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

RTI, Ranchi2 Session Objectives At the end of the session, the participants will be able to –List the State Receipts –Explain the constitutional role of CAG with regard to State Receipts Audit –Detail the focus areas for audit

RTI, Ranchi3 Tax Structure in India Well developed and rationalized Both Central and State Governments have authority to levy taxes –Centre levies both direct and indirect taxes –States levy only indirect taxes and local taxes

RTI, Ranchi4 Direct Taxes Tax levied directly on the ultimate entity / person who bears the tax burden –E.g. Income Tax and Corporate Tax

RTI, Ranchi5 Indirect Taxes Tax is levied on the manufacturer / trader, who passes on the tax burden to the consumer –E.g. Customs Duty, Excise Duty, Sales Tax etc.

RTI, Ranchi6 Taxes Levied by Central Government Income tax Central excise Customs duty Corporate tax Central sales tax Expenditure tax Service tax etc.

RTI, Ranchi7 Taxes Levied by State Government State excise duty State sales tax Land revenue tax Motor vehicles tax Stamps and Registration fees

RTI, Ranchi8 Taxes Levied by State Government (contd.) States also receive non-tax revenue such as, –Police receipts –Mining receipts –Interest receipts –Forest receipts etc.

RTI, Ranchi9 Mandate for Audit Constitution of India Comptroller and Auditor General’s (DPC) Act –Section 16

RTI, Ranchi10 Audit of Receipts General principles governing audit of receipts laid down in CAG’s manual of Standing Orders (Audit) Main Focus is to ensure effective check on –Assessment –Collection –Allocation of revenue Examination of cases after completion of assessment

RTI, Ranchi11 Audit Focus Areas Whether adequate systems and procedures exist for proper assessment of receipts due Whether the computation and realization of taxes, rent, fees, royalty etc. is in accordance with tax laws

RTI, Ranchi12 Audit Focus Areas (contd.) Whether adequate control and monitoring mechanisms have been devised to prevent loss or leakage of revenue Whether the relevant records and registers required to be maintained are maintained properly

RTI, Ranchi13 Audit Focus Areas (contd.) Whether the system of raising demands and realizing revenue is effective and within the prescribed timeframe Whether the follow up action in case of default is adequate and sustained

RTI, Ranchi14 Audit Focus Areas (contd.) Whether cases pending in courts of law or appellate authorities are pursued adequately Whether appeals where justified are filed within the prescribed period

RTI, Ranchi15 Audit Focus Areas (contd.) Whether there is effective machinery for detection of tax evasion Whether adequate measures are taken for recovery of arrears due

RTI, Ranchi16 Limitations of Audit Audit should not take upon the role of revenue authorities while conducting audit of receipts Audit cannot question authoritative interpretation of relevant rules and orders or judicial decisions of administrative authority in quasi-judicial capacity

RTI, Ranchi17 Responsibility of Audit Ensure confidentiality of assessment records received during the course of audit