Service Tax Amnesty Scheme

The government has introduced a new Service Tax Amnesty Scheme with effect from the budget 2013. This is to grant an opportunity to defaulters of service tax to pay their service tax dues without having been paid the interest and penalty there to. Following is the compilation of such questions and their answers which have been raised regarding this scheme.

1. What is VCES?
VCES is a new amnesty scheme introduced vides Finance Bill, 2013 to encourage voluntary compliance by defaulter of Service Tax. The VCES is announced in order to self-motivate the defaulters to pay the service tax, not paid in the past.

2. Who are eligible to apply under VCES?
Tax payers/ assessees who have
* not filed return, or
* stopped filing return, or
* who have not made a truthful declaration in their return
are eligible to apply under VCES.
Further, any person may declare his tax dues, in respect of which no notice or an order of determination under section 72 or section 73 or section 73A of the Finance Act has been issued or made before the 1st day of March, 2013.

3. Who are ineligible to apply under VCES?
The following assessees are not eligible to opt for VCES in terms of Section 96 of the Finance Bill:
1. the person who has furnished return and disclosed the liability thereof but has not paid his dues of the service tax.
2. The person against whom,-
(a) an inquiry or investigation in respect of a service tax not levied or not paid or short-levied or short-paid has been initiated by way of -
(i) Search of premises under Section 82 of the Finance Act; or
(ii) Issuance of summons under Section 14 of the Central Excise Act, 1944, as made applicable to the Finance Act under Section 83 thereof; or
(iii) Requiring production of accounts, documents or other evidence under the Finance Act or the rules made thereunder; or
(b) An audit has been initiated,
And such inquiry, investigation or audit is pending as on the 1st day of March, 2013.

4. Whether a person who has not obtained service tax registration so far can make a declaration under VCES?
If such person does not already have a service tax registration he will be required to take registration before making such declaration. After taking registration he can make a declaration under this scheme.

5. 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.
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.

6. What do you mean by “Tax Dues”?
Tax dues means the service tax due or payable under the Finance Act or any other amount due or payable under Section 73A thereof, for the period beginning from the October 1, 2007 and ending on the December 31, 2012 including a cess leviable thereon under any other Act for the time being in force, but not paid as on March 1, 2013.

7. What is period for which assesses can avail relief under VCES?
The Assessees can avail benefit under VCES for all service tax including cess, not paid from October 1, 2007 to December 31, 2012.

8. What are the benefits under VCES?
Assessee who is making truthful declaration of the service tax dues which are still unpaid, would be granted immunity from interest, penalty and other proceeding in respect of such dues.

9. What are the conditions to be fulfilled to avail benefit under VCES?
The assessees has to deposit at least 50% of the declared dues by December 31, 2013 and the remaining portion of tax dues has to be paid by June 30, 2014 without any interest.
Where the declarant fails to pay said tax dues or part thereof on or before the said date, he shall pay the same on or before the December, 31, 2014 along with interest thereon, to be calculated from July 1, 2014 to the date of payment before 31^st December 2014.

10. Whether tax paid under VCES is refundable?
No, the tax paid under VCES is not refundable in any manner.

11. When the declaration made under VCES will be deemed as conclusive?
Declaration will attain finality/ become conclusive upon issuance of acknowledgment of discharge of total tax dues from designated authority.

12. What is the effective date for implementation of VCES?
The Scheme will come into force from the date of enactment of the Finance Bill.

13. Whether the tax dues after December 31, 2012 will be eligible for benefit under VCES?
No. Service tax liability effective from January 1, 2013 to be paid as normal service tax liability and this scheme is not applicable on any such dues arising after the date of January 1, 2013.

14. What is the last date for availing the scheme?
The assessee can file the declaration under this scheme only upto December 31, 2013.

15. What if the declarant fails to pay declared tax dues?
Where the assessee fails to pay the tax dues, either fully or in part, then said amount along with interest will be recovered as arrear of land revenue, which can be recovered by attaching the movable and immovable properties of the declarant.Also the immunity in terms of the VCES would be withdrawn.

16. What do you mean by “Designated Authority” ?
According to VCES “designated authority” means an officer not below the rank of Assistant Commissioner of Central Excise as notified by the Commissioner of Central Excise for the purposes of this Scheme.

17. What are the consequences if the declaration made under VCES is substantially incorrect?
As per VCES, if the declaration made under VCES is found substantially incorrect by the Commissioner of Central Excise, then show cause notice is to be served for recovery of tax dues not paid or short paid within a period of one year from the date of declaration.

18. 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?
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.

19. 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?
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 thereunder, 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 made a return fails to assess the tax in accordance with the provision of the Chapter or rules made thereunder.
(ii) 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.

20. For which period this scheme is applicable?
The scheme is applicable for a period ranging from 01- October -2007 to 31-December-2012.

21. Can Cenvat balances be utilized for the payment of service tax under this scheme ?No, the liability under this scheme has to be fully discharged in cash and Cenvat can’t be utilized for the payment of dues under this scheme.

Comments

chandra prakash on 21 December, 2013 wrote:

Assessee has provided service during April.2012 to March 2013 and apply for VCES. Now penalty for late filing of return for 2nd Half ( Oct.12 -March-13) period will be levied or not, as return for whole period will be filed togather ? Is assessee has to revised return for F.Y. 2012-13 for showing extra service ( for which he is going for VCES) or Is it manadatory to file return for tax payable/ service declared under VCES ? or what to do for this period service tax return for partly service previousaly declared & remaining services now showing under VCES ?
GYAN PRAKASH on 23 June, 2013 wrote:

very good information. one place full package

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Service Tax Amnesty Scheme

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