The Finance Ministry intends to intensify its strategy for service tax mop up, as the collections were below the desired levels.

While Finance Minister P. Chidambaram will meet industry associations on Service Tax Voluntary Compliance Encouragement Scheme next month, the Service Tax Department is in the process of dispatching letters to nearly 10 lakh non- filers/those who have stopped filing service tax returns. The Ministry is also in the process of simplifying the settlement process.

This exercise is taking place at a time when there is a threat of the fiscal deficit exceeding the Budget target of 4.8 per cent. Services (excluding constructions) account for nearly 57 per cent of the gross domestic product.

The Budget has set a target of Rs 1.80 lakh crore for the current fiscal, which requires a growth of 36 per cent. However, in the first six months (April-September) of the current fiscal, service tax collection grew by only 16 per cent to touch Rs 59,000 crore. This tax constitutes nearly 14 per cent of the total tax collection and 32 per cent of the indirect tax (Custom duty, Excise duty and Service tax) collection.

Talking about voluntary scheme, a senior Finance Ministry official said that till date, it has got nearly 5,000 applications with tax payments of little over Rs 1,000 crore. The scheme has been operational since May 10 and will continue till December 31.

The scheme offers ‘no penalty, no interest’ and provides a one-time opportunity to defaulters to come clean. Under it, defaulters have to pay at least 50 per cent of arrears for the five-year period ending 2012 and the balance in another six months without interest.

Now with just two months left in the scheme, the Finance Minister, himself, will steer the scheme by speaking to industry bodies and other associations, the official added. He also said that usually people join the scheme in the last few days, as no interest can be earned by depositing arrears early, while it can fetch some interest if it remains in the bank.

On non/stop filers of service tax returns, the official said a common format of letter has been approved and sent to various units of the department. Now, local commissionerate will dispatch reminding them about the scheme and asking to deposit the dues immediately.

Earlier on August 8, the Finance Minister had said that about 10 lakh non-filers or stop filers of service tax are in a way defaulters and they are liable to punishment. The Government in the Service Tax Act has already provided for monetary penalty and punishment. Those who have collected service tax in excess of Rs 50 lakh and not deposited to Government face punishment of imprisonment up to seven years.

Three arrests have already made in this regard.

> shishir.s@thehindu.co.in

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