1 Regional Training Institute, Ranchi Structured Training Courseware on State Receipts Audit Audit of Entertainment Tax Receipts

RTI, Ranchi2 Session Objectives At the end of these sessions, the participants will be able to Explain the nature of entertainment tax receipts Understand the assessment and collection mechanism and List the audit checks relating to entertainment tax receipts

RTI, Ranchi3 Background Government of India Act 1935 –States empowered to levy tax on payments for admission to all entertainment –Registered Proprietor of an entertainment to pay such tax

4 Organizational Set up Commissioner Commercial Taxes –Responsible for administration of relevant Acts and Rules at apex level Sr.Joint Commissioner, Dy. Commr and Asst. Commr at Headquarters Divisions – headed by Joint Commr Circles – headed by CTO

RTI, Ranchi5 Nature of Entertainment Tax Receipts Entertainment includes Cinemas Commercial video shows Dish antennae Cable connections of TVs Exhibitions

RTI, Ranchi6 Nature of Entertainment Tax Receipts (contd.) Races Games and sports Use of loudspeakers Performance and Amusements

RTI, Ranchi7 General Exemptions If entire proceeds devoted to philanthropic, religious or charitable purposes If entertainment is of wholly educational character

RTI, Ranchi8 General Exemptions If entertainment provided by institution not established for profit By non-profit institution consisting solely of exhibition of articles related to public health, or agriculture or manufacturing industry

RTI, Ranchi9 Special Exemptions Drama Kavi sammelan and Mushaira Dangal and kushti Flower show Magic show Puppet show Sports Qawwali

RTI, Ranchi10 Special Exemptions Entertainment in Fair New cinema house where there is less than 1 lakh population Military personnel in uniform Personnel of BSF

RTI, Ranchi11 Registration Every proprietor of entertainment needs a registration –Violation to be penalized Duplicate registration certificate can be obtained If business is changed/discontinued, registration can be cancelled

RTI, Ranchi12 Security Deposit Proprietor of entertainment to deposit security with prescribed authority –Amount not to exceed total entertainment tax chargeable for fortnight –Amount to be forfeited if returns not furnished on due date –Amount can be adjusted against dues/arrears

RTI, Ranchi13 Details of Entertainment Proprietor should inform prescribed authority about –Place of entertainment –Nature of entertainment –Commencement and termination timings –Changes or modifications to timings of entertainment At least 44 hours in advance

RTI, Ranchi14 Penalty Proprietor is liable for payment of penalty in the following cases: Admits a person to entertainment in contravention of the Act Fails to pay tax dues within the timeframe prescribed Fraudulently evades payment of tax

RTI, Ranchi15 Penalty (contd.) Obstructs an officer from carrying out inspection, search or seizure Fails to produce records demanded by Inspecting Officer Contravenes any other provisions of the Act

RTI, Ranchi16 Procedure for Assessment Tax is levied on all payments for admission to any entertainment Liability rests with proprietor of entertainment

RTI, Ranchi17 Procedure for Assessment (contd.) State Government can permit a proprietor to pay the tax in the following manner –Compounding the tax for a fixed sum or –Consolidated payment at a percentage of gross proceeds or –On the basis of a mechanical device that registers persons admitted to entertainment automatically –For cinematograph exhibition, a show tax is levied in addition to entertainment tax

RTI, Ranchi18 Consolidated Payment of Tax Tax not exceeding 45% and not less than 10% of gross collection capacity per show Percentage fixed as per classification of places based on population census

RTI, Ranchi19 Compounding of Tax Tax based on fixed percentage of gross collection capacity –For a specified number of shows –In a specified period –Not less than average amount of tax payable for preceding 3 years

RTI, Ranchi20 Mode of Payment Entertainment tax can be paid in any of the following ways: By stamping ticket indicating amount of tax By calculating persons admitted By way of compounding tax By consolidated payment of tax By using a mechanical device to register automatically

RTI, Ranchi21 Appeal Appeal against an assessment order To be filed within 45 days of receipt of demand notice To be sent to authorised Joint Commissioner / Deputy Commissioner Appellant to be given reasonable opportunity to be heard –No order can be passed without hearing

RTI, Ranchi22 Revision Application for revision of order To be filed within 30 days of communication of order To be sent to Joint Commissioner –If passed by a person lower than him in rank or else, to the Commissioner –Commissioner can also revise an order on his own, if passed by his subordinate

RTI, Ranchi23 Review Review to be within 12 months after date of passing order –Commissioner can permit review after the expiry of this period No Officer can review orders passed by predecessors except with approval of Commissioner

RTI, Ranchi24 Refund Revenue realized can be refunded in the following cases: Where net proceeds of entertainment are devoted to philanthropies, charitable or religious purposes Where the prescribed authority feels tax is charged in excess of dues Where show is cancelled and spectators are refunded their money

RTI, Ranchi25 Important Registers & Records Entertainment Act does not prescribe maintenance of registers/records –Registers prescribed for Sales Tax department are maintained To keep track of individual assessments and collections

RTI, Ranchi26 Important Registers & Records (contd.) Registers Application for Registration Cancellation of Registration Certificate Application for Amendment Register of Registered dealers

RTI, Ranchi27 Important Registers & Records (contd.) Demand and Collection Register Disposal of offences Register Progressive Collection Register Refund Register Registers relating to requisitions from Appellate Officers

RTI, Ranchi28 Important Registers & Records (contd.) Register of Securities Seized books of accounts and disposal Inspection of non-registered dealers

RTI, Ranchi29 Audit Checks Whether there is an effective system to ensure all returns due from proprietors are received on time Whether correctness of returns checked? Whether action taken for non- filing\delays in filing returns

RTI, Ranchi30 Audit Checks (contd.) Check if tax is charged correctly See if number of shows have been correctly calculated Whether entertainment tax and show tax paid by proprietor, were remitted in the treasury

RTI, Ranchi31 Audit Checks (contd.) Compare opening number of regular tickets, complimentary passes, and concession tickets issued as per return, with closing balance of previous week\fortnight

RTI, Ranchi32 Audit Checks (contd.) Verify the correctness of stamps used for each demonstration See if treasury challans have been maintained properly Check if there is a system of reconciliation between tax received and treasury records

RTI, Ranchi33 Audit Checks (contd.) Whether security furnished by proprietor is sufficient and whether related records are maintained properly Whether arrears of tax recovered from security Whether orders of exemption, refunds and remission conform to relevant rules

RTI, Ranchi34 Audit Checks (contd.) Whether proprietors violating rules were punished? Whether guidelines relating to checking evasion of taxes followed properly by assessing authorities Scrutinize the income-tax returns of proprietors if there is prima-facie doubt about returns on entertainment