THE journey of taxation on services began in July, 1994 by selective
taxation of three services. With consistent increase in tax rate and
widening of tax base by addition of new services under the tax net, the
once moderate collections of service tax are now one of the key
contributors to the Government's revenue
kitty.
Last year, a new system of taxation of services was introduced, popularly known as the Negative List. The new system was a paradigm shift from selective based taxation of services to taxation of all services except those covered under negative list or specifically exempted. This approach had augmented tax collections and further widened tax base. With this, provisions relating to prosecution were also introduced to bring tax-payers to comply with their statutory obligation.
However, inspite of rationalization of service tax law, the level of compliance by tax-payers have been found to be much below the desired level. The Finance Minister in his Budget Speech stated that out of 17 lakh registered tax-payers; only 7 lakh tax-payers file periodic tax returns.
In order to encourage voluntary compliance of filing of returns and payment of tax dues, a new one-time amnesty scheme termed as Voluntary Compliance Encouragement Scheme, 2013 (VCES) has been introduced as part of Finance Bill, 2013. The scheme shall become effective from the day the Finance Bill 2013 is enacted. Thereafter the other Rules in this regard prescribing the procedures to be followed would be notified. The scheme provides immunity from penalty, interest or any other proceedings on payment of tax dues based on truthful declaration of tax dues by the declarant.
Key features are:
+ Eligibility criterion for making valid declaration
The scheme can be availed by tax-payers who have not filed or have stopped filing their statutory periodic returns. The scheme is applicable for the service tax dues including cess leviable thereon, for the period beginning 1 October, 2007 and ending 31 December 2012 and not paid as on 1 March, 2013.
However, following tax-payers would not be eligible to make declaration under the scheme:
++ person who has been served notice or an order of determination before 1 March, 2013 in respect of his tax dues
++ person who has furnished periodic return, disclosed his true liability but has not paid service tax shall not be eligible to make declaration for the period covered under the return
++ person against whom an inquiry, investigation, search or audit proceedings is pending as on 1 March 2013.
++ person to whom summons have been issued
+ How to make a valid declaration
Declaration is required to be made to the `designated authority' in prescribed form on or before 31 December 2013.
The declarant would be required to pay at least half of tax dues before 31 December 2013 and remaining half is required to be paid as under:
++ on or before 30 June 2014 without payment of interest; or
++ on or before 31 December 2014 with payment of interest calculated from 1 July 2014
The declarant is required to furnish details of tax payment of declared tax dues to the designated authority. On furnishing the details of full payment of declared tax dues and interest, if any, the designated authority will issue an acknowledgement of discharge of tax dues to the declarant.
The tax dues paid in pursuance of declaration shall not be refundable under any circumstances.
+ Immunity from interest, penalty and proceedings
The declarant, upon payment of tax dues, will get immunity from penalty, interest or any other proceedings under service tax law. The declaration made shall become conclusive upon issuance of acknowledgement of discharge from authority and no matter shall be re-opened thereafter in any proceedings under service tax law before any authority or court of law for the period covered by such declaration.
However, the Commissioner of Central Excise is empowered to issue show cause notice where he has reasons to believe that the declaration made was substantially false.
Conclusion
The scheme is expected to bring in significant revenue for the government as well enabling the defaulter assesse to pay the arrears of service tax without payment of any interest and penalty.
By Prashant Deshpande
kitty.
Last year, a new system of taxation of services was introduced, popularly known as the Negative List. The new system was a paradigm shift from selective based taxation of services to taxation of all services except those covered under negative list or specifically exempted. This approach had augmented tax collections and further widened tax base. With this, provisions relating to prosecution were also introduced to bring tax-payers to comply with their statutory obligation.
However, inspite of rationalization of service tax law, the level of compliance by tax-payers have been found to be much below the desired level. The Finance Minister in his Budget Speech stated that out of 17 lakh registered tax-payers; only 7 lakh tax-payers file periodic tax returns.
In order to encourage voluntary compliance of filing of returns and payment of tax dues, a new one-time amnesty scheme termed as Voluntary Compliance Encouragement Scheme, 2013 (VCES) has been introduced as part of Finance Bill, 2013. The scheme shall become effective from the day the Finance Bill 2013 is enacted. Thereafter the other Rules in this regard prescribing the procedures to be followed would be notified. The scheme provides immunity from penalty, interest or any other proceedings on payment of tax dues based on truthful declaration of tax dues by the declarant.
Key features are:
+ Eligibility criterion for making valid declaration
The scheme can be availed by tax-payers who have not filed or have stopped filing their statutory periodic returns. The scheme is applicable for the service tax dues including cess leviable thereon, for the period beginning 1 October, 2007 and ending 31 December 2012 and not paid as on 1 March, 2013.
However, following tax-payers would not be eligible to make declaration under the scheme:
++ person who has been served notice or an order of determination before 1 March, 2013 in respect of his tax dues
++ person who has furnished periodic return, disclosed his true liability but has not paid service tax shall not be eligible to make declaration for the period covered under the return
++ person against whom an inquiry, investigation, search or audit proceedings is pending as on 1 March 2013.
++ person to whom summons have been issued
+ How to make a valid declaration
Declaration is required to be made to the `designated authority' in prescribed form on or before 31 December 2013.
The declarant would be required to pay at least half of tax dues before 31 December 2013 and remaining half is required to be paid as under:
++ on or before 30 June 2014 without payment of interest; or
++ on or before 31 December 2014 with payment of interest calculated from 1 July 2014
The declarant is required to furnish details of tax payment of declared tax dues to the designated authority. On furnishing the details of full payment of declared tax dues and interest, if any, the designated authority will issue an acknowledgement of discharge of tax dues to the declarant.
The tax dues paid in pursuance of declaration shall not be refundable under any circumstances.
+ Immunity from interest, penalty and proceedings
The declarant, upon payment of tax dues, will get immunity from penalty, interest or any other proceedings under service tax law. The declaration made shall become conclusive upon issuance of acknowledgement of discharge from authority and no matter shall be re-opened thereafter in any proceedings under service tax law before any authority or court of law for the period covered by such declaration.
However, the Commissioner of Central Excise is empowered to issue show cause notice where he has reasons to believe that the declaration made was substantially false.
Conclusion
The scheme is expected to bring in significant revenue for the government as well enabling the defaulter assesse to pay the arrears of service tax without payment of any interest and penalty.
By Prashant Deshpande
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