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.
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3. Service Tax Voluntary Compliance Encouragement Scheme
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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.
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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.
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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.
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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.
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The period covered under the scheme is from “October 1st, 2007 to December 31st, 2012”.
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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.
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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.
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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
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4. vi.
vii.
viii.
ix.
x.
xi.
xii.
xiii.
xiv.
xv.
xvi.
xvii.
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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.
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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
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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.
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