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2013 Service Tax Amnesty Scheme!

Published on Tue, May 21,2013 | 09:55, Updated at Tue, May 21 at 12:13Source : 

By: Saloni Roy is Senior Director with Deloitte Touche Tohmatsu India Private Limited

Acknowledging fiscal deficit as a stumbling block to economic growth, the Finance Minister in the Union Budget 2013-2014, without changing the basic rate of service tax, proposed to encourage compliance of service tax through an amnesty scheme. The scheme is known as the Service tax Voluntary Compliance Encouragement Scheme (‘VCES’).

The Finance Minister in his budget speech had mentioned that though there are nearly 17 lakh registered assessees under the service tax laws, only about 7 lakh assessees file their service tax returns.

The Finance Bill has been enacted on May 10, 2013. Consequently, VCES has come into effect.

VCES grants immunity from interest, penalty and other proceedings under the Finance Act, 1994 provided a truthful declaration of the service tax dues are made and tax along with interest (if any) is paid in installments within the time-limits specified.

Tax payers/ assessees who have not filled return or stopped filling returns or who have not made a truthful declaration in their return for the period October 1, 2007 to December 31, 2012are eligible to apply under VCES. The scheme aims to provide one-time amnesty to such assessees.

To avail the benefits mentioned, an assessee is required to deposit at least 50% of the declared dues by December 31, 2013 and the remaining portion of tax dues by June 30, 2014 without any interest. Further, where the declarant fails to pay said tax dues or part thereof on or before the said date, he is required to pay the same on or before December 31, 2014 along with interest thereon, to be calculated from July 1, 2014.Any service tax which becomes due or payable for the month of January, 2013 and subsequent months shall be payable by an assessee with interest.

Further, benefits under the scheme are available to a:
• person to whom no notice or order of determination of tax dues has been raised or issued before March 1, 2013;
• person who has not disclosed his true service tax liability,
• person against whom, no inquiry or investigation in respect of a service tax not levied or not paid or short-levied or short-paid or no audit has been initiated, and such inquiry, investigation or audit is not pending as on March 1, 2013.

The limited scope of the scheme may not resolve the disputes pertaining to demand of service tax by the authorities that have been pending for long.

Subject to the limitations mentioned, all persons are entitled to participate in the scheme.

For instance, unregistered assessees who have tax dues are required to register under the service tax laws before making declaration under VCES.
It is pertinent to note here that though, as per the extant provisions of the service tax laws, non-registration would typically attract penalty, a  declarant who registers himself to benefit under VCES would however be granted immunityfrom penalty under the service tax laws.

Also, service tax assessees who have collected service tax but not deposited the same with the Government can opt to avail the benefit of VCES.

The service tax regime provides a mechanism for refund of service tax paid erroneously to the service tax authorities in certain situations. However, any amount paid in pursuance of a declaration made under this scheme is not refundable in any circumstance.

Service Tax Voluntary Compliance Encouragement Rules, 2013 governing the procedural framework in relation to VCES have also been introduced.

Tax dues under the VCES need to be paid in cash since as per the said rules, no CENVAT Credit can be utilized for such payment. 

Forms and manner of declaration, acknowledgement of such declaration along with issuing acknowledgement of discharge of tax dues have also been prescribed.

The scheme provides an excellent chance to those who may not have deposited their service tax dues in the past to come clean as it offers immunity from interest, penalty and prosecution.


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