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ENCOURAGEMENT SCHEME, 2013 (VCES)
Background of the Scheme
Service tax is a new emerging law and there has been lack of clarity on the applicability of the service tax, among the trade, departmental officer and also among the consultants, this would have left lot of assesse not being compliant although has no intention to evade the payment of service tax. Voluntary compliance under service tax comes with the interest and penalty with an added harassment of some of the corrupt departmental offices. Many service providers as well as service receivers have been fearful and not happy with payment of interest and penalties on amounts not collected form the customer. In such state of affair introduction of amnesty scheme is undoubtedly a welcome move which may enable/ entice them to comply without payment of interest and penalty. This article aims at providing an insight of the said VCES and to address some practical FAQ on the subject.
This scheme is for all those assessees who have neither paid the service tax, neither filed any returns nor have not been served any notice or order. Importantly even the cases where there is enquiry already in progress may not be covered under the said scheme. The salient feature of this scheme is as under:
1. VCES scheme is applicable in respect of tax dues for the period 01.10.2007 to 31.12.2012. For the period from 01.01.2013, the regular provisions of the Act shall be applicable and no amnesty under this scheme would be provided.
2. The option of claiming amnesty under this scheme has to be exercised by the eligible assesseeby filing a declaration to designated authority. Such declaration shall be filed on or before 31st December 2013. (Designated Authority and Prescribed form to be notified)
3. VCES scheme shall not be available to the following categories of the person:
i. Any person to whom any notice or order has been issued before 01st March 2013.
ii. Any person who has filed the returns disclosing his true liability and not discharged the service tax amount shown in the same.
iii. Amount unpaid pertains to subsequent period of the same issue for which a notice is service or an order is passed for the previous period.
4. Designated authority will reject the declaration by any person if it is found that there was some enquiry or investigation pending as on 01.03.2013. Such investigation may be due to search of premises or by issuing summons or by calling for information/documents or by an audit.
5. 50% of tax due has to be paid on or before 31st December 2013 and the balance of tax dues has to be paid by 30th June 2014 for availing the amnesty of interest and penalty. However if the balance amount is defaulted either in part or full then such person has the option of payment on or before 31st December 2014 for claiming the amnesty of penalty alone. Interest is payable from 1st July 2013 till the date of payment before 31st December 2014 for claiming the amnesty of penalty. In case there is default either in part of full even after 31st December 2014 then the amount so declared shall be received along with the interest.
6. The proceeding under this scheme is final and cannot be reopened by any forum. The amount so paid in non-refundable. However if the Commissioner has reasons to believe that the declaration made by a declarant under this Scheme was substantially false then he may serve Show Cause Notice within one year from the date of declaration.
Frequently Asked Questions (FAQ’s)
Q1. Who is eligible for claiming benefit under this scheme?
Ans. Any person who is liable to pay tax for the period from 01.10.2007 to 31.12.2012, but has not paid the same till 01.03.2013 for the reason whatsoever would be eligible for claiming the benefit of this scheme. Also provided that no investigation/enquiry or notice is issued to such person.
Q2. What are the benefits available under this scheme?
Ans. This scheme aims at providing immunity from interest and penalty in case the amount has been paid on or before 30.06.2014 (50% to be paid before 31.12.2013) and immunity from penalty in case the amount has been paid on or before 31.12.2014 (50% to be paid before 31.12.2013)
Q3. Whether a person who is liable to pay tax as a recipient of service is eligible to avail the VCES scheme?
Ans. The memorandum to the budget states that the scheme is available to non-filers, stop-filers, non-registrants and service providers. However, on perusal of the scheme it states that tax dues means any amounts due under the chapter or any other chapter which means that even amounts paid by the recipient of service shall be covered by this scheme.
Q4. I have some CENVAT erroneously accumulated in my returns, which is carrying forward till date, whether I can use VCES scheme for regularizing my credit?
Ans. This is scheme is for the payment of service tax under this chapter and not for the reversal of the CENVAT and hence such reversal is not eligible here. However since the amount has not been utilized there may not be the implication of interest and penalty.
Q5. I am proving exempted service, but had erroneously collected service tax on the same, but did not remit to Govt. Will I be eligible for this scheme?
Ans. Yes this scheme is not only for the tax, but also for the amount payable under section 73A which is for depositing the amount collected representing as service tax.
Q6.What is the earliest date for applying for this scheme?
Ans. VCES shall be applicable from the date the finance bill receives the assent of the President. So the day the Finance bill receives the assent of the president that would be the earliest date to apply. However one can be prepared and compute the liability by that time.
Q7. I am an assessee registered with service tax department. I have not paid the service tax, but have filed the return indicating the service tax is due. Will I be eligible for this scheme?
