The revenue department recovered only around 9% of service tax arrears in 2016-17 even as the number of cases detected increased from the previous fiscal, government auditor CAG said today.

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The department had an opening balance of Rs 2,658.31 crore in arrears to be realised in 2016-17, but with an addition of Rs 6,176.31 crore during the fiscal the total went up to Rs 8,834.62 crore.

However, it could realise only Rs 783.33 crore, a mere 8.87% of the total recoverable, said the Comptroller and Auditor General (CAG) report, 'Indirect Taxes - Service Tax', tabled in Parliament today.

The department disposed of demands worth Rs 4,285.29 crore last fiscal, ending the year with a closing balance of Rs 3,766 crore as arrears that could be recovered.

"It can be seen that only 8.87% of recoverable arrears could be recovered by the department during 2016-17. Given the significant amounts of arrears to be recovered, it is essential that the tax department specifically focuses on legacy issues even after transition to GST," said the CAG report.

It said that for recovery of tax dues raised but not realised, the revenue department has powers to resort to various methods including adjustment against amounts payable, attachment and sale of excisable goods and recovery through district revenue authority.

The report said the Directorate General of Central Excise and Intelligence (DGCEI) detected more cases of service tax evasion in 2016-17 than in the previous two fiscals.

As many as 8,085 cases were detected as the anti-evasion drive of the DGCEI in 2016-17, up from 7,534 such cases in 2015-16 and 6,719 in 2014-15, it said.

"It is observed that the number of service tax cases detected by DGCEI had increased during 2016-17 as compared to 2015-16 while the amount detected had decreased slightly," CAG said.

In 2016-17, the amount detected by the intelligence unit was worth Rs 17,846 crore, lower than Rs 18,971 crore in 2015 -16. In 2014-15, the amount detected by DGCEI as evasion of service tax stood at Rs 10,544 crore.

The government had collected service tax of over Rs 2.54 lakh crore in 2016-17, accounting for 29.52% of indirect tax revenue.

As per the CAG compliance audit, arrear cases having revenue implication of Rs 1.18 lakh crore were pending for recovery as on March 31, 2017.

Besides, the audit also found that the service tax collection from commercial training or coaching service increased from Rs 880.09 crore in 2012-13 to Rs 1,950.08 crore in 2015-16.

It proves that the business of coaching centres is expanding day by day, the report said, adding that the average annual growth rate of service tax from this service sector over that three years was not commensurate with the growth rate projected for the sector.

"Efforts by the department to widen the tax net were inadequate as compared to the pace of growth of this sector and this had implication of revenue loss," CAG said.

The CAG audit said the special cells that were mandated with the task of identifying potential assessees were non- existent/non-functional in all the selected Commissionerates.

"Audit detected 1,005 number of unregistered assessees out of which in 250 cases, we were able to quantify service tax liability of Rs 6.11 crore," the report said.