Come January 1 and thousands of service tax defaulters who have not bothered to avail of the one time Voluntary Compliance Encouragement Scheme (VCES) are likely to be arrested. VCES is an amnesty scheme for those who have never filed their service tax returns as well as those who have stopped doing so. Launched by finance minister P Chidambaram, the scheme gives benefits like waiver of interest and fine on tax dues to the defaulters who come forward to pay up.

Highly-placed sources told TOI that the Hyderabad zone of the service tax department has got a 'green signal' from the finance ministry to launch the strictest action against defaulters, including arrest and immediate recovery of the money by attaching property or bank accounts.

Meanwhile, the department is leaving no stone unturned to give wide publicity to the scheme slated to end on December 31. Apart from putting up kiosks, mobile teams have been formed to reach various corners of the city in the next two weeks to persuade people to pay the tax. Officials are reportedly working even on weekends. However, sources revealed that the response is still lukewarm despite the closure date being barely 10 days away. "At present, the department is getting 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 dues after being issued summons.

Ahead of the massive crackdown, the service tax wing of the Central Board of Excise and Customs has constituted teams to persuade defaulters to file returns. "In the recent past, we were forced to arrest some defaulters in construction, multimedia companies and security agencies. 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 such evaders, there are thousands who are yet to get registered with the department while scores have stopped filing their service tax returns," a senior official said