Audit of Tax, Cess Receipt
Session Title
Training Module on Audit of ULBs Session 6 2
Session Overview
In this session we will discuss
tax and cess collection procedure, and
audit points thereon.
Training Module on Audit of ULBs Session 6 3
Learning Objective
The necessary information will enable the
participants, to acquire basic concepts of power to impose tax,
to understand procedure for collection of taxes,
and
accounting system of property and other taxes
along with Cess.
Training Module on Audit of ULBs Session 6 4
Taxation: Power to impose Municipal TaxationThis is to be adopted as per State specific scenario
• The Board of Councillors of a municipality shall have
the power to levy the following taxes:• property tax on lands and buildings,
• tax on advertisements, other than published in the newspapers,
• tax on cart,
• tax on carriage,
• on ferries and bridges.
Training Module on Audit of ULBs Session 6 5
Power to impose Municipal Taxation
•The Board of Councillors may levy
–a fee per head or per vehicle for providing
municipal services in connection with any
congregation like
pilgrimage, fair etc. within a municipal area.
Training Module on Audit of ULBs Session 6 6
• The Board of Councillors may frame
– regulations for the rate of levy, and
– the mode of collection.
Power to impose Municipal Taxation
Training Module on Audit of ULBs Session 6 7
• Board of Councillors may also
– levy fee for licenses issued or permissions granted
under the provisions of the relevant Act, and
– impose charges for any specific services.
• The St. Govt. may prescribe
– the scale at which such fees may be levied or charges
imposed.
Power to impose Municipal Taxation
Training Module on Audit of ULBs Session 6 8
Property tax on lands and buildings
• Property Tax
– main source of income of most ULBs.
– levied on residential and commercial properties, and
– collected from the citizens and organisations.
Training Module on Audit of ULBs Session 6 9
Property tax on lands and buildings
• In Government undertakings, property tax is
– received directly from undertakings, or
– from the State or Central Government.
Training Module on Audit of ULBs Session 6 10
Property tax on lands and buildings
• It may be comprised of the following:
– General Tax
– Water Tax
– Conservancy Tax or Sewerage Tax
– Development Cess, and
Training Module on Audit of ULBs Session 6 11
Property tax on lands and buildings
– Tax on Vehicles, Boats and Animals
– Dog Tax
– Fire Cess
– Any other taxes
Training Module on Audit of ULBs Session 6 12
Property tax on lands and buildings
• The Property Tax Department may also collect
– Property Transfer Charges
– Notice Fee, Warrant Fee, Other Fees,
– interest and penalties charged for delays, and
– defaults made by the taxpayers.
Training Module on Audit of ULBs Session 6 13
Property tax on lands and buildings
• A property tax, imposed by the Municipality shall
be calculated as follows:
– Where the annual value of land and buildings does not
exceed Rs.999/-,
the property tax shall be determined in accordance
with the formula shown in the next slide.
Training Module on Audit of ULBs Session 6 14
Annual value
[% of the annual value]
+ 10
100
Property tax on lands and buildings
Training Module on Audit of ULBs Session 6 15
•Where the annual value of lands and
buildings exceeds Rs.999/-, tax shall be
determined in accordance with the formula
shown below:
Annual value
[% of the annual value]
+ 22
1,000
Property tax on lands and buildings
Training Module on Audit of ULBs Session 6 16
• Provided that
– property tax shall not exceed 40% of the annual value
of lands and buildings, and
– in calculating the percentage of property tax, the
decimal figure below 0.5 shall be ignored and 0.50 or
above shall be rounded off to 1.00.
Property tax on lands and buildings
Training Module on Audit of ULBs Session 6 17
• State Government may
• revise this formula, and
• no such revision shall be made more than once in
five years.
Property tax on lands and buildings
Training Module on Audit of ULBs Session 6 18
Levy of Surcharge
• Surcharge shall be levied
– on commercial, industrial or other holdings;
– at a rate not less than 20% and not exceeding 50% of
the total amount of the property tax;
• Rate of surcharge shall form part of property tax
for the purpose of recovery.
Training Module on Audit of ULBs Session 6 19
• Where a holding is used by the owner
exclusively for his own residential purposes
– a rebate, not exceeding 20% of the property tax
may be allowed by the Board of Councillors.
