Service tax Amnesty Scheme and recent clarifications by CBEC

The Finance Act, 2013 has provided “Amnesty Scheme for Non Filers and Stop Filers”. Notification No. 10/2013 dated 13th May 2013 brings into action the proposed scheme and notified Service Tax Voluntary Compliance Engagement Rules, 2013. The purpose of this scheme is to encourage voluntary compliance and broaden the tax base. The scheme will be applicable on service tax dues from October 1, 2007 to December 31, 2012.

The salient features of the scheme and its benefit are given below:

  1. Who are eligible to take the benefit of the scheme ?
  2. Who cannot take the benefit of the scheme?
  3. What is the procedure for availing the scheme?
  4. What is the benefit of availing the scheme?

1.    Who are eligible to avail the benefit of scheme?

The following persons can take the benefit of this scheme

  •  Stop filers
  •  Non Filers
  •  Non registrants
  •  Service providers who have not disclosed there full liability in the return filed by them.

2.    Who are not eligible for scheme?

  • Person against whom order of determination u/s 72, 73 or 73A has been issued before 1stMarch, 2013.
  •  Person who have filed the return u/s 70 and disclosed his true liability but has not paid the amount of service tax appropriately.
  • Person to whom notice or order of determination has been issued in respect of any period on any issue i.e. if a person had already been caught by the department earlier on any issue then he is not eligible to file the declaration.
  •  Person on whom any inquiry or investigation in respect of service tax not levied, not paid or short levied or short paid has been initiated and such inquiry, investigation or audit is pending as on 1st March, 2013.

The CBEC has issued a circular no. 169/4/2013 – ST dated 13th May 2013 which clarifies that the provisions of section 106(2)(a)(iii) shall be attracted only in such cases where accounts, documents or other evidences are requisitioned by the authorized officer from the declarant under the authority and inquiry so initiated is pending as on 1st March 2013. No other communication from the department would attract the provisions of section 106(2)(a)(iii) and thus would not lead to rejection of the declaration.

3.    What is the procedure for availing the scheme?

Step 1: If the defaulter is not registered, then he is first required to get himself registered and then apply for this scheme.

Step 2: After registration, defaulter shall make a declaration (Sec 97) in Form VCES – 1.

Step 3: On receipt of VCES the designated authority will issue acknowledgement of declaration in form VCES – 2. This acknowledgment shall be issued within 7 days from the receipt of declaration.

Step 4: The defaulter can pay his tax dues without interest and penalty into installments. The defaulter is required to pay 50% of tax dues by 31st, December, 2013 and rest 50% by 30thJune, 2014.

Step 5: On full payment of taxes, the designated authority will issue acknowledgement of discharge (Sub section (7) of section 97) in VCES – 3.  VCES – 3 shall be issued with 7 working days from the date of furnishing of details of tax dues in full along with interest.

4.    What is the benefit of availing the scheme?

  • The declarant upon payment of amount in default shall get immunity from – interest, penalty, any other proceedings under Service Tax.
  • On issuance of acknowledgement of discharge no matter shall be reopened thereafter in any proceedings before any authority or court relating to the period covered by such declaration, subjected to the provisions of Section 101-Failure to make true declaration.

However there is no refund of amount paid under this scheme. Where the declarant fails to pay the tax dues, either fully or in part, as declared by him, such dues along with interest thereon shall be recovered under the provisions of section 87 of the Chapter.

Thus the Scheme is beneficial to the Service Tax Assessees and defaulters who are not issued any order of determination before 1st March 2013 in respect of their tax dues for the period beginning with 1st October 2007 and ending with 31st December 2012 under section 72, 73 and 73A of the Act. On the contrary this scheme is disadvantageous for the Service Tax Assesses who have timely discharged their dues.

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16 Responses to Service tax Amnesty Scheme and recent clarifications by CBEC

  1. navin says:

    service tax amnesty scheme

    sir I deposited 50% of the service tax before 31 December 2013 which was Rs.126000/- according to the service tax amnesty scheme I need to pay rest of 50% before 30 June 2014.but right now I am running short of money, can I pay the rest 50 % amount Rs.126000/- with interest in the first week of September 2014.

  2. dharmilal says:

    Dear Sir,

    I am eligible for VCES scheme, but once you made the payment, should we need to file the service tax returns for the that period.

  3. devendra deshpande says:

    Sir,
    We applied for service tax amnesty scheme. 50% of the amount was due on 31st December13. Due to server error the payment could be processed on 1st January14. The concerned officer called me and said you are out of vcs scheme since u didn’t make the payment before 31st. Is there any remedy for this? Can we go in appeal?

    Devendra

  4. SUMIT RANINGA says:

    DEAR SIR,

    I HAD FILED IN VCES ON TIME AND PAID FULL PAYMENT AND SUBMITTED CHALLAN.

