Finance minister P Chidambaram on Thursday announced an amnesty scheme for service tax defaulters in an effort to "entice a large number of assesses to tax fold" and simultaneously boost tax collections for the exchequer.
The amnesty scheme will be called 'Voluntary Compliance Encouragement Scheme' and allow defaulters to file truthful declaration of service tax dues since October 1, 2007.
"A defaulter may avail of the scheme on condition that he files a truthful declaration of service tax dues since October 1, 2007 and makes the payment in one or two installments before the prescribed dates. In such a case, interest, penalty and other consequences will be waived," Chidambaram said in his budget speech.
The minister explained that of the nearly 17 lakh registered assesses under service tax ambit, only around 7 lakh file returns. "Many have simply stopped filing returns. We cannot go after each of them. I have to motivate them to file returns and pay the tax dues. Hence I propose to introduce a one time scheme called 'Voluntary Compliance Encouragement Scheme" he added.
The scheme promises one time amnesty by way of waiver of interest and penalty, immunity from prosecution to stop filers, non-filers and non registrants or service providers who have not disclosed true liability in the returns filed by them during the period from October 2007 to December 2012 who pay the tax dues.
The minister expressed hope that a large of assesses would return to the tax fold.
However, exactly how much money would the government hope to mop up through the amnesty scheme is any body's guess at the moment.
Service tax collections during the year 2012-13 stood at Rs 1,32,697 crore and for the next fiscal 2013-14 government expects to garner Rs 1,80,141 crore. The government, at present levies 12.36% service tax. All types of services except nineteen categories come under the service tax ambit.
"The Service Tax Voluntary Compliance Encouragement Scheme, 2013 would be available post the enactment of Finance Act 2014. The scheme would require the person to pay up to 50% of the declared service tax liability by December 31, 2013 and the balance by June 30, 2014,"said Deloitte, a global consultancy firm. Deloitte further added that this scheme would be available to only those persons against whom the department has not initiated any inquiry or audit or who has not filed any return with the authorities for the above period.
Chidambaram added two more services into the negative list that include vocational courses offered by institutes affiliated to the State Council of Vocational Training and testing activities in relation to agriculture and agricultural produce. He also granted full exemption of service tax to films exhibited in cinema halls. The minister also brought in all air conditioned restaurants under the ambit of service tax.
His amnesty scheme for service tax defaulters reminisces of a similar scheme named Voluntary Disclosure Scheme introduced by him in 1997-98 when he was finance minister in the then United Front government.