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Regional Training Regional Training Institute, RanchiInstitute, RanchiRegional Training Regional Training Institute, RanchiInstitute, Ranchi

Structured Training Structured Training Courseware on State Receipts Courseware on State Receipts

AuditAudit

Audit of Entertainment Tax Audit of Entertainment Tax ReceiptsReceipts

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Session ObjectivesAt 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

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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

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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

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Nature of Entertainment Tax Receipts

Entertainment includes• Cinemas• Commercial video shows• Dish antennae• Cable connections of TVs• Exhibitions

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Nature of Entertainment Tax Receipts (contd.)

• Races• Games and sports• Use of loudspeakers• Performance and• Amusements

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General Exemptions• If entire proceeds devoted to

philanthropic, religious or charitable purposes

• If entertainment is of wholly educational character

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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

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Special Exemptions• Drama• Kavi sammelan and Mushaira• Dangal and kushti• Flower show• Magic show• Puppet show• Sports• Qawwali

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Special Exemptions• Entertainment in Fair• New cinema house where there is

less than 1 lakh population• Military personnel in uniform• Personnel of BSF

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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

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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

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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

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PenaltyProprietor 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

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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

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Procedure for Assessment

• Tax is levied on all payments for admission to any entertainment

• Liability rests with proprietor of entertainment

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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

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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

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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

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Mode of PaymentEntertainment 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

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AppealAppeal 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

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RevisionApplication 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

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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

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RefundRevenue 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

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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

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Important Registers & Records (contd.)

Registers• Application for Registration• Cancellation of Registration

Certificate• Application for Amendment• Register of Registered dealers

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Important Registers & Records (contd.)

• Demand and Collection Register• Disposal of offences Register• Progressive Collection Register• Refund Register• Registers relating to requisitions

from Appellate Officers

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Important Registers & Records (contd.)

• Register of Securities• Seized books of accounts and

disposal• Inspection of non-registered

dealers

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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

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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

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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

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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

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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

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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