Service Tax Voluntary Compliance Encouragement Scheme, 2013

A PRESENTATION BY C.A. PULAK SAHAAT ACAE CA STUDY CIRCLE ON 04.12.2013 Service Tax Voluntary Compliance Encouragement Scheme, 2013[ Chapter VI of the Finance Act, 2013 ]

LEGAL PROVISIONSSALIENT FEATURES OF THE SCHEMEOne time amnesty to be provided by way of: (i) waiver of interest and penalty; and (ii) immunity from prosecution, to the stop filers, non-filers or 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 CAN MAKE DECLARATION OF TAX DUES UNDER THE SERVICE TAX VCES, 2013? DECLARATION OF TAX DUESAny person may declare his tax dues in respect of which:

no notice or an order of determination under section 72 or section 73 or section 73A has been issued or made before the 1st day of March, 2013.

Clarifications6Clarifications7Clarifications8TAX DUES: MEANINGClarificationsAny service tax that has been paid utilizing the irregular credit, amounts to non-payment of service tax. Therefore such service tax amount is covered under the definition of tax dues.

Under VCES a declaration can be made only in respect of tax dues. A case where no tax is pending, but return has not been filed, does not come under the ambit of the Scheme.

PERSONS NOT ELIGIBLE TO MAKE DECLARATION OF TAX DUESFiled return and disclosed his true liability but has not paid the disclosed amount of Service Tax.IllustrationReturn filed for the period 01.10.2007 to 31.03.2008 but not paid service tax for the period. Thereafter neither filed their returns nor paid the service tax liability? Are they eligible to opt for the scheme? If so, to what extent?They cannot opt for the scheme for the period 01.10.2007 to 31.03.2008.They can opt for the scheme for the period from 01.04.2008 to 31.12.2012.

WHICH DECLARATIONS ARE LIABLE FOR REJECTION BY THE DESIGNATED AUTHORITY?Declaration made by Person:Audit has been initiatedREJECTION contd and such inquiry, investigation or audit is pending as on the 1st day of March, 2013, then, the designated authority shall-by an order, and for reasons to be recorded in writing, reject such declaration.

ClarificationsInitiation of audit: The date of the visit of auditors to the unit of the taxpayer.

Culmination of audit: The audit culminates at a point when the audit paras raised are settled by closure of audit file if no discrepancy is found in audit; closure of audit para by the Monitoring Committee Meeting (MCM); approval of audit para by MCM and payment of amount involved therein or approval of audit para by MCM, and issuance of SCN, if party does not agree to the para so raised.

ClarificationsThere is no bar from filing of declaration to a party, against whom an inquiry, investigation or audit has been initiated after 1.3.2013 (the cutoff date).

Where the assessee has been audited and an audit para has been issued, the assessee can declare tax dues concerning an issue which is not a part of the audit para, under the VCES 2013.

PROCEDURE FOR MAKING DECLARATION AND PAYMENT OF TAX DUESStep -1 : RegistrationAny person, who wishes to make a declaration under the Scheme, shall, if not already registered, take registration. Website: www.aces.gov.in

Step 2 :Submission of Declaration

Submit a declaration to the designated authority. on or before the 31st day of December, 2013 in Form VCES-1.

Step 3 : Acknowledgment of DeclarationThe designated authority shall acknowledge the declaration In form VCES -2.Within seven working days from the date of receipt of declaration.

Step -4 :Payment The declarant shall-on or before the 31st day of December, 2013, pay not less than 50%, of the tax dues so declared andsubmit proof of such payment to the designated authority.

Step - 4 :Contd..Remaining tax dues - on or before the 30th day of June, 2014.

If not paid then

along with interest thereon by 31.12.2014 for the period of delay starting from 1st day of July, 2014.

NoteAny service tax which becomes due or payable by the declarant for the month of January, 2013 and subsequent months shall be paid by him in accordance with the provisions of the Chapter along with interest, if any, for delay.