Levy of Surcharge
Training Module on Audit of ULBs Session 6 20
Exemption of Central Government Property
• Lands and Buildings of the Union government shall
be exempted from the property tax.
– Provided that the Board of Councillors may levy a
service charge on the annual value of such buildings at
such rate as may be determined by the Central
Government from time to time.
Training Module on Audit of ULBs Session 6 21
Power to reduce rates
• The Board of Councillors may
– reduce levy of property tax on any holding, and
– such reduction or remission shall have effect for one
year.
Training Module on Audit of ULBs Session 6 22
Determination of Annual Valuation
• The annual value of a land or building shall
– be the gross annual rent including service charge, less
an allowance of 10% for the cost of repairs and other
expenses necessary to maintain such land or building.
Training Module on Audit of ULBs Session 6 23
Determination of Annual Valuation
• The annual value of a vacant land shall
– be an amount equal to, but may not exceed, 5% of
the estimated market value of such land at the time
of assessment.
Training Module on Audit of ULBs Session 6 24
Determination of Annual Valuation
• If the gross annual rent of any holding can not be easily estimated
– the annual value shall be an amount not less than 5% but not exceeding 10%, of the value of the holding
--by adding the estimated cost of erecting the building at the time of assessment less an amount to be deducted on account of depreciation to the estimated present market value of the holding.
Training Module on Audit of ULBs Session 6 25
• The annual value as determined shall be
– rounded off to the nearest ten rupees.
Determination of Annual Valuation
Training Module on Audit of ULBs Session 6 26
Periodic Assessment
• The annual value of a land or building, which
has been determined before, shall
– remain in force until a fresh valuation list is
enforced.
Training Module on Audit of ULBs Session 6 27
Periodic Assessment
• The Chairman-in-Council shall
– review valuation of all holdings at periodic intervals,
and
– ensure that there is a revision of annual valuation of all
holdings at the termination of successive period of six
years.
Training Module on Audit of ULBs Session 6 28
Collection of Taxes
• The Executive Officer, or
• the Finance Officer, or
• the Secretary, or
• the Tax Collector,
– shall collect the taxes.
Training Module on Audit of ULBs Session 6 29
Collection of Taxes
• Chairman-in-Council may divide the
municipality into collecting circles as decided.
• Each circle shall be numbered and a Collecting
Sarkar shall be appointed for each circle.
Training Module on Audit of ULBs Session 6 30
• Whenever property tax, surcharge, rents or other
dues are not received in the municipal office the
Chairman-in-Council shall arrange
– for the verification of the receipts granted to the tax
payers with the duplicate copies filed in the office, and
– for the enquiry in all the cases in which taxes have
been outstanding.
Collection of Taxes
Training Module on Audit of ULBs Session 6 31
Assessment Register and Demand & Collection Register
• Separate Assessment Register and Demand &
Collection Register for each circle shall be
maintained.
• Assessment Register shall be maintained in the
prescribed form and there should be separate
volume for each collecting circle.
Training Module on Audit of ULBs Session 6 32
Assessment Register and Demand & Collection Register
• All charges shall be entered in an Assessment
Register from which the Demand & Collection
Register shall be posted.
• The bills shall be prepared from the Demand &
Collection Register.
• The details of the totals on completion shall be
compared with the entries in Assessment Register
for the quarter.
Training Module on Audit of ULBs Session 6 33
Maintenance of Assessment and collection of records
• The Assessor shall
– keep the Assessment Register, and
• the Collection Department shall deal with
collections, remission etc. and
• post them in the Demand & Collection Register.
Training Module on Audit of ULBs Session 6 34
Maintenance of Assessment and collection of records
• The Collecting Sarkar shall not be allowed to
have access to the Assessment Register and
Demand & Collection Register.
• The Finance Officer or in his absence an officer
authorized by Chairman shall in every case check
the remission.
Training Module on Audit of ULBs Session 6 35
Verification as to correctness of quarterly demand
• The annual value and quarterly demands showed
in the Assessment Register and abstract of
demand and collection shall be
– totalled at least a month before the beginning of the
first quarter of the year.
Training Module on Audit of ULBs Session 6 36
Verification as to correctness of quarterly demand
• When the total has been struck, the executive
officer or any other officer authorized by
Chairman shall
– carefully check the entries and
– sign the register.
