Voluntary Compliance Encouragement Scheme (VCES)
Service tax amnesty scheme (VCES 2013) was introduced in Finance Act, 2013 and is effective from 10th may 2013. Tax payers can pay tax dues from October 1, 2007 to December 31, 2012 without interest and penalty.
Applications should be made on or before 31.12.2013 in the prescribed format.
VCES is on the lines of 1997 Voluntary Disclosure of Income (VDIS) scheme that was aimed at getting people to pay income tax on undisclosed income.
Why VCES?
At present about 17 lakh taxpayers are registered under Service Tax. Of these only 7 lakh have been paying the levy; VCES is aimed at encouraging those who haven’t yet started paying service tax promptly.
Progress Report (Nov. 2013)
The revenue department has so far yielded Rs. 1500 crores with 6,409 applications, of which 3,085 have been accepted, only 89 have been rejected while 3,235 cases are waiting to be processed.
Bulk of the declarations, according to the officials, are made by assessees engaged in construction and works contracts, followed by transportation and supply of manpower.
Finance Minister aims to collect Rs. 1.80 lakh crore in service tax in the current fiscal.
Features of VCES
Based on Notification no 10 dated 13th May, 2013, circular no 169 dated 13th May, 2013 and circular no 170 dated 8th August, 2013, salient feature of are given below:
Eligibility
A person who was required to pay Service Tax under the Service Tax provisions for the period 1st October 2007 to 31st December, 2012, but remains outstanding as on 1st March, 2013 is eligible to get benefit of the scheme provided the same was not detected by Service Tax Department as on 1st March, 2013.
Scheme is available to people who have already registered under service tax. Those who are not registered can first get themselves registered under Service tax and then apply for amnesty scheme.
Benefits of the Scheme
- No interest to paid for delay in payment. Interest is normally levied up to 18% on delayed payments.
- No penalty will be levied, which normally may go up to 50% of the service tax.
- No matter shall be reopened thereafter in any proceedings under the Act before any authority or court relating to the period covered by such declaration
Payment of Tax Dues declared by the scheme
- 50 % of total dues declared in the declaration filed must be paid on or before 31st December, 2013. Amount paid under the scheme will not be refunded.
- If 50 % amount declared is not paid on or before 31st December, 2013, the declarant cannot get benefit of the scheme, and the amount may be adjusted against his service tax liability.
- Balance 50% is to be paid on or before 30th June, 2014.
- Balance amount, if any, as on 1st July, 2014 is to be paid on or before 31st December, 2014 with 18% interest.
- Balance amount, if any, as on 1st January, 2015 can be recovered by the dept as if it is Service Tax due but not paid.
Rejection of the Declaration
- The dept may reject the declaration if it feels that the declaration is “substantially false”. In such case, the declarant may be required to revise upward “Tax Dues” amount stated in the declaration filed by him.
- Otherwise, he may be required to pay Service Tax with Interest and Penalty.
Should you apply for VCES
Given the benefits of no interest and penalty, it is advisable to take the benefit of this scheme. Application should be made at the earliest with complete details in the prescribed format to avoid possibilities of rejection.
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