Tuesday, May 28, 2013

FAQs of Service Tax Voluntary Compliance Encouragement Scheme, 2013

FAQs of Service Tax Voluntary Compliance Encouragement Scheme, 2013
Finance Minister has said that, out of 17,00,000 registered assessee only 7,00,000 assessee file service tax returns. In order to motivate assessee to pay service tax and file pending returns, the Hon’ble Minister has announced Service Tax Voluntary Compliance Encouragement Scheme, 2013 (hereinafter referred as Scheme) in Finance Budget 2013.

What is Date of enactment of scheme?
The scheme has been made applicable from 10th May, 2013 (date on which assent of the President of India to the Finance Bill 2013-14)

What are relevant provisions and rules for scheme?
·         The Finance Act, 2013 has provided “Amnesty Scheme for Non Filers and Stop Filers”. Section 104 to 114 of Chapter VI of Finance Act, 2013 provides legal backing to this Amnesty Scheme.
·         To brings into action the above Amnesty Scheme, “Voluntary Compliance Encouragement Rules, 2013″ has been prescribed vide the notification no. 10/2013 dt. 13.05.2013.

What is Period of applicability of scheme?
The Scheme is applicable for the tax dues not paid for the period 1st October 2007 to 31st December 2012.

What is Objective of scheme?
As the name suggests, the scheme is prepared to encourage assessee to come forward voluntarily and pay the taxes to get immunity from imposition of interest and penalty.

What are benefits of the Scheme?
The assessee opting for the scheme shall be benefitted in two ways;

1.      He shall be eligible for immunity from penalty, interest and any other proceedings under the provisions of Finance Act, 1994.
2.      If all the declarations made are true and if commissioner has not initiated any proceedings within one year from the date of declaration, on receipt of the acknowledgement of discharge of liability, declaration made by the declarant shall not be re-opened.

Who are Eligible to apply under the Scheme
Any assessee registered / un-registered, who has not paid tax dues for the period between October 2007 to December 2012 as on 1st March 2013
And
1.      Who has not filed Service tax returns or
2.      Who has not received Notice / Assessment order as on 1st April 2013 for point No. 1 under Section 72 of Finance Act, 1994 or
3.      Who has not received notice / order as on 1st April 2013 under Section 73 of Finance Act, for not levy or paid or short levy or short payment or erroneously refund of Service Tax or
4.      Who has not received notice / order as on 1st April 2013 under Section 73A of the Finance Act, for non-payment of Service tax which is collected from the customer but not paid to the government.

Who are specifically not eligible to apply under the Scheme?
1.      Person against whom order of determination u/s 72, 73 or 73A has been issued before 1 st March, 2013.
2.      Any Assessee who has furnished Service Tax return under section 70 of the Finance Act and disclosed true liability, but not paid the disclosed liability or part thereof
3.      Who has received a notice / order for any period on any issue before 1st March, 2013, he cannot apply for the tax dues on the same issue for subsequent period
4.      Against whom an enquiry or investigation in respect of a service tax not levied or not paid or short levied or short paid has been initiated by way of Search of the premises, Issuance of summons, requiring production of accounts, documents or other evidence, initiation of an Audit and same is pending as on 1st March 2013.

Whether a person who has not obtained service tax registration so far can make a declaration under VCES?
Any person who has tax dues to declare can make a declaration in terms of the provisions of VCES. If such person does not already have a service tax registration he will be required to take registration before making such declaration.

Whether a declarant shall get immunity from payment of late fee/penalty for having not taken registration earlier or not filed the return or for delay in filing of return?
Yes. It has been provided in VCES that, beside interest and penalty, immunity would also be available from any other proceeding under the Finance Act, 1994 and Rules made thereunder.

Whether an assessee to whom show cause notice or order of determination has been issued can file declaration in respect of tax dues which are not covered by such SCN or order of determination?
In terms of section 106 (1) of the Finance Act, 2013 and second proviso thereto, the tax dues in respect of which any show cause notice or order of determination under section 72, section 73 or section 73A has been issued or which pertains to the same issue for the subsequent period are excluded from the ambit of the Scheme. Any other tax dues could be declared under the Scheme subject to the other provisions of the Scheme.

To whom the declaration shall be made under scheme?
The declaration shall be made to the designated authority, who shall be an officer not below the Rank of Assistant Commissioner of Central Excise as notified by Commissioner of Central Excise for the purpose of this scheme.

What is the meaning of the word ‘tax dues’?
Tax dues means Service tax , and cess leviable thereon under any other Act ( for e.g. Education Cess 2% , SHED Cess 1% , R & D Cess ) or due or payable or any other amount due or payable under section 73 A for the period October -2007 to 31-Dec.-2012 but not paid as on 01-Mar-2013.

When to make the payment of service tax under Scheme?
Declarant have to make the minimum 50% of the amount of tax dues on or before 31-Dec-2013 And balance of tax dues or part thereof on or before 30-June-2014 . However still you can make payment of balance tax dues or part thereof on or before 31-Dec-2014 with interest for a period of delay starting from 01 –July -2014.