Training Module on Audit of ULBs Session 6 37
Verification as to correctness of quarterly demand
• The Assessor shall be responsible for seeing that
– it is correctly prepared and
– all alterations made therein are attested by the proper
authority.
Training Module on Audit of ULBs Session 6 38
Verification as to correctness of quarterly demand
• The Executive Officer or any such officer
authorised by Chairman shall check that
– the Assessment Register and Demand & Collection
Register are free from erasing;
– no alterations are made in then except under the
initials of the Executive Officer or any officer
authorised in this behalf.
Training Module on Audit of ULBs Session 6 39
Receipt Forms
• When the tax is paid,
– the Tax Collector or the Collecting Sarkar shall
grant a receipt in prescribed form.
• The tax receipt form shall be
– numbered consecutively for the year and
– bound up in books of 100 duplicate forms each.
Training Module on Audit of ULBs Session 6 40
• All the unused tax receipts forms/books shall be
– kept under personal custody of the Chairman or
– any Council member nominated by the Chairman in
this behalf.
• A register of the Tax Receipts forms/books shall
be maintained by the Chairman-in-Council.
Receipt Forms
Training Module on Audit of ULBs Session 6 41
Register of Daily Collection of Taxes
• The Collecting Sarkar shall maintain
– a register of daily collection with counterfoils in both
ends, and
– a separate Challan Book for cash collections and
collection by cheques.
• The particulars in the counter foils shall also be
furnished by him.
Training Module on Audit of ULBs Session 6 42
• The Tax Collector shall
– maintain a Hand Book showing the monthly circle-wise
collection position.
– prepare annual statement of month-wise collection
position of all the circles from the challans, registers.
Register of Daily Collection of Taxes
Training Module on Audit of ULBs Session 6 43
Collection of Taxes
• As soon as the Tax is paid the collector shall
– fill in the printed receipt and
– make over the original receipt to the tax-payer and
– simultaneously note the fact with date in the duplicate
of the bill.
Training Module on Audit of ULBs Session 6 44
Collection of Taxes
• The Collecting Sarkar shall deliver to the cashier
– all the moneys he has collected together with the
Daily Collection Register and
– the Receipt Book in his possession after all the
entries are verified by the Tax Collector.
Training Module on Audit of ULBs Session 6 45
Collection of Taxes
• The Tax Collector shall check the account
– by comparing the credits with the duplicate of
receipts.
• After completion of necessary checks by the
Cashier, the Collecting Sarkar then
– handover the Challan to the tax collector for
necessary posting in the Demand and Collection
Register
Training Module on Audit of ULBs Session 6 46
Collection of Taxes
• The Accountant shall
– verify total collections of any month as per his Cash
Book
– with the cumulative total of collections as worked
out by the Collecting Sarkar by the Challans for the
last working day of the month, and
– put his signature accordingly.
• Any discrepancy shall be reconciled
immediately.
Training Module on Audit of ULBs Session 6 47
Collection of Taxes
• Every item of collection, remission or rebate shall
– be posted daily in the demand and collection register
from
the Collecting Sarkar’s daily collection,
Challans or
from the other relevant documents.
• Collecting Sarkar is not allowed to have access to
the Demand and Collection Register.
Training Module on Audit of ULBs Session 6 48
Miscellaneous Revenue
• When the collection of revenue is leased for fixed amount the recovery shall be watched through Demand and Collection Register.
• Few such sources are– Market Rent,
– Ferry Rent,
– Fishery Rent,
– Holiday-home Rent,
– Town-hall Rent etc.
Training Module on Audit of ULBs Session 6 49
Miscellaneous Revenue
•A separate page or sets of pages of the register
shall be set apart for each of the above kinds of
revenue for which there is fixed monthly,
quarterly, half-yearly or annual demand.
Training Module on Audit of ULBs Session 6 50
Miscellaneous Revenue
• The Accountant shall fill up the current year’s
register in respect of the arrear demands from
the previous register and lay before the
executive officer for his initials.
Training Module on Audit of ULBs Session 6 51
Miscellaneous Revenue
• Payments made in satisfaction of the demand
shall be posted by the Accountant from
– the daily collection,
– Challan or
– the Cashier’s Cash Book
Training Module on Audit of ULBs Session 6 52
Miscellaneous Revenue
•When collection of revenue is managed
departmentally instead of being leased out to
lessees, it shall be collected by means of
bilingual tickets in prescribed form.
