SERVICE TAX VOLUNTARY COMPLIANCE ENCOURAGEMENT SCHEME 2013 CMA RAKESH BHALLA

CONTENTS 1.Introduction 2. Genesis of the Scheme 3. Broad features 4.Eligibility Criteria 5. Manner of declaration 6. Validity of declaration 7. Payment of Dues 8.Failure to pay dues 9. Acknowledging the dues 10.Advantages 11. Alerts for tax payers 12. Silent scheme 13. Any questions? 1.Introduction 2. Genesis of the Scheme 3. Broad features 4.Eligibility Criteria 5. Manner of declaration 6. Validity of declaration 7. Payment of Dues 8.Failure to pay dues 9. Acknowledging the dues 10.Advantages 11. Alerts for tax payers 12. Silent scheme 13. Any questions?

INTRODUCTION

TAXING ENTRIES

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 1 st Oct,07 to 31 st Dec,12. - undisputed service tax dues as on 1 st 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,  I ssuance 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) 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 A Issued before 1 st 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.ule 7C 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 duplicatedesignated authorityVCES 1 Condition1 3 Declaration shall be made in the prescribed manner Condition1 4 Acknowledgement of declaration by designated authority in form VCES 2.VCES 2.

FORMS Form of Declaration Form of Acknowledgement of declaration Form of Acknowledgment of discharge VCES 1-VCES 1- declaration in respect of tax dues VCES 2- Acknowledgement of receipt of declaration within 7 days of declaration madeVCES 2 VCES 3- Acknowledgement of discharge within a period of 7 days from the date of furnishing details.VCES 3

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 1 st March,13 Satisfied Yes No Invalid Declaration 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 declaration made 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 whyserve notice 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 31 st 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 31 st 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

CMA RAKESH BHALLA