Ans. An assessee who has filed his returns and have indicated the turnover but has failed to pay service tax would not be eligible the benefit of this scheme. However the benefit may be claimed to the extent of the turnover not indicated in the ST-3.
Q8. I have received a show cause notice in respect of an issue on a liability during the period Oct’07 to Dec’12. However order is yet to be passed by the Adjudicating Authority, whether I would be eligible for VCES?
Ans. No this scheme is restricted to those people on whom no notice is service not have filed the returns.
Q9. I was served SCN for the period Oct 07 to March 08 seeking payment of service tax on sales commission, which is pending in Appeals. However I have been receiving such commission till date but neither a periodical SCN was served nor paid the service tax on the same till date. Now can get the benefit of this scheme for the period April 08 to Dec 12
Ans. No this scheme is specifically barring the cases where service tax is unpaid on the same issue on which the notice was service for the previous period. Therefore this benefit cannot be claimed for the subsequent period. However, in case an assessee who has been issued a notice on one issue, can make a declaration for VCES for another issue.
Q10. I have appealed against the order of the adjudicating authority, which is pending before the appeals. Whether I would be eligible for VCES?
Ans. No this scheme is restricted to those people on whom no notice is service not have filed the returns.
Q11. I have been registered for service tax, but have neither paid service tax nor filed any returns, prior to three months I received a letter from my range superintendent enquiring about failure to make the returns and also called for details of revenue, financial statements etc. whether I will be eligible for this scheme now?
Ans. Section 96(2) (iii) specifically restricted the benefited to this scheme to the person on whom any investigation has been initiated by way of calling for accounts documents etc. and hence such all application has been rejected.
Q12. In the above case, if the application is rejected, what would be the future course of action?
Ans. Department may issues a SCN for demanding the amount so declared along with the interest and penalty, however whether the extended period of limitation (5 year notice) can be invoked has be decided on case to case basis.
Q13. I have been summoned for investigation of application of service tax on a certain issue which is still on. In the meantime can I make an application for this scheme for other revenue which is not covered under investigation?
Ans. No if any investigation is pending on any issue that is upto issue of SCN any application made under this scheme would be rejected. However once the investigation has been concluded and an SCN has been issued on certain issue, then application can be made for the other issues not covered under the SCN.
Q14. I was subject to audit, but there was no discrepancies found by the audit party and the audit was concluded giving Nil audit report. Now for such audit period can I claim the benefit of this scheme?
Ans. Yes the restriction is only in case the audit has been initiated, which indicate that the audit is pending and hence once the audit is concluded there is no bar on claiming the benefit of such exemption subject to satisfaction of all other requirement.
Q15. In case I pay service tax under this scheme on an issue that is not clear as to taxability and after the payment if it has been held in any judicial forum that service tax is not payable, whether I can claim refund of the amount so paid under this scheme?
Ans. No, Amount declared and paid under this scheme is not eligible for refund. However since the service tax itself was not liable, retraining such amount by department is ultra vires to constitution.
Q16. Can the declaration be made by any declarant be rejected on any grounds?
Ans. Yes, in case the commissioner has reasons to believe that the declaration made by the declarant is substantially false, he may serve a notice why tax dues as stated therein should not be paid by him.
Q17. What is the duty of the declarant in respect of the amounts paid pursuant to VCES scheme?
Ans. The declarant who has paid any amounts pursuant to VCES scheme shall furnish the details of payment under the scheme along with the acknowledgement of the accepted declaration form.
Q18. Whether any proceedings can be initiated against persons opting for VCES scheme subsequent to payment of tax dues?
Ans. On furnishing the details of payment of tax dues by the declarant the designated authority shall issue a form for acknowledgement of dues upon which the declarant shall be granted immunity from interest, penalties and other proceedings under the Act.
Q19. In case a declarant makes a declaration but fails to deposit the tax dues within prescribed time limit what shall be consequences?
Ans: Where the declarant fails to make the payment of tax dues within the prescribed time limit, the tax dues shall be recovered with interest under Section 87 of the Act viz. Recovery of any amount due from the Government.
Q20. Who is designated authority?
Ans: Designated authority is an officer not below the rank of Assistant commissioner. Designated Authority shall be notified by the Commissioner of Central excise.
Q21: Who is a declarant?
Ans: Declarant is a person who makes the declaration of tax dues in the prescribed manner.
Q22: What is the form and manner to make the declaration under the Act?
Ans: Declarant shall make declaration in the Form prescribed by the rules framed in this regards by the Central Government. Presently, no such rules have been prescribed by the CG.
This article is the first cut and for the preliminary guidance of the tax payers who may examine the provisions in detail and then only take further action. For further queries please host on pdicai.org
Madhukar N Hiregange FCA & V.S.Sudhir FCA