Training Module on Audit of ULBs Session 6 53
Miscellaneous Revenue
•The tickets shall be obtained by the Board of
Councillors from some press outside the
municipality and shall be of different colours for
different values.
•Before issue to the collecting staff, the tickets
shall be stamped with the seal of the Board of
Councillors.
Training Module on Audit of ULBs Session 6 54
Miscellaneous Revenue
•The stock account of their receipts, issues and
balance shall be
–kept by the Head Clerk in prescribed form and
•the tax collector shall give his receipt in the
proper column for tickets made over to him
periodically.
Training Module on Audit of ULBs Session 6 55
Miscellaneous Revenue
•The number of tickets issued to the Sarkar by
the Tax Collector shall be
– counted and entered by him in the Sarkar’s Debit
and Credit Account of tickets.
Training Module on Audit of ULBs Session 6 56
Miscellaneous Revenue
• The Accountant shall
– check this account when verifying the Cash Book
and
• the Executive Officer shall check it fortnightly
like other subsidiary registers.
Training Module on Audit of ULBs Session 6 57
Miscellaneous Revenue
• At the end of the day the Sarkar shall bring his collection money and the balance of tickets in hand to the Municipal Office and make them over to the Cashier;
• Cashier shall check the cash and the balance of tickets in hand with the Sarkar’s Debit and Credit Account of Tickets.
Training Module on Audit of ULBs Session 6 58
Miscellaneous Demands
• Miscellaneous Demands Register shall be
maintained and the entries in the respective
columns of the register should be posted after
the bills are signed and payments are made.
• The money shall then be credited into the
Cashier’s Cash Book.
Training Module on Audit of ULBs Session 6 59
Accounting system for property and other taxes
• Now we will discuss
– the recommended accounting system for Property
and Other Taxes related transactions
• as prescribed by Ministry of Urban
Development, Government of India in National
Municipal Accounts Manual.
Training Module on Audit of ULBs Session 6 60
Procedure of accounting of records
Tax Bill
•A Summary Statement of Bills raised shall be
prepared ward-wise and tax-head-wise, in
prescribed form on monthly basis within 7 days
from the end of the previous month.
Training Module on Audit of ULBs Session 6 61
Procedure of accounting of records• The postings in the Ledger Account of
“Receivables for Property Tax” Account and Revenue accounts shall be carried out as per ‘General Accounting Procedures’.
• The postings in the Ledger Accounts shall be similarly carried out in respect of all other accounting entries.
• Whenever, the cash or the bank account is involved, there will be no entry in the Journal Book.
Training Module on Audit of ULBs Session 6 62
Procedure of accounting of records
• It is a normal practice for the ULB to include
the arrears of the tax dues while issuing the
fresh demand.• Entries in respect of the arrears would have
already been recorded in the earlier years..
Training Module on Audit of ULBs Session 6 63
Procedure of accounting of records
• Cesses/Levies collected on behalf of State
Government together with property tax demand
shall be reckoned and credited to control
account, “State Govt. Cesses / levies in Property
Taxes - Control account”.• However the liability to the State Government
arises only upon collection. • The treatment of this is discussed subsequently.
Training Module on Audit of ULBs Session 6 64
Procedure of accounting of records
• In case of new assessments, demand may be
raised for a period earlier to the financial year
in which the assessment is made.
• In such case the demand should be split
– according to the period to which it relates and
– income related to earlier period be accounted as
Prior period Income.
Training Module on Audit of ULBs Session 6 65
Procedure of accounting of records
• Any demand raised earlier may undergo changes
by court order / by the order of Commissioner /
by any other competent authority.
• This may either lead to increase or decrease in
demand amount.
Training Module on Audit of ULBs Session 6 66
Procedure of accounting of records
• A summary statement of all changes in Demand
Raised shall be prepared
• in prescribed Form on monthly basis within 7
days from the end of the previous month.
• This forms the base for accounting.
Training Module on Audit of ULBs Session 6 67
Procedure of accounting of records
• In case the revised demand is more than what
was recorded earlier, then, the entry to be
passed is same as accounting of existing
demand.