    MY QUERY IS THAT NOW I WANT TO FILE RETURN FROM JANUARY-13 TO SEPTMBER-13. SO, I WANT TO KNOW THAT I AM LIABLE TO PENALTY OF LATE RETURN FILED.

    PLEASE DO THE NEED FULL AND THANKING YOU

  5. Amit says:

    Dear Sir,
    As I am liable to pay the S.T. of Rs. 20.00 lacs but anyhow I am anable to pay the same amount within specified time ie 31 Dec 2013. I want to know whether I can pay my dues with another ten days (10.01.2014) ?????????????

  6. S Jothi says:

    The Service Tax Voluntary Compliance Encouragement Scheme (VCES) has come into effect from 10.5.2013. We have paid the pending dues in July2013 & and August 2013 ie much after VCES scheme enactment. Since we were not aware that VCES declaration should have been filed before payment of these dues, VCES declaration was filled after paying almost 60% of the liability. In VCES, we have shown 100% liability including the payment mades.

    Wish to draw your attention that as per the scheme, we are to pay 50% by December 2013, but we arranged the funds thru overdraft facility and cleared 100% dues by September 2013.

    Kindly confirm are we still liable to pay interest and penalty on these dues, bcoz of delay in submission of VCES.

  7. Palani velu says:

    Dear Sir,
    I am eligable for paying service tax of 12.36%. My annual income is Rs.2,00,000pa.
    But i have taken service tax number mistakenly. That time i am not aware of this Rs.10,00,000 only eligable for paying tax. Now only i known this. Any how, last 8month i didnt do any transcation. Now i need a better clearance about this. what i have to do further. Kindly help me on this.

    Thanks,
    Palani

  8. A.M.Subramanian says:

    Sir,
    We got order for works contract. Actually we are doing Steel Fabrication and erection with the use of our Machinery and consumable. The party must free issue of steel material, power and shelter in his premises. Now we liable to Service Tax 12.36 and TDS 2%. Purchase of consumable have a Cenvat duty and VAT tax. already we have a Registration of Central Excise and Service tax. Kindly advice to take cenvat credit and sales tax credit utilisation.

  9. GIRIDHARAN says:

    Dear sir,
    Kindly advise
    1. whether a service receiver ca apply for benefit under the ‘Service Tax Voluntary Compliance Engagement Rules, 2013′.
    2. The rule requires to pay the dues by cash. If he pays the dues , can he avail the cenvat credit earned during the said period of amnesty to be use for a later period dues.

  10. rrswamy says:

    Dear sir,

    Is the service tax dues paid under VCES is eligible for cenvat credit under Cenvat Credit Rules,2004?

    VCES is silent on this aspect. It only says, cenvat credit can not be used for making payment under VCES. Cenvat credit rules also do not provide any restriction to avail cenvat credit of service tax paid under CCR. Either CCR is not amended consequent to introduction of VCES.

    Your comments please…..

    • Chintan Patel FCA, CPA(USA), CISA (USA), DISA, DIRM, Cert.IFRS(ICAI) says:

      Rule 6(2) of Service Tax Voluntary Compliance Encouragement Rules, 2013 prohibits the utilization of CENVAT credit for payment of tax dues under the Scheme. But there is no specific prohibition for cenvat credit of tax dues paid under VCES. Hence, in my view, service tax dues paid under VCES is eligible for cenvat credit.

  11. Ankur Agarwal says:

    under amnesty scheme we can discharge liability from 1/10/2007 to 31/12/2013 and also as per section 72 of service tax an A.O can issued notice of demand for the period 5 year( in case of short payment or non payment). My queries is as we are applying on 1/7/2013 and 5 five year end at 1/7/2008. whether we can pay tax under amnesty scheme from 1/7/2008 or noy

    • Chintan Patel FCA, CPA(USA), CISA (USA), DISA, DIRM, Cert.IFRS(ICAI) says:

      Period of limitation of 5 years applies to AO for issue of demand by A.O. In my view, the assessee in default has to pay tax default from 1/10/2007.

  12. Ananthanarayanan says:

    I have a service tax regn number .I had paid all the Service tax that I had collected till 2006. Around 2006 the service tax office did not accept my returns as the previous return copy was not submitted as wanted by them.
    Later my income fell below 5 lakh and I had not charged any service tax and have not any service tax.
    Also I had misplaced the bank pay in slip for 2 of my last payment in 2006 or 2007 .( I think the dept can verify from their accounts the payments made by me)
    Since then I hv not filed any return as my income was less than 5 lakh . also I have not surrendered my tax registration.
    What is my position and how I can avail the facility of the amnesty scheme.

    • Mr. Ananthanarayanan,
      Service Tax Amnesty scheme can be availed only by Tax Defaulters. As i understand from your query, you have default for non-filing of service tax returns and not for tax payment. Hence, you would not be eligible to get benefit of this scheme.

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