A jail term for service tax evasion? You cannot rule that out anymore.
The government has revived a stringent prosecution procedure junked in 1998 to turn the screws on those who duck tax payment or let their businesses function without proper records.
The budget for 2011-12 has reintroduced the provision for rigorous imprisonment under penal provisions, present in the Finance Act of 1994.
"We're going for stricter prosecution norms such as heavy penalty and imprisonment up to three years against those who wilfully try to delay or evade payment of tax or involved in unrecorded business," a finance ministry official told HT.For intentionally delaying tax payment, a person may have to pay a penalty up to 18%, while in the case of "tax theft" one would be liable to pay 25% of the total tax amount.
Not paying service tax can lead to six months of imprisonment. Not raising invoices or carrying on an unrecorded business may land one in prison from one year to three years.
Business chambers say the return of stringency could hit small service providers.
"Since, the goods and services tax (GST) is on way to a new tax regime, this prosecution provision is unwarranted. Moreover, the service sector comprises small service providers, unlike the manufacturing sector," said chairman, Indirect Taxes Committee of PHD Chamber, JK Mittal.
The government has ruled out revisiting the move. "There's no question of roll-back. The government is trying to encourage businessmen to keep proper records," the official said.