What is Procedure to comply under the scheme?
The person desiring to opt for the scheme needs to follow a specific procedure enumerated as below:

Step 1: In case the person making the declaration under the scheme is not registered then he would require to get himself registered before making the declaration.
Step 2: After registration, desired person should make an application on or before 31st December 2013 in Form No. VCES – 1 in duplicate.
Step 3: the designated authority shall acknowledge receipt of the application in Form No. VCES – 2, within 7 working days from the date of receipt of the declaration.
Step 4: The Declarant should pay at least 50% of the tax dues on or before 31st December 2013 and submit proof of payment to designated authority.
Remaining taxes are required to be paid on or before 30th June 2014 and submit proof of payment to designated authority.
If he could not make entire payment, same shall be payable on or before 31st December 2014 along with interest to be calculated w.e.f.1st July 2014 and submit proof of payment to designated authority.
Step 5: On submission of details of full payment of declared service tax and interest if any, designated authority shall issue an acknowledgement of discharge of the liability in Form No. VCES – 3, within 7 working days from the date of receipt of the tax payment details.
“designated authority” means an officer not below the rank of Asst. CCE as notified by the CCE for the purposes of this Scheme.

Whether the designated authority can reject declaration under VCES 2013?
If any inquiry , investigation , issuance of summons , search of premises , production of Accounts, audit is initiated and pending as on 1-March-2013 then designated authority shall by an order and for reasons to be recorded in writing , reject such declaration.

Whether declarant has to submit the calculation sheet showing service tax liability?
Yes ,along with declaration in FORM VCES -1 , declarant have to submit the calculation sheet showing service tax liability ,service wise and service tax return period wise, for this declarant may use the format prescribed in S.No. 3 F (I) of the service tax return in Form ST – 3.

What happens if the dues are not paid in time before 30th June 2014?
Amount not paid before 30th June 2014, payment can be made on or before 31st December 2014 along with interest at the prescribed rate. Interest will be calculated from the period 1st July 2014 till the time payment is made fully. However, immunity from penalty & prosecution still be granted up to 31st December, 2014.

Declarant have made a declaration, but later on failed to pay the taxes in stipulated period what would be the consequences?
Such tax dues shall be recovered under the provisions of Section 87.

Whether compliance certificate is granted?
Yes, after furnishing the details of full payment, the designated Authority shall issue & acknowledgement of Discharge of Dues in Form No. VCES – 3, within 7 working days from the date of receipt of the tax payment details.

Whether after getting the Discharge Certificate, any subsequent action is initiated by the Department?
No, no matter will be re-opened, thereafter, in any proceedings before any authority or court relating to the period covered under such declaration. However, if the Commissioner of Central Excise has reason to believe that the declaration is false, then such belief has to be recorded in writing and show-cause-notice will be issued asking to pay the duties along with interest and penalty. However, no action will be taken after the expiry of one year from the date of declaration and the said date will be considered as Relevant Date for the purpose of limitation.

If declaration is made of higher amount and payment is also made of higher amount, whether refund is admissible?
No.

What if commissioner of Central excise has reason to believe that declarant has made substantially false declaration under the scheme?
If the Commissioner of Central Excise has reason to believe that the declaration is false, then such belief has to be recorded in writing and show-cause-notice will be issued asking to pay the duties along with interest and penalty. However, no action will be taken after the expiry of one year from the date of declaration and the said date will be considered as Relevant Date for the purpose of limitation.

Can declarant use amount lying in Cenvat Credit Account for payment of tax dues under the Scheme?
No. Cenvat credit shall not be utilized for payment of tax dues under the scheme.

What is the last date for availing the scheme?
The assessee can file the declaration under this scheme only upto December 31, 2013.

Whether a communication from department seeking general information from the declarant would lead to rejection of declaration?
Section 106 (2) (a)(iii) of the Finance Act, 2013 provides for rejection of declaration if such declaration is made by a person against whom an inquiry or investigation in respect of service tax not levied or not paid or short-levied or short paid, has been initiated by way of requiring production of accounts, documents or other evidence under the chapter or the rules made there under, and such inquiry or investigation is pending as on the 1st day of March, 2013.
The relevant provisions, beside section 14 of the Central Excise Act as made applicable to service tax vide section 83 of the Finance Act, 1994, under which accounts, documents or other evidences can be requisitioned by the Central Excise Officer for the purposes of inquiry or investigation, are as follows‑
(i) Section 72 of the Act envisages requisition of documents and evidences by the Central Excise Officer if any person liable to pay service tax fails to furnish the return or having made a return fails to assess the tax in accordance with the provision of the Chapter or rules made there under.
(ii) Rule 5A of the Service Tax Rules, 1994 prescribes for requisition of specified documents by an officer authorized by the Commissioner for the purposes specified therein.
The provision 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 of any of the above stated statutory provisions and the inquiry so initiated against the declarant is pending as on the 1st day of 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.