• In case the revised demand is less than what
was recorded earlier, the entry passed earlier
has to be reversed for the difference.
Training Module on Audit of ULBs Session 6 68
Procedure of accounting of records
• The reversal shall be reflected in the current
year revenue in case the revision in demand
relates to the current year;
• In any other case the reversal shall be accounted
as prior period expenses.
• The remission / refund amount shall be adjusted
against Receivables if the demand is
outstanding.
Training Module on Audit of ULBs Session 6 69
Procedure of accounting of records
• If the demand is already paid
– it will either be taken as credit and adjusted against
future payments or
– will be paid to the tax payee as refund depending on
the governing principle of the ULB.
Training Module on Audit of ULBs Session 6 70
• The amount of refunds/remissions shall be
credited to the account ‘Advance Collection
of Revenues’ with proper account code when
it is to be adjusted against future payments.
• If it is to be refunded then it shall be credited
to the Refunds payable account.
Procedure of accounting of records
Training Module on Audit of ULBs Session 6 71
Collection of Taxes• Based on Summary of Daily Collection
received from the various Collecting Offices / Centres, the Accounts Department shall pass the following entry:
Code of Account
Accounting EntryDr./ Cr.
Debit Amt. (Rs.) Illustrative figures
Credit Amt. (Rs.) Illustrative figures
Books to be entered into
450-21-(a)431-80-(a)
Bank Account* To Receivables Control Accounts- Property Taxes
Dr.Cr.
5,10,0005,10,000
Cash Book, Ledger
* name of the Bank and account number(a) Insert Detailed Head Codes of Account as applicable
Training Module on Audit of ULBs Session 6 72
Collection of Taxes
• The total amount collected should be credited
to “Receivables Control Accounts - Property
Taxes” Account.
• The collection made shall be segregated into
year wise, head wise collection on a monthly
basis.
Training Module on Audit of ULBs Session 6 73
Collection of Taxes
• A Summary Statement of Year-wise/ Head-
wise Collection of Property & Other Taxes in
prescribed form on a monthly basis shall
– be prepared and sent to the Accounts Department
to record the details of collection.
• Interest shall be recognised as income only on
collection.
Training Module on Audit of ULBs Session 6 74
Collection of Taxes• To record the break-up of collections into
year-wise recovery, tax received in advance and to record the interest income the Accounts Department shall pass the following entry:
Code of Account
Accounting EntryDr./ Cr.
Debit Amt. (Rs.) Illustrative figures
Credit Amt. (Rs.)Illustrative figures
Books to be entered into
431-80-(a)431-10-(a)431-10-(a)350-41-(a)171-80-(a)140-20-(a)
Receivables Control Accounts -Property Taxes To Receivables for Property Taxes (Yr.) To Receivables for Property Taxes (Yr.) To Advance Collection of Revenues –Property Taxes* To Other Interests – Receivables To Penalties and Fines
Dr.
Cr.Cr.Cr.
Cr.Cr.
5,10,000
4,40,00055,00011,000
1,0003,000
Journal Book, Ledger
(a) Detailed Head Codes of Account as applicable
Training Module on Audit of ULBs Session 6 75
Transfer of amount outstanding in respect of arrears from specific year account to general account
• The arrears of Property and Other Taxes shall be carried forward year-wise, up to five years.
• On completion of the 5th year, the amount outstanding in the specific year-wise receivable account shall be transferred to a general arrears account.
• An example is given in next slide.
Training Module on Audit of ULBs Session 6 76
Transfer of amount outstanding in respect of arrears from specific year account to general account - an example
• the tax receivable in respect of the demand raised during the accounting year 1998-99 shall be carried forward in “Receivables for Property Taxes (1999)” Account up to the year ending March 31, 2004.
• On March 31, 2004, the balance outstanding in this account shall be transferred to “Receivables for Property Taxes (Others)” Account.
Training Module on Audit of ULBs Session 6 77
Internal controls on property & other taxes
• The Tax Department shall ensure
– Bills / Demands are raised on a quarterly/half
yearly basis for Property and Other Taxes.
Training Module on Audit of ULBs Session 6 78
Internal controls on property & other taxes
• The Head of the Accounts Department shall
ensure that
– taxes are accrued in the month in which it is due
and
– journalisation of all the demands/bills raised for
property & other taxes before accounting for the
collection.
