Audit of Accounts

[Nitika Patni]

U/S 44AB of Income Tax Act it is mandatory to get accounts audited if gross sales turnover or gross receipts exceed Rs 40 Lakhs. I want to know whether while calculating the gross receipts or gross sales the amount of Service Tax is to be included or excluded. Experts opinion is urgently required. Please help. Nitika.

[CAGOPALJI AGRAWAL]

Nikita, service tax is not added for the purpose of turnover u/s 145A. But make sure that the assessee is not showing the gross sales including service tax.

[DEV KUMAR KOTHARI]

AS per specific provisions of service tax, service tax stands diverted at source on collection, so it cannot be considered as trading receipt or gross turnover or receipt etc. As usual ST shoudl be shown separetely in bills, and accounts otherwise, it can be considered as trading receipt and ST paid as separate item of cost of services rendered.

AI Summary

Service tax exclusion from gross receipts affects audit threshold; present service tax separately on invoices to avoid turnover treatment.
Service tax is not to be added to gross receipts for turnover computation and related audit obligations because it is diverted at source on collection and does not form part of trading receipts; service tax should be shown separately on bills and in accounts to avoid being treated as part of turnover.