FM to interact with trade bodies on service tax amnesty scheme

Govt had launched the scheme for paying service tax dues without interest and penalty

Finance Minister P Chidambaram will address industry bodies and interact with them here later today to give a boost to amnesty scheme launched for service tax in the Budget for 2013-14.

The Voluntary Compliance Encouragement Scheme (VCES) 2013 has been introduced with effect from May 10, 2013 as a onetime amnesty scheme for paying service tax dues for the period October 1, 2007 to December 31, 2012 without interest and penalty.
 
The finance minister had similarly addressed industry bodies in Chennai on Saturday. He had said the government had enough information on economic wrongdoers and warned them of tough action, including arrest.

"Government has to send a message, a stern message, that such violations cannot go unpunished," he had said, adding that ten persons had been arrested recently for alleged service tax default across the country.

At present, the services sector, including construction, contributes about 65% to GDP, while service tax constitutes less than a third of total indirect tax collections.

Of the 1.7 million registered assesses under service tax, only 700,00 are filing returns; some are exempted and some have turnovers of less than Rs 10 lakh.

According to government estimates, service tax evaders deprived the exchequer of over Rs 9,872 crore during April-December 2012. During this period, 4,133 cases of service tax defaults were detected. Over Rs 1,969 crore has been realised from these defaulters.

A defaulter can avail of the one-time scheme on the condition that he files a truthful declaration of service tax dues since October 2007 and makes the payment in one or two instalments.

This is for the first time that an amnesty scheme has been announced for service tax evaders. A voluntary disclosure of income scheme had been launched by the finance ministry in 1997 and it had helped increase income-tax collections dramatically that year.

Government has set indirect tax collection target of Rs 5.65 lakh crore for 2013-14, up from Rs 4.73 lakh crore in the last fiscal.

According to preliminary information with the finance ministry, companies engaged in construction and work contracts account for the bulk of the application under the amnesty scheme for service tax. Transportation and supply of manpower follow.

VCES had drawn 3,681 applications declaring tax to the tune Rs 897 crore as on September 30. Of this, tax of Rs 58 crore had already been paid, while the rest was to be paid by December 31, when the scheme would close. The scheme is likely to bring to the exchequer about Rs 1,500 crore this year — 50% more than the initial internal estimate of Rs 1,000 crore.