Training Module on Audit of ULBs Session 6 79
Internal controls on property & other taxes
• The Hd. of the Accounts Deptt. and the Hd. of
the Tax Deptt. shall reconcile
– the balance at the beginning of the accounting year
in respect of the year-wise Property and Other Tax
Receivables (as appearing in the Balance Sheet of
the previous year)
– with the year-wise total of the arrears recorded in
the Demand Register.
Training Module on Audit of ULBs Session 6 80
CESS
• Cess is
– the tax levied along with any other tax or
– in lieu of tax and is considered income of the ULB
– normally collected by self-declaration made in the
returns filed under the relevant provisions..
Training Module on Audit of ULBs Session 6 81
CESS
• Every person (individual/entity) who is liable
to pay Cess
– gets registered with the Cess Department.
• The registered individual/entity voluntarily
assesses
– their Cess liability and pays the same to the ULB
at specified periodic intervals.
Training Module on Audit of ULBs Session 6 82
CESS
• The Cess Deptt. undertakes an assessment of
the returns filed to determine the actual Cess
liability.
• Additional demand is raised for Cess, interest
and penalties if the Cess paid voluntarily is
less than the assessed Cess liability.
• In case the Cess paid is more than the assessed
Cess liability, the excess Cess collected is
refunded.
Training Module on Audit of ULBs Session 6 83
CESS
• In addition to Cess, following may be collected
by the Cess Department:
– Cess Registration Fee at the prescribed rates from
the dealers applying for registration.
– Penalties and/or interest in the event of evasion
and for delays and defaults made by the dealers.
Training Module on Audit of ULBs Session 6 84
Cess Collection on Registration and filing of returns • Based on Summary of Daily Collection in
prescribed form received from the various Collecting Offices / Centres, the Accounts Deptt. shall pass the following entry:
Code of Account
Accounting EntryDr./ Cr.
Debit Amt. (Rs.)
Illustrative figures
Credit Amt. (Rs.)
Illustrative figures
Books to be entered into
450-21-(a)110-52-(a)
Bank Account* To Cess –Gross Income
Dr.Cr.
9,00,0009,00,000
Cash Book, Ledger
*name of the Bank and Account number(a) Insert Detailed Head Codes of Account as applicable
Training Module on Audit of ULBs Session 6 85
Cess Collection on Registration and filing of returns
• The summary of daily collections does not
provide
– the details in respect of the year-wise head-wise
collections made in respect of Cess.
• Hence, the total amount collected should be
credited to “Gross Cess Income” Account;
Training Module on Audit of ULBs Session 6 86
Cess Collection on Registration and filing of returns
• The Cess deptt. updates
– the Head wise & year wise collection register
maintained in prescribed form for collection based
on the collection statement received from
collection centres along with bills if any.
Training Module on Audit of ULBs Session 6 87
Cess Collection on Registration and filing of returns
• A Summary Statement of Year-wise/ Head-
wise Collection of Cess in prescribed form
shall be prepared on a monthly basis and sent
to the Accounts Department to record the
details of collection.
Training Module on Audit of ULBs Session 6 88
Cess Collection on Registration and filing of returns
• To record the head-wise break-up of the
collections made and to record cess received
in advance
– the Accounts Deptt. shall pass the entry shown in
the next slide
Training Module on Audit of ULBs Session 6 89
Cess Collection on Registration and filing of returns
Code of Account
Accounting EntryDr./ Cr.
Debit Amt. (Rs.) Illustrative
figures
Credit Amt. (Rs.) Illustrative
figures
Books to be entered into
110-52-(a)140-10-(a)110-52-(a)350-41-(a)
Cess - Gross Income To Empanelment Registration Charges – Cess To Cess - Net Income To Advance Collection of Revenues- Cess*
Dr.Cr.
Cr.Cr.
9,00,00045,000
8,50,0005,000
Journal Book, Ledger
(a) Detailed Head Codes of Account
Training Module on Audit of ULBs Session 6 90
Write-offs
• In case of write-off of any Cess Income dues
– the details of the write off has to be entered in the
‘Statement of Write off’ by the respective deptt. in
prescribed form;
• This form has to be prepared on a monthly basis and
forwarded to the Accounts Deptt. and based on which,
the write off shall be adjusted against the provision
made.
