Dr. Sanjiv Agarwal
The Voluntary Compliance Encouragement Scheme, 2013 (VCES, 2013) has been introduced by Finance Act, 2013 by the Union Government as a one-time measure to serve twin objectives – to encourage voluntary compliance of tax return filing and payment of Service Tax by granting immunity from interest and penal provisions. With the passage of Finance Bill, 2013, on 10th May, 2013, the provisions of VCES – 2013 have come into force. Accordingly, Voluntary Compliance Encouragement Rules, 2013 have also been notified w.e.f. 13 May, 2013 which prescribes rules, forms and procedure for implementation of the Scheme. The period for which a person may seek benefit under VCES, 2013 shall be of five years from 1st October, 2007 to 31st December, 2012.
The defaulters will be required to make a truthful declaration of all pending tax dues (from October1, 2007 to December 31, 2012) and pay at least half of that before December 31, 2013. The remaining half shall have to be paid by:
(a) June 30, 2014 without interest; or
(b) By December 31, 2014 with interest from July 1, 2014 onwards.
On compliance with all the requirements, the person will have immunity from interest, penalties and other proceedings. The monetary penalties and interest may otherwise go upto three times the tax amount.
Though VCES, 2013 is a beneficial scheme from assessee’s point of view, it prohibits certain categories of assessees for availing the same. VCES, 2013 cannot be availed –
If any person makes a declaration under the scheme, despite aforementioned disqualifications, such a declaration is liable to be rejected.
The Cost – Benefit Equation
VCES 2013 is applicable only to registered service tax assessees. Those who are already registered under service tax can avail of the benefit of VCES, 2013. However, any person who wants to avail VCES, 2013 and is not registered for service tax can do so by first taking registration under Rule 4 of Service Tax Rules, 1994 and then make a declaration under VCES, 2013.
While Form VCES – 1 is to be used for making declaration under the scheme, declarant may note that declaration is in duplicate and is of tax dues. VCES-1 is in two parts- declaration and verification duly signed and dated by the declarant.
To conclude, it may be said that while the VCES, 2013 is a welcome move from the view point of both, exchequer and the Service Tax assessees, yet it is not forward looking and suffers from certain distortions. The main draw-back is that the scheme allows the core defaulters, even the non-registered ones an opportunity to pay Service Tax without any interest, penalties and prosecution but it restricts those who are genuine defaulters in one way or the other. Just because someone filed the return but could not pay Service Tax, he can not avail of this scheme. Those who have not even filed the return are better off.
CBEC has recently issued FAQs on the VCES, 2013 which may be referred to for clarifications in implementation of the scheme.