service tax voluntary compliance encouragement scheme 2013 cma rakesh bhalla nancybhalla@yahoo.com...

SERVICE TAX VOLUNTARY COMPLIANCE

ENCOURAGEMENT SCHEME 2013

CMA RAKESH BHALLA nancybhalla@yahoo.com 09779010685

CONTENTS

1. Introduction 2. Genesis of the

Scheme3. Broad features4. Eligibility Criteria5. Manner of

declaration6. Validity of

declaration7. Payment of Dues8. Failure to pay dues 9. Acknowledging the

dues10.Advantages11. Alerts for tax payers12. Silent scheme13. Any questions?

INTRODUCTION

TAXING ENTRIES

1995 1998 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

-40

-20

0

20

40

60

80

100

120

140

4

24

49

58

71

80

95 97103 106

114 116

-17

The Central Govt has been keen enough to introduce various amnesty schemes for the tax payers in the past as well as present.

But failed to curb the menace of the parallel economy especially in the case of evasion of sales tax.

Similar approach was adopted by the tax payers when Finance act 1994 was enacted introducing Service Tax Regime

Either the deptt was not fully equipped with the necessary infrastructure to strictly implement the payment regulations or the

assesses have not taken the compliance seriously.

Even with the introduction of negative list the situation was not changed rather it gave a jolt to revenue that the there are 17 lacs

assesses under service tax & only about 7 lac file returns.

The service sector contributes about 65 per cent of the gross domestic product (GDP) but the number of service tax payers is quite less.

Hence a one time measure called VOLUNTARY COMPLIANCE ENCOURAGEMENT SCHEME

has been introduced

Scheme introduced in Finance Bill 2013, chapter vi

Introduced as one time measure

Aims at--Providing amnesty to tax payers- enhancing the tax base

Introduced for defaulters/ non registrants

The Scheme has come into force with the enactment of the Finance Bill, 2013 i.e. May 10, 2013.

GENESIS OF THE SCHEME

VOLUNTARY DISCLOSURE

SCHEME AMNESTY SCHEME

introduced in budget 2001 for central excise & customs

introduced in budget 2013 for service tax

objective was to dispense with SCN & adjudication proceedings

if short levy of taxes is paid within 45 days of passing the order- interest waived if paid after 45 days- interest not waived.

objective- amnesty to tax payers & facility for non registrants & defaulters

100% tax dues have to be paid in 2 installments interest & penalty waived immunity from prosecution

BROAD FEATURES

Voluntary tax declaration to Govt.

Declaration for the past period.

Clauses 94 to 104 in chapter vi

Applicable to non tax payers, non filers stop filers

Service tax dues

Covered under the scheme

-payable under sec 73 A of Finance Act 1994 including cess

- dues not paid from 1st Oct,07 to 31st Dec,12.- undisputed service tax dues as on 1st Mar,13 related to above period

ADVANTAGES

To Revenue To Tax Payer

Easy collection of tax

Widening tax base

Speedy recovery of dues

Less tax evasion

Resource expansion for nation

Amnesty to tax payers

Waiver of interest & penalty

Holistic culture of safety from prosecution etc

immunity from prosecution

Self motivation for defaulters to pay tax

The finance minister while addressing the powers under judiciary mechanism of the taxation laws in his speech has moved proposals to make some selective offences as cognizable & non bailable such as-Offences covered under these sections include evasion of service

tax,

Issuance of invoice, bill or challan without provision of taxable services,

availing or utilisation of credit of taxes or duty without actual receipt of taxable service or excisable goods

failure to pay any amount collected as service tax to the credit of central government beyond a period of six months from the date on which such payment becomes due.

in the case of an offence where the amount exceeds fifty lakh rupees, with imprisonment for a term which may extend to three years

UNDER COGNIZABLE OFFENCE-,ARREST CAN BE MADE EVEN WITHOUT WARRANT

Stringent Provisions encouraging tax payers

With the introduction of this scheme, judiciary is trying to create a holistic

culture by promoting the tax payers to pay the undeclared dues and saving

themselves from the stringent provisions of law and as a result, over

one million defaulters identified, 1,400 had filed declarations amounting to Rs

650 crore. (FM)

Present position

ELIGIBILITY CRITERIA(DETAILS)

APPLICABILE TO SERVICE PROVIDER /s

NOT APPLICABLE TO SERVICE PROVIDER

WHO HAS

On whom no notice or order of determination

u/s

Furnished return u/s 70 & disclosed true liability

Or any notice is being issued or order of determination for any period or any issue.

72 73 73 A

Issued before 1st March,13

disclosed amount has not been paid

BUTOR

Non/ stop filers,Declarants of false

information

CLARIFICATIONS

RETURN- if a person has paid service tax but return has not been filed, he cannot take the benefit of VCES so as to avoid the

payment of penalty for non filing of return.However relief under rule 7C can be obtained in deserving

cases.

SHOW CAUSE NOTICE-The tax dues could be declared for which no show cause notice has been issued subject to other

provisions of act.

INQUIRY/INVESTIGATION-Even the communications of deptt soughting information of roving nature from potential tax payer regarding business activities would not constitute

inquiry or investigation.