Training Module on Audit of ULBs Session 6 91
Transfer of amount outstanding in respect of arrears from specific year account to general account
• The arrears of Cess shall be carried forward
year-wise, i.e., in “Receivables of Cess Income
(Yr.)” Account up to 3 years.
Training Module on Audit of ULBs Session 6 92
Transfer of amount outstanding in respect of arrears from specific year account to general account
• On completion of the 3rd year
– the amount outstanding in the specific year-wise
receivable account shall be transferred to a general
arrears account, i.e. “Receivables of Cess Income
(Others)” Account.
• An example is given in next slide:
Training Module on Audit of ULBs Session 6 93
• The cess receivable in respect of the demand raised during the accounting year 2000-01 shall be carried forward in “Receivables of Cess Income (2001)” Account up to the year ending March 31, 2004.
• On March 31, 2004, the balance outstanding in this account shall be transferred to “Receivables of Cess Income (Others)” Account.
Transfer of amount outstanding in respect of arrears from specific year account to general account- An Example
Training Module on Audit of ULBs Session 6 94
Internal controls
• The Hd. of the Accounts Deptt. and the Hd. of
the Cess Deptt. shall reconcile
– the balance at the beginning of the accounting
year in respect of the year-wise Cess Receivable
(as appearing in the Balance Sheet of the previous
year)
– with the year-wise total of the arrears recorded by
the Cess Deptt.
Training Module on Audit of ULBs Session 6 95
Internal controls
• A quarterly reconciliation shall be carried out
by the Hd. of the Accounts Deptt. and the Hd.
of the Cess Deptt.
– in respect of the amount collected and the year-
wise amount outstanding between the balances
standing in the relevant Ledger Accounts
maintained in the Accounts Deptt., and
– the records/registers maintained in the Cess Deptt.
Training Module on Audit of ULBs Session 6 96
Internal controls
• The officers designated by the
municipality/corporation for operating the
Designated Cess Bank Account shall
– co-ordinate with the banks on a daily basis, and
– ascertain the status of the cheques/drafts deposited
by them.
Training Module on Audit of ULBs Session 6 97
Internal controls
• The Hd. of the Cess Deptt. Shall-
– annually co-ordinate with the department handling
the Shop and Establishment registrations
– ascertain that the dealers who have been granted
new registrations are liable to Cess have registered
with the Cess Department.
Training Module on Audit of ULBs Session 6 98
Internal controls
• The Cess Deptt. shall ensure that the Receipt /
Summary of Daily Collection prepared,
provides reference to the Cess Collection
Register;
• The Chief Executive Officer/Head of the
municipality/municipal corporation shall
specify such appropriate calendar of returns
/reports for monitoring.
Training Module on Audit of ULBs Session 6 99
Internal controls
• All Reconciliation Statements shall be certified
by the Head of the Accounts Department.
Training Module on Audit of ULBs Session 6 100
Presentation in the financial statements
• The various heads of account used for the
accounting of Cess related transactions shall be
reflected in the Financial Statements or
– in the Schedules attached to the Financial
Statements;
• All such Financial Statements and schedules
should be
– affixed with signature and seal of designated
authorities.
Training Module on Audit of ULBs Session 6 101
Presentation in the financial statements
• The provision against the outstanding Cess
Income receivable is to be
– disclosed under the major head ‘Accumulated
Provisions’ as a separate line item in the Balance
Sheet below ‘Sundry Debtors’.
Training Module on Audit of ULBs Session 6 102
Audit Points
• Could the auditor ensure that
– the levy, assessment and collection of taxes were
made as per prescribed rules and bye-laws?
– the Board of Councillors actually framed
regulations specifying the occasions for imposition
of levy, rate of levy and mode of collection?
– the arithmetical accuracy of the computation of the
Property Tax?
Training Module on Audit of ULBs Session 6 103
Audit Points
• Did the Board of Councillors impose any
charges for any specific services rendered in
pursuance of concerned Act?
• Did the State Government prescribe the scale
for levy of fees or imposition of charges?
Training Module on Audit of ULBs Session 6 104
Audit Points
• Was the Property Tax imposed on the annual
value of the lands and buildings?
