EA-2000service tax audit under GST Regime

[Guest]

Is service tax audit under EA-2000 in GST regime is possible, what does the savings clause in GST mentions about it? Will the service tax be covered in the GST audits beginning April 2019?

[KASTURI SETHI]

Dear Querist,

Query-wise reply is as under:-

(i) Yes. 100%.

(ii) Section 174 of CGST Act, 2017 (Appended below)

(iii) Yes.

Saving Section is for all purposes in order to safeguard revenue. On 12.10.18, Gauhati High Court has held in favour of the department on this issue in the case of M/s. Mascote Entrade Pvt. Ltd. Vs.UOI & two others. = 2017 (12) TMI 1070 - GUWAHATI HIGH COURT

[YAGAY andSUN]

Gujarat HC Stays Service Tax Audit Post-GST Rollout

The Gujarat High Court has stayed a communication to submit Service Tax audit report against the petitioners, M/s OWS Warehouse Services LLP. =  2018 (10) TMI 1008 - GUJARAT HIGH COURT Before the High Court, the petitioner has challenged the communication issued by the Comptroller and Auditor General of India calling upon the petitioner to submit Service Tax audit at the hands of the officers of the CAG. The petitioner submitted that the Union of India has asked for the transfer of such petitions along with other proceedings filed before different High Courts. Our attention was drawn to an order dated 31.08.2018 passed by the Supreme Court, in which, the reference to the said order of this Court is made and the proceedings before the High Court have stayed. After analyzing Section 173 of the CGST Act, Justice Akil Kureshi and Justice B N Karia noted that “clause of Subsection (2) of Section 174 and other clauses would, prima facie, show that there was no saving of Rule 5A in such manner that fresh proceedings for audit could be initiated in exercise of powers under the said Rule. We, therefore, have serious doubts whether, with the aid of Rule 5A of the Service Tax Rules, 1994, the CAG can carry out compulsory Service Tax audit of private agencies like the petitioner.” “Under the circumstances, issue Notice, returnable on 28.11.2018. By way of ad interim relief, the impugned order dated 09.10.2018 is stayed. In other words, the CAG shall not carry out any further Service Tax audit of the petitioner. Direct service permitted,” the bench said.

[DR.MARIAPPAN GOVINDARAJAN]

I endorse the views of Shri Sethi. The Court only gives stay order. But on arguments it may be decided otherwise.

[KASTURI SETHI]

Sir,

Moreover, litigation is not a cake walk. Govt. has so many arrows (of law) in its armoury. Every case law has its own background, facts & circumstances. One should not be a victim of trajectory of legal words.

[Guest]

What remedies one service tax assessee has, if he is nit registered in GST, but was registered in Service Tax

[DR.MARIAPPAN GOVINDARAJAN]

If the threshold limit exceeds register with GST now. However you have to face the consequences for non registration, non levying of tax etc

[KASTURI SETHI]

Rightly advised by Sh.Govindarajan Sir. I further add that if any rule is set aside by any court the department does not sit idle. The department fights such cases up to Supreme Court. Meanwhile, all assessees comply with in routine manner till the final decision of the Supreme Court. Latest news is that Delhi High Court has fixed date on this very issue.. Litigation will go on. Govt work will not suffer. Neither any court wants that Govt work should suffer.

[KASTURI SETHI]

Decision of Kolkata High Court regarding conducting Service Tax Audit by the department

M/s. Gitanjali Vacationville Private Limited & anr. Vs. The Union of India & anr. = 2019 (1) TMI 917 - CALCUTTA HIGH COURT

AI Summary

Service tax audit under GST: saving clause may preserve legacy audits, but courts show conflicting stances on compulsory CAG audits. Service tax audits may be pursued post-GST where the saving clause preserves departmental powers, but high courts have diverged: some sustain legacy audits while others stayed CAG-initiated compulsory audits, creating uncertainty. Assessees not registered under GST but previously under service tax must evaluate registration obligations and comply with filings while litigation over audit powers proceeds.