The Comptroller & Auditor General (CAG) today said measures initiated by the Revenue Department to improve recovery of service tax arrears did not make any impact as collections fell drastically in 2013-14 as against the previous fiscal.

"It is a matter of concern that the collection as ratio of arrears during FY14 has fallen drastically to 3.12 per cent as compared to 11.40 per cent in FY13.

"There is a need to strengthen the recovery mechanism of the Department," the CAG report tabled in Parliament said today.

In 2013-14, service tax arrears realisation was Rs 1,232 crore, while the arrears were Rs 39,537 crore at commencement of the fiscal in April 2013.

While in 2012-13, the collection was Rs 2,322 crore or 11.4 per cent of the Rs 20,361 crore arrear at the beginning of the fiscal.

The report noted that indirect tax revenue as a per centage of gross domestic product (GDP) has increased from 3.79 per cent in 2009-10 to 4.41 per cent in 2013-14.

During the same period, service tax revenue as a per centage of GDP rose from 0.9 per cent to 1.36 per cent.

On service tax liability in insurance sector, the CAG report said "ambiguity" in a circular issued by the Central Board of Excise and Customs resulted in non-payment of service tax of Rs 252.4 crore.

Also, non-payment of service tax of Rs 7.05 crore under reverse charge on insurance auxiliary was noticed, the CAG said.

In a chapter on non-compliance with rules and regulations, the auditor observed instances of non-payment/short payment of service tax, incorrect availing/utilisation of CENVAT credit and non-payment of interest on delayed payments having financial implications of over Rs 128 crore.