• Was the computation of the Property Tax in
accordance with the prescribed norms?
Training Module on Audit of ULBs Session 6 105
Audit Points
• Was there any case where the Property Tax
imposed exceeded 40% of the annual value of
the lands and buildings?
• Was revision of the Property Tax made more
than once in five years?
Training Module on Audit of ULBs Session 6 106
Audit Points
• Was there any case
– of non-levy of surcharge on Property Tax in case
such holding was used wholly or in part for
commercial, industrial or such other non-
residential purposes?
– where the amount of surcharge was less than 20%
or more than 50% of the total amount of the
Property Tax?
Training Module on Audit of ULBs Session 6 107
Audit Points• Was the rebate allowed on holdings used
exclusively for residential purposes exceeded
20% of the Property Tax?
• Did the Board of Councillors levy a service
charge on the buildings owned by the Central
Government?
• Was there any case where reduction or remission
of Property Tax was allowed more than once in a
year?
Training Module on Audit of ULBs Session 6 108
Audit Points
• Could the auditor ensure that the valuation of
all municipal holdings was reviewed at the
termination of each successive period of six
years?
• Was the duty for collection of taxes performed
by the authorized personnel under the written
order of the Chairman?
Training Module on Audit of ULBs Session 6 109
Audit Points
• Were separate Assessment Register and
Demand and Collection Register maintained
for each circle in the prescribed form?
• Were the details of the totals on completion
compared with the entries in the Assessment
Register for a quarter?
Training Module on Audit of ULBs Session 6 110
Audit Points
• Was the Collecting Sarkar ever allowed access
to the Assessment Register and Demand and
Collection Register?
• Were the columns showing the annual value
and quarterly demands in the Assessment
Register and abstract of demand and collection
totalled at least once in a month?
Training Module on Audit of ULBs Session 6 111
Audit Points
• Did the Executive Officer or any other officer
authorized by the Chairman/Mayor carefully
check the entries after the total had been struck
and sign the register in token of having made
the check?
• Could the auditor ensure that all the alterations
made in the Assessment Register were attested
by the appropriate authority?
Training Module on Audit of ULBs Session 6 112
Audit Points
• Could the auditor ensure that all the unused tax
receipt forms/books were kept under the
personal custody of the Chairman/mayor or a
member of the Council nominated by the
Chairman/Mayor?
• Was the Register of the Tax Receipt
forms/books maintained by the
Chairman/Mayor-in-Council?
Training Module on Audit of ULBs Session 6 113
Audit Points
• Did the Tax Collector maintain a Hand Book
showing therein the circle-wise collection
position of each month?
• Could the auditor reconcile the position shown
in the annual statement of month-wise
collection with the position shown in the Hand
Book?
Training Module on Audit of ULBs Session 6 114
Audit Points
• Could the auditor ensure (on a detailed check
of the position for a fixed period) that
– the Collecting Sarkar delivered every day to the
Cashier all the moneys collected together with the
Daily Collection Register and the Receipt Book
and the same was properly verified?
Training Module on Audit of ULBs Session 6 115
Audit Points
• Could the auditor trace the postings of the
Daily Collection register from those of the
Cash Book and the counterfoil of the Challan?
• Did the Tax Collector make necessary
postings in the Demand and Collection
Register from the Challan handed over to him
by the Collecting Sarkar?
Training Module on Audit of ULBs Session 6 116
Audit Points
• Was the Collecting Sarkar given access to the
Demand and Collection Register? If so, the
same should be pointed out.
• Did the Accountant verify total collections of
every month as per his Cash Book with the
cumulative total of collections as worked out
by the Collecting Sarkar and put his signature
accordingly?
Training Module on Audit of ULBs Session 6 117
Audit Points
• Did the municipality/corporation take steps to
follow the National Accounting System as
recommended by the Ministry of Urban
Development, Government of India?
• If not, the reasons therefore should be analysed
and audit observations furnished.
Training Module on Audit of ULBs Session 6 118
Audit Points
• Could the auditor ensure that
– in case of a demand (new assessment) raised for a
period earlier to the financial year in which
assessment is made,
– the demand was split in the Accounts Office
according to the period to which it related to
earlier period and the same was accounted as
“Prior Period Income”?
The End