From January 1, 2014, thousands of Service Tax defaulters who have been evading the payment of Service Tax and have not bothered to avail the one time Voluntary Compliance Encouragement Scheme (VCES) are likely to be arrested. VCES is an 'Amnesty Scheme for those who never filed their service tax returns and those who stopped doing so.

Highly placed sources told TOI that the Service Tax Department has got a 'go green' from none other than the top brass in the Finance Ministry for Hyderabad zone officials to launch the strictest of the actions including arrest and immediate recovery of the money by attaching property and/or bank accounts.

Interestingly, to publicise the scheme which is going to end on December 31, the department is leaving no stones unturned including even putting up kiosks and educating passers by. The teams have gone mobile to reach various corners of the city in the next two weeks and officials are reportedly working even on weekends for facilitating the service providers. However, the sources revealed that the response is lukewarm despite the closure date barely 10 days away.

"In the recent past, we were forced to arrest some non filers in construction companies, multimedia companies and security agencies etc. We found that they were not depositing the service tax collected from customers with the department. These are the cases of 'deliberate and criminal evasion'. Apart from these kind of evaders, there are thousands others who are yet to get registered with the department while scores others have stopped filing the service tax returns," said a senior official.

Ahead of the massive crackdown expected to be launched in the New Year, the Service Tax wing of the Central Board of Excise and Customs has constituted teams for intensifying surveys for non-filers/ stop-filers and non-registrants in the next few days to goad them into going for VCES. Interestingly, theatre owners, exhibitors and builders are amongst the major defaulters of service tax payment who pleaded ambiguity with respect to certain issues during the recent visit of finance minister P Chidambaram to the city. To these issues, the Board clarified that there is no case for exemption merely because the consideration towards such service is out of the proceeds on ticket sale. It has been made clear that each case has to be looked into with respect to contract terms i.e., whether it is for mere letting of the premises by the exhibitor to distributor or it also involves rendering support services to distributor. In both cases, service tax is leviable.

At present, the department is getting at the most one or two odd cases of VCES per day," said an official, adding that recently, a leading regional language TV channel paid Rs 80 lakh of the due amount after being issued summons.

VCES was launched with much fanfare by Chidambaram and aims at convincing those who are registered with the department but not filing returns or stopped filing service tax returns, those who have not even got themselves registered and those have not been paying service tax to come clean and enjoy the benefits including exemption of interest on Service Tax dues and fine by voluntary disclosure of service tax liabilities.