Step: 4 contd..furnish details of payment made from time to time along with a copy of acknowledgement issued to him.

Utilization of CENVAT Credit not allowed for payment of dues!!!Step: 5 Acknowledgement of DischargeOn furnishing the details of full payment of declared tax dues and the interest, if any- the designated authority shall issue an acknowledgement of discharge of such dues to the declarant in Form VCES-3.

BENEFITS OF THE SCHEME1.IMMUNITY FROM PENALTY, INTEREST AND OTHER PROCEEDINGThe declarant, upon payment of the tax dues and the interest, if any, shall get immunity from penalty, interest or any other proceeding under the Chapter.

2. Declaration to be Conclusive(2) Subject to the provisions of section 111, a declaration shall become conclusive upon issuance of acknowledgement of discharge and no matter shall be reopened thereafter in any proceedings under the Chapter before any authority or court relating to the period covered by such declaration.

FAILURE TO MAKE TRUE DECLARATIONWhere the Commissioner has reasons to believe that the declaration under this Scheme was substantially false, he may, serve notice on the declarant requiring him to show cause why he should not pay the tax dues not paid or short-paid.

No action shall be taken after the expiry of one year from the date of declaration.

It is not feasible to define the term substantially false in precise terms. The proceeding under section 111 would be initiated in accordance with the principles of natural justice.WHETHER THE AMOUNT PAID UNDER THE SCHEME CAN BE REFUNDED?Any amount paid in pursuance of a declaration made under the scheme shall not be refundable under any circumstances.

WHAT IF THE TAX DUES ARE DECLARED BUT NOT PAID?Where the declarant fails to pay the tax dues, either fully or in part, as declared by him- such dues along with interest thereon shall be recovered.

STEPS FOR MAKING DECLARATION CLARIFICATIONSThe designated authority, after taking into account the overall facts of the case may allow amendments to be made in the declaration.

The declarant can pay tax dues even before the acknowledgement is issued by the department.

The designated authority, if the has reasons to believe that the declaration is covered by section 106(2), shall give a notice of intention to reject the declaration within 30 days of the date of filing of the declaration stating the reasons for the intention to reject the declaration.

CLARIFICATIONSThe Scheme does not have a statutory provision for filing of appeal against the order for rejection of declaration under section 106(2) by the designated authority.

Where, a declarant pays a certain amount under the Scheme and subsequently his declaration is rejected, the amount so paid by him will be adjusted against his liability that may be determined by the department.

if the declarant fails to pay at least 50% of the declared tax dues by 31st Dec, 2013, he would not be eligible to avail of the benefit of the scheme.

CBECs clarifications on certain apprehensions of the Trade and public at large vide Circular No. 169/4/2013-ST dated 13.05.2013.Circulars and FAQs available in the website: www.cbec.gov.in ClarificationClarificationClarificationClarificationClarifications vide Circular No. 174/9/2013-ST dated 25.11.2013 Clarifications vide Circular No. 174/9/2013-ST dated 25.11.2013 COMPARATIVE SNAPSHOT ::-

NORMAL CASESVCES CASESService Tax Amount Payable Fully afterutilisation of CENVATCredit

Payable Fully beforeutilisation of CENVATCreditPossibility of Refund in case offavourable verdictSubject to limitation andunjust enrichmentNot PossibleInterestPayable @ 18% p.a.Not Payable till30.06.2014PenaltiesPayable up to the taxAmountNot PayableLate Filing FeesPayable up to `20,000/- per returnNot Payable

ProsecutionCan be initiatedImmunity GrantedRecovery ProceedingsCan be initiatedNot till conclusion ofScheme The Scheme is silent about the confidentiality of the declaration made. There is no appeal provision if the declaration is rejected. The scheme is iniquitous in the sense that the benefit of adjustment of Cenvat Credit has been denied while paying the tax due. This scheme will discourage the honest tax payers.LIMITATIONS OF VCES ::-

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