With the Voluntary Compliance and Encouragement Scheme (VCES) coming to end on Tuesday, the UPA Government has warned service tax evaders of “arrest and prosecution” starting January 1.

“I would like to advise that from January 1, 2014, stern action will be taken against service tax evaders and the provisions in the Finance Act relating to arrest and prosecution will be enforced in right earnest,” Finance Secretary Sumit Bose told reporters here

There are 17 lakh registered service tax assessee in the country, but only 7 lakh are filing returns regularly. The Government has asked tax officials and sleuths to map establishments and shops to go after evaders after the expiry of the scheme.

“In Delhi, leads will be dug out from sources of information such as the Delhi Government under the Shops and Establishments Act under which all businesses must register,” official sources told The Hindu.

“Delhi has 70,000 service tax assesses but at least 1.5 lakh to 2 lakh registered businesses.” Mumbai has 1.1 lakh service tax assesses.

The Finance Secretary said that there has been an “overwhelming response” to the VCES in the last four days with over 16,000 applications involving Rs 1,500 crore of service tax dues. Up to December 29, 40,000 declarations involving over Rs 5,500 crore have been made under the scheme. “This would broadly correspond to Rs 55,000 crore of services, which had escaped the tax net,” Mr. Bose said.

The scheme will not be extended, said Mr. Bose, as its duration is laid down in the Finance Act.

In order to help the service tax assesses, it has been decided to open the service tax office beyond working hours on Monday and Tuesday. At the same time, the Government has also extended the banking hours in the designated branches up to 6 p.m. on December 31.

In addition, all Commissionerates have been advised to accept demand drafts/pay orders submitted by declarants, under the Receipt Payment Rules.

The VCES lets declarants pay half of the declared tax dues for the five-year period October 1, 2001-December 31, 2012 by December 31 and the balance in another six months without interest.