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Service tax voluntary compliance encouragement scheme, 2013


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Service tax voluntary compliance encouragement scheme, 2013

  1. 1. Report on Service Tax Voluntary Compliance Encouragement Scheme, 2013 Prepared By: Anannd Kankni +91-9707056733 For Budding Professionals Pvt. Ltd. Page 1
  2. 2. INTRODUCTION “While there are nearly 17, 00,000 registered assessees under service tax, only about 7, 00,000 file returns. Many have simply stopped filing returns. We cannot go after each of them. I have to motivate them to file returns and pay the tax dues. Hence, I propose to introduce a one-time scheme called „Voluntary Compliance Encouragement Scheme‟. A defaulter may avail of the scheme on condition that he files a truthful declaration of service tax dues since 1.10.2007 and makes the payment in one or two instalments before prescribed dates. In such a case, interest, penalty and other consequences will be waived. I hope to entice a large number of assessees to return to the tax fold. I also hope to collect a reasonable sum of money.” Extract from the Budget Speech 2013 - By P. Chidambaram (The Hon‟ble Finance Minister of India) For Budding Professionals Pvt. Ltd. Page 2
  3. 3. Service Tax Voluntary Compliance Encouragement Scheme - This scheme is a one time amnesty for those assesses who have collected the amount with respect to service tax but have not yet deposited with the Government. - Service Providers that have not filed service tax returns since October 2007 can disclose their true liability and get an interest or penalty waive off. - This scheme immunes the tax defaulters from all kinds of interest, penalty & all 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 instalments within the time-limits specified. - Through this scheme FinMin (CBEC) intended to provide defaulters an opportunity to rectify all the defaults made by them such as: i. Non payment of Service Tax Liability ii. Short payment of Service Tax Liability iii. Non filing of Service tax returns iv. Default in registering under Service Tax Law. - The period covered under the scheme is from “October 1st, 2007 to December 31st, 2012”. - The following persons are eligible for availing the benefits under this scheme :i. Assessees who have made default in filing the Service Tax Return ii. Non Registrants iii. Assessees who have not disclosed true liability in the returns filed during the period of scheme. - The key benefits of the scheme to Assessees are as follows:i. The interest liability for the delayed of tax will be waived off. ii. The penalty charges for the non payment of tax will be waived off. iii. Absolute immunity against initiation of proceedings including prosecution. - The following are the pre-conditions & procedures of the Scheme : i. Any amount of tax remaining unpaid pertaining to January 2013 or subsequent periods shall not be eligible under this scheme. ii. Amount of tax paid under this scheme shall not be refundable under any circumstances. iii. If the amount of tax dues declared is not paid within the prescribed time limit, the same shall be recovered in accordance with the provisions of service tax laws. iv. The assessee is required to deposit at least 50% of the declared dues by December 31st, 2013 and the balance portion by June 30th, 2014 (WITHOUT ANY INTEREST). v. However in case where the assessee fails to pay such declared dues or part thereof on or before the due date, he shall pay the same on or before December For Budding Professionals Pvt. Ltd. Page 3
  4. 4. vi. vii. viii. ix. x. xi. xii. xiii. xiv. xv. xvi. xvii. - 31st, 2014 along with interest as prescribed under section 75 of the Finance Act, 1994, which will be calculated from July 1st, 2014 till the date of payment. Tax dues under the scheme need to be paid in cash as per the rules and No CENVAT credit can be utilized for such payment. Declaration to be filed in Form VCES – 1 with the appropriate authority on or before 31st December, 2013. Declaration should be accompanied by a sheet showing calculation of the amount declared as due. It is mandatory to furnish a separate calculation sheet for each category of service.  E.g. an assessee wishes to pay dues under the category Advertising agency services and Credit rating agency service, then the assessee will be required to furnish separate sheets showing the calculation from each category of services.  