007 01.06.2007 01.06.2007 01.06.2007 01.06.2006 01.06.2007 16.05.2008 16.05.2008 16.05.2008 16.05.2008 16.05.2008 16.05.2008 01.09.2009 01.09.2009 01.09.2009 01.07.2010 01.07.2010 01.07.2010 01.07.2010 01.07.2010 01.07.2010 01.07.2010 01.07.2010

100 Design Services 101 Information Technology Software services 102 Investment Management for ULIP 103 Recognized Stock Exchange 104 Recognized Associations-Commodity Exchange Services 105 Clearing & Processing House services 106 Supply of Tangible Goods services 107 Cosmetic or Plastic Surgery Services 108 Transport of Coastal goods, Goods through National Waterways or Goods through Inland Waterways 109 Legal Consultancy Services 110 Promotion, marketing or organizing of games of chance including lottery, bingo etc. services 111 Health services undertaken by Hospitals or Medical establishments 112 Maintenance of Medical Records services 113 Promotion of Brand of Goods, Services etc. 114 Services of Permitting Commercial Use or Exploitation of any event 115 Electricity Exchange Services 116 Copyright Services 117 Services provided by Builder in relation to preferential location, internal/external development etc

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Services of Air-conditioned restaurants having license to 118 service alcoholic beverages in relation to service of food or beverages. Services of providing of accommodation in hotels / inns/ 119 cubs/ guest houses/ campsite for a continuous period of less than three months

1.5.2011

1.5.2011

Source: www.servicetax.gov.in

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Forms needed for payment of service tax The following table shows different types of forms needed to pay service tax. Table 5.6: Forms needed for service tax
Form type G.A.R. 7 ST - 1 ST - 2 ST - 3 ST - 3A ST - 4 ST - 5 ST - 6 ST - 7 AAR (ST-I) ASTR - 1 ASTR 2 Application Form - A Brief Description G.A.R. Proforma for Service Tax payments (For payments from April, 2007 onwards)
[Front] [Reverse]

Application form for registration under Section 69 of the Finance Act, 1994 Certificate of registration under Section 69 of The Finance Act, 1994 (32 of 1994) Return under Section 70 of the Finance Act, 1994 Memorandum for provisional deposit under rule 6 of the Service Tax Rules, 1994 Form of Appeal to the Commissioner of Central Excise (Appeals) Form of Appeal to Appellate Tribunal under section 86 of the Finance Act, 1994 Form of memorandum of cross objections to the Appellant Tribunal under section 86 of Finance Act, 1994 Form of application to Appellate Tribunal under Section 86(2) [or Sec.86(2A) of the Finance Act,1994 Application for Advance Ruling (Service Tax)
Application for filing a claim of rebate of service tax and cess paid on taxable services exported

Application for filing a claim of rebate of duty paid on inputs, service tax and cess paid on input services Proforma for Application for permission to file ST-3 Return electronically Application for refund of CENVAT credit under Rule 5 of the CENVAT Credit Rules, 2004

Source: www.servicetax.gov.in

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CHAPTER 6 SUMMARY AND CONCLUSIONS

6.1 SUMMARY OF LEARNING EXPRIENCE Working with a large organization like Ernst & Young, there were several key learnings throughout the training period. While some are related to the working environment and work culture, HR practices, some are related to doing the same work more efficiently. Report of missing and incomplete vouchers could have been submitted at the end of each day, or at the end of one updation of one financial year so that one final report could be presented and there is no redundancy of vouchers, i.e., a same voucher is not filed more than once. How the work is done entirely with the help of MS Excel, tabulating the data, computing the data so that it could be presented in a more precise and usable form for the purpose of analysis and report making. Also, coordinating with seniors from time to time to make sure that any important data or information is not missed out. It enhances your skills as a team member. How the goals and objectives of the team are communicated to the team members well in advance and they work towards achieving those goals is an important aspect of working in a team. In this case, the objective was to minimize the amount of missing and incomplete vouchers so that more and more amount of service tax can be set off against the amount which the company has charged from its clients.

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6.2 CONCLUSION & RECOMMENDATIONS Ernst & Young, being a consultancy service provider company, charges service tax from its clients for the services rendered by it. This service tax has to be paid to the government. The firm can however take the credit to the amount of service tax it has paid to its various service providers for various services rendered by them, such as telecommunications, courier, car hire, hotel rooms, air travel and the likes. For taking such credit, the firm, i.e., Ernst & Young has to furnish all the invoices on which it has paid service tax to its service providers. It has to present all the necessary bills on which the firm has paid service tax. Based on the experience of working towards preliminary arrangements for a service tax audit in Ernst & Young, it was found that there are several ways of doing the same task, i.e., filing the vouchers in their serial no. and to make sure that all the vouchers whose details are mentioned in the excel sheet are presented in the files. Moreover, the vouchers should be complete, i.e., the original invoices should be present in the vouchers to prove that service tax has been paid by the firm. During the final updation of vouchers with the excel sheet records, the list of missing vouchers should not be given for finding them as and when it is found that a particular voucher is missing, instead it is better to prepare a final report of the missing vouchers once the vouchers of an entire year has been checked as it happens sometimes that the vouchers of June month are filed in the file of July month vouchers by mistake. This reduces the chances of redundancy in vouchers, i.e., the same voucher does not appear more than once in the file. It reduces both the space and time.

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