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Scheme to promote voluntary compliance with service tax
March, 01st 2013

The proposed scheme to encourage voluntary compliance with service tax announced in the Union budget is a tool to broaden the tax base. It excludes cases where the assessees have disputed the levy, or against whom the government has initiated action.

What the Service Tax Voluntary Compliance Encouragement Scheme, 2013, aims to provide is a one-time amnesty to those who have collected service tax but haven’t remitted it to the government.

Tax expert and advocate K. Vaitheeswaran says besides persons and organisations that are liable and haven’t paid the list may include those collecting the levy without even being registered as an assessee.

“The scope of the scheme is limited,” he says, underscoring need for the government to have considered this scheme as a mechanism to resolve disputes pertaining to levy amount by the service providers. Some of these cases have been dragging on for several years. The scheme will hence be more attractive if the restrictions are removed.

According to budget documents, under the “amnesty scheme for non-filers and stop-filers,” the interest and penalty will be waived. It will also provide “immunity from prosecution to the stop-filers, non-filers or non-registrants or service providers (who haven’t disclosed true liability in the returns filed by them from October 2007 to December 2012) who pay the tax dues.” The scheme will be operational from the date on which the Finance Bill, 2013, receives the assent of the President.

In his speech, Finance Minister P. Chidambaram said only about seven lakh of the 17 lakh registered assessees filed the returns. “Many have simply stopped filing the returns. We cannot go after each of them. I have to motivate them to file the returns and pay the tax dues.” A defaulter, he said, may avail himself of the scheme on condition that he files a truthful declaration of service tax dues since October 1, 2007, and makes the payment in one or two instalments before the prescribed dates. “I hope to entice a large number of assessees to return to the tax fold. I also hope to collect a reasonable sum of money,” he said.

Mr. Vaitheeswaran told The Hindu that the scheme was not available for people where any enquiry, investigation, search, summons or audit had taken place. It is for people who apprehend that the department will issue a notice and hence opt for voluntary compliance.

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