The calculation sheets are to be furnished half-yearly. E.g. Assessee furnishing declaration for the period 1 October 2007 to 30 September 2008. Therefore, assessee must furnish two calculation sheets, one for the period 1 October 2007 to 31 March 2008, and another for the period 1 April 2008 to 30 September 2008. The calculation sheets are to be in the format of the service tax return that was prescribed during the period to which the calculation sheet pertains to. Upon receipt of the declaration in form VCES – 1, the appropriate authority shall issue an acknowledgement in form VCES – 2, within seven working days In order to claim amnesty under the scheme, Assessee is required to furnish proof of payment periodically along with copy of acknowledgement (Form VCES – 2). Upon furnishing of details of payment of dues in full, the appropriate authority to issue an Acknowledgement of Discharge in Form VCES – 3 within seven working days. A person who wishes to make a declaration, but is not registered under service tax laws, must obtain registration first and then file declaration. Upon receipt of Form VCES – 3, no proceedings can be initiated thereafter in respect of the period of declaration. If amount declared as due in Form VCES – 1 remains due as on 1 January 2015, the same shall be recovered as per section 87 of Finance Act, 1994. Commissioner of Central Excise may serve notice on the declarant if he has reasons to believe that the declaration made by the declarant is substantially false. The presidential assent was received on 10 May 2013. For Budding Professionals Pvt. Ltd. Page 4
  5. 5. Recent Update: Clarification on Service Tax Voluntary Complaince Encouragement Scheme. Circular No. 169/4 /2013 – ST, New Delhi, dated the 13th May, 2013 Issue No. 1: Whether a person who has not obtained service tax registration so far can make a declaration under VCES? Clarification: Any person who has tax dues to declare can make a declaration in terms of the provisions of VCES. If such person does not already have a service tax registration he will be required to take registration before making such declaration. Issue No. 2: Whether a declarant shall get immunity from payment of late fee/penalty for having not taken registration earlier or not filed the return or for delay in filing of return. Clarification: Yes. It has been provided in VCES that, beside interest and penalty, immunity would also be available from any other proceeding under the Finance Act, 1994 and Rules made thereunder. Issue No. 3: Whether an assessee to whom show cause notice or order of determination has been issued can file declaration in respect of tax dues which are not covered by such SCN or order of determination? Clarification: In terms of section 106 (1) of the Finance Act, 2013 and second proviso thereto, the tax dues in respect of which any show cause notice or order of determination under section 72, section 73 or section 73A has been issued or which pertains to the same issue for the subsequent period are excluded from the ambit of the Scheme. Any other tax dues could be declared under the Scheme subject to the other provisions of the Scheme. Issue No. 4: What is the scope of section 106 (2)(a)(iii)? Whether a communication from department seeking general information from the declarant would lead to invoking of section 106 (2) (a)(iii) for rejection of declaration under the said section? Clarification: Section 106 (2) (a)(iii) of the Finance Act, 2013 provides for rejection of declaration if such declaration is made by a person against whom an inquiry or investigation in respect of service tax not levied or not paid or short-levied or short paid, has been initiated by way of requiring production of accounts, documents or other evidence under the chapter or the rules made there under, and such inquiry or investigation is pending as on the 1st day of March, 2013. The relevant provisions, beside section 14 of the Central Excise Act as made applicable to service tax vide section 83 of the Finance Act,1994, under which accounts, documents or other evidences can be requisitioned by the Central Excise Officer for the purposes of inquiry or investigation, are as follows,i. Section 72 of the Act envisages requisition of documents and evidences by the Central Excise Officer if any person liable to pay service tax fails to furnish the return or having For Budding Professionals Pvt. Ltd. Page 5
  6. 6. ii. made a return fails to assess the tax in accordance with the provision of the Chapter or rules made there under. Rule 5A of the Service Tax Rules, 1994 prescribes for requisition of specified documents by an officer authorised by the Commissioner for the purposes specified therein. The provision of section 106 (2)(a)(iii) shall be attracted only in such cases where accounts, documents or other evidences are requisitioned by the authorised officer from the declarant under the authority of any of the above stated statutory provisions and the inquiry so initiated against the declarant is pending as on the 1st day of March, 2013. No other communication from the department would attract the provisions of section 106 (2)(a)(iii) and thus would not lead to rejection of the declaration. For Budding Professionals Pvt. Ltd. Page 6