• Sep
  • 03
  • 2013

Service Tax Voluntary Compliance Encouragement Scheme (VCES)

CA Tarannum Khatri

VCES means gift to taxpayers by finance minister. Voluntary pay your tax and get many benefits.

Period: 1st October  2007 to 31st  December  2012

Eligibility:

  • The person who has not received notice or order of determination u/s 72, 73 or 73A on or before 1st march 2013 is eligible under the scheme.
  • If any person has filed service tax return but does not pay tax, he will be not eligible for the scheme.
  • If any inquiry, investigation or audit has been initiated  and pending as on 1st march 13,

Assesses can not avail the scheme. If it is initiated after 1st march, he can avail the scheme.

  • If any notice or order of determination has been issued for any period between October 07 to December 12, declaration cannot be made on same issue for any subsequent period. But if show cause notice has been issued prior to October  07, declaration can be made on same issue.

Payment of tax:

Up to 31stdecember, 2013 : minimum 50% tax payment else not eligible for the scheme

Up to 30th June , 2014 : balance without interest

Up to 31st December 2014 :  balance with interest (all payments without penalty and prosecution)

Other points :

  • If any person has not obtained registration under service tax, he will be required to take registration before making such declaration. He will get immunity from penalty for not having registration.
  • If taxpayer has received show cause notice for particular period during October  07 to December  12, he can file declaration for period not covered by notice.
  • Mere general communication for taxpayers’ business by department will not make him ineligible for scheme. If it is for inquiry, investigation or for audit which is pending as on 1st march 13, taxpayer will be ineligible.
  • If taxpayer has two units with separate service tax registration number, the eligibility for scheme will be determined separately for each unit.
  • Taxpayer can make declaration for tax dues concerning an issue which is not a part of audit para.
  • If any person has paid  his tax dues but has not filed  return, he is not eligible for the scheme to avoid penalty for late return filling.
  • If any person has paid tax dues for part of the period of the scheme and paid other part of the tax dues under VCES  scheme, he will eligible for immunity from interest and penalty on tax dues which he has paid under scheme. Let say if any person has paid 20 lacks for the period 1st October  07 to 31st December  11 on 1st jan 2013 and 25 lacks on 31st august  2013 under VCES  scheme for the  period 1st January  12 to 31st December 12. He will be entitled for immunity from interest and penalty for 25 lacks which he has paid under  vces.
  • If there is any mistake in declaration, Taxpayer can amend the declaration and correct it after approaching authority and submit it before 31st December  2013.
  • Declaration can be rejected after giving opportunity to be heard to taxpayer if designated authority finds declaration wrong. Taxpayer may get show cause notice for the tax dues thereafter. So it is good for taxpayer that he shows right tax liability.
  • Tax under VCES  should be paid in cash.
Sandeep Kanoi

4 Responses to “Service Tax