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Service tax amnesty scheme: Caught in web of fine print
March, 31st 2014

If you thought that by meeting formalities for availing of the service tax amnesty scheme, you have escaped the government’s radar, chances are that you may be in for a rude shock. If you did not conform to all the conditions that came with the Voluntary Compliance Encouragement Scheme (VCES), your application may not be accepted even if you have paid the amount as required.

The service tax amnesty scheme, announced last year by finance minister P Chidambaram in the Budget 2013-14, though witnessed 66,062 applications pouring in till February 21 as per Parliament data, not every assessee desirous of making the most of the opportunity has been successful due to myriad reasons.

“We have got many cases where assessees came to us, got themselves registered, made a declaration and then simply sat back, thinking that since they have declared, they are protected by the scheme. Similarly, a few did not pay the entire 50 per cent amount by December deadline, on the grounds that the remaining payment they could make by June-end. Such applications have of course been rejected as they are not in line with the conditions laid down,” according to a government official.

This would mean that all such assessees now would be under the department scanner and will have to shell out penalty and interest on the amount declared. Prosecution may also be launched if it is found that the non-payment of service tax was wilful and deliberate. So essentially, the immunity they would have enjoyed in the event of being covered by the scheme will no longer be there.

Further, assessees who collected the service tax but did not deposit it, and if this amount is more than Rs 50 lakh, they may face arrest too.

As such, the service tax department is vetting the applications received so far and tallying the declaration with the amount paid. The department is also verifying the veracity of declarations. While many applications have already been rejected, many are likely to get rejected due to issues relating to interpretation of the provisions.

Most of the applicants are from the sectors including construction, real estate, works contract, business auxiliary, goods transport operation, financial services, and renting of immovable property. The highest number of applications have been from Maharashtra, especially Mumbai, which contributes over 40 per cent of the total service tax collection. This is followed by Delhi.

The government had announced the scheme with a view to encourage people to come forward and clear that service tax dues pending for the last five years either due to lack of awareness or any other reason.

According to the scheme, if anyone liable to pay service tax, either as service provider or receiver, has not been able to pay during October 2007 to December 2012 as on March 31, 2013, they could do it subject to certain conditions. In the event of availing of the facility, the penalty and interest due on the amount unpaid was to be waived off along with penal proceedings provided the person made a truthful

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