Despite the introduction of the negative list of services, with effect from July 1, 2012, the Government could not achieve the expected growth in service tax collection. One of the reasons could be non-compliance by taxpayers. Finance Minister P. Chidambaram, in his budget speech, has indicated that of 17 lakh registered assessees only 7 lakh file returns.
To encourage taxpayers to come forward and comply with the service tax provisions, the Government has introduced the one-time amnesty scheme — Service Tax Voluntary Compliance Encouragement Scheme 2013, effective from the date of enactment of Finance Bill 2013.
The scheme grants immunity from payment of interest, penalty and any other proceeding, including prosecution, if the service tax dues are paid within the prescribed time frame.
The scheme applies to all assessees who have defaulted in payment of service tax on output services, including liability under reverse charge. It also applies to those who have collected the service tax from the service recipient but have not remitted it to the Government exchequer. The period covered under the above scheme is from October 1, 2007 to December 31, 2012. This scheme will not apply where:
a show cause notice or a demand order has been issued before March 1, 2013;
an admitted non-payment of service tax in the filed service tax return;
where a show cause notice or a demand order has been issued in respect of any period on any issue, the tax dues on the same issue for the subsequent months;
and if an inquiry, audit or investigation for non-payment of service tax has been initiated and is pending as on March 1, 2013.
The declarant may use this scheme on condition that he/ she files a truthful declaration of service tax dues on or before December 31, 2013, and makes the payment in the following manner: The declarant has to pay minimum 50 per cent of the tax dues along with the above declaration, and balance by June 30, 2014. If the declarant fails to pay the balance amount by June 30, 2014, he/ she has the option to pay by December 31, 2014 along with interest at 18 per cent from July 1, 2014 till the date of payment.
If the declaration submitted is substantially false, the Government would initiate recovery proceeding along with interest and penalty. The form and manner of the declaration would be prescribed once the scheme is enacted.
The scheme is a welcome move by the Finance Minister to increase the tax base and thereby increase the service tax collection. This is also a window for the assessees to come clean by remitting the service tax dues without paying interest and penalty.
Shailendra Sukhlecha, Senior Manager, PwC India, contributed to this article.
The author is Executive Director, Indirect Tax, PwC India