MANNER OF DECLARATION

An assesse can avail benefit under the Scheme by making truthful

declaration regarding tax dues to Designated Authority in specified

form.

Thereafter, an acknowledgement in form shall be issued to him within 7

working days of his declaration(DETAILS)

Only an eligible person shall make declaration

Condition 1

Condition1 2

Declaration shall be made to the designated authority in form VCES 1

in duplicate

Condition1 3

Declaration shall be made in the prescribed manner

Condition1 4

Acknowledgement of declaration by designated authority in form VCES 2.

FORMS

Form of Declaration

Form of Acknowledgement of

declaration

Form of Acknowledgment of

discharge

VCES 1- declaration in respect of tax dues

VCES 2- Acknowledgement of receipt of declaration

within 7 days of declaration made

VCES 3- Acknowledgement of discharge within a

period of 7 days from the date of furnishing details.

REGISTRATION-A person who wishes to make a declaration must obtained service tax regn number if he does not have

the same.

UTILISATION OF WRONG CENVAT CREDIT-Declaration can be made in respect of cenvat credit wrongly utilised for payment of service tax, (as service tax paid

utilising irregular credit amounts to non payment of service tax)

ACKNOWLEDGEMENT- Payment of tax dues is not linked to the issuance of an acknowledgement by the deptt. (i.e. even if the

designated authority does not issues the acknowledgement within 7 days)

REGISTRATION-Two differently registered units are two different assessees for making out declaration. The

incompetency/ ineligibility of one will not affect another.

CLARIFICATIONS

VALIDITY OF DECLARATION

On receipt of declaration by the eligible person the designated authority will further verify that whether-

After condition 4

CONDITIONS

Inquiry/investigation for-Non levy- Short levy- Short payment of service tax

An audit has been initiated

OR

AND

Inquiry/investigation/ audit is pending on 1st March,13

Satisfie

d

Yes

No

Invalid Declaratio

n

Valid declaration

INQUIRY/INVESTIGATION-If the inquiry, investigation or audit has been initiated after 01/03/13, there is no bar from

filing of declaration in such cases.

AUDIT ISSUE-Liability can be declared by the assessee , where he has been audited but only for those issues which

are not the part of audit para.

SHOW CAUSE NOTICE- Issuance of show cause notice or order of determination for any period prior to Oct,07 on an issue

would not make a person ineligible to make a declaration on the same issue for the period covered by the scheme.

INQUIRY/INVESTIGATION-The inquiry or investigation would have been initiated by way of production of accounts,

documents or other evidence.

CLARIFICATIONS

WHAT IF WRONG DECLARATION

MADE BY ASSESSEE ????

In case the mistake is discovered suo moto by the declarant himself, he may

approach the designated authority, who, after taking into account the overall

facts of the case may allow amendments to be made in the declaration, provided

that the amended declaration is furnished by declarant before the cut off

date for filing of declaration, i.e. 31/12/2013

WHAT IF FALSE DECLARATION FOUND BY DESIGNATED

AUTHORITY ???? Where the Commissioner of Central Excise has reasons to believe that the

declarationmade by a declarant under this Scheme was substantially false, he may, for reasons to be recorded in writing, serve notice on the

declarant in respect of such declaration requiring him to show cause why

he should not pay the tax dues not paid or short-paid.

No action shall be taken under sub-section (1) after the expiry of one year from the date of declaration.

PAYMENT OF DUES

Not less than 50% of total service tax dues declared on or before

31/12/13

On or before 31st Dec 2013

balance 50% of service tax dues

On or before 30th June 2014

WHAT IF ATLEAST 50% OF DECLARED AMT NOT PAID BY ASSESSEE BY

31/12/13 ????

The benefit of the scheme would not be available to such assessee.

FAILURE TO PAY DUES

payment along with interest at rate

specified u/s 75 or 73 B

On or before 31st Dec, 2014

Interst will be charged for the delay occurred as

per the regulations of the respective chapters.

Dues for Jan 2013 &

subsequent months

Interest to be calculated for the period of delay starting from 1st July 2014.

ACKNOWLEDGING THE DUES

- Furnishing details of payment made

And

Copy of acknowledgement issued to declarant

Declarant to Designated Authority

-Acknowledgement slip for the payment of total service tax dues made by the declarant

Designated Authority to Declarant

ALERTS FOR TAX PAYERS

NO REFUND

If any amount is paid/ declared wrongly in excess to the actual liability the payer will not get any refund for the said amount.

If the declared amount is not paid or short paid then recovery of the dues with interest will be as per the provisions of sec 87

On finding the short/ non payment of dues on the basis of false declaration , the CCE will serve SCN for paying such dues within 30 days of such declaration.

RECOVERY OF DUES WITH INTEREST

SHOW CAUSE NOTICE

NO APPEAL

No statutory provision for filing of appeal against the order for rejection of declaration however the amount can be adjusted against the determined liability.

SCHEME REMAINS SILENT

Cenvat credit on the excluded input service such as Rent a

Cab/ Outdoor catering services/ construction work etc for the period prior to their exclusion

i.e. before Mar 2011

ANY QUESTIONS?

CMA RAKESH BHALLA nancybhalla@yahoo.com 09779010685

CMA RAKESH BHALLA nancybhalla@yahoo.com 09779010685