Amnesty Scheme - Settle your ST issues without any Cash Outflow

Amnesty Scheme - Settle your ST issues without any Cash Outflow


By Gajendra Maheshwari & Rajat Bose

ONE announcement in the Union Budget that is attracting interest of one and all is introduction of an amnesty scheme in service tax called "SERVICE TAX VOLUNTARY COMPLIANCE ENCOURAGEMENT SCHEME".

Under the scheme you can get a complete waiver or immunity from interest, penalty and prosecution with respect to the service tax liability declared under the scheme. Further, the matters declared under the scheme cannot be reopened later in any department or court proceedings.

In addition to the above immunities, you can also explore the following possibilities to save on the existing or future cash outflows with respect to the tax required to be deposited under the scheme:

1. Payment of tax declared through existing CENVAT credit balance: Under the scheme documents released currently, there is no bar to making payment of the tax declared by utilizing CENVAT balance. Therefore, you may utilize the CENVAT credit balance for making payment of the tax declared under the scheme instead of depositing the tax through cash.

2. Claiming of CENVAT credit for the amounts deposited: There is no bar to take CENVAT credit for the tax deposited under the scheme. For example, if you have not correctly deposited tax on import of services (under the reverse charge mechanism) then you should declare the same now and take CENVAT credit with respect to the amount deposited. The CENVAT so claimed may be utilized by you in future for discharging any service tax or excise duty liability.

3. Issuance of a supplementary invoice: Depending on the terms and conditions of the agreement with your client, you can explore the possibility of recovering the amount payable under the scheme from him by issuance of a supplementary invoice. If your client is a service provider or manufacture of goods, it may be possible for him to take CENVAT credit for the amount paid to you. This is for the reason that the tax deposited under the scheme cannot be treated to be recoverable on account of any fraud, evasion etc. This mechanism would not involve any additional cash outflow for both the parties - i.e. you and your client.

Although the above benefits would be subject to evaluation of other relevant factors such as eligibility to take CENVAT credit, agreement between the parties, provisions in the rules to be framed under the scheme etc., but the opportunity to get the contentious service tax matters resolved by without any additional cash outlay should be evaluated by you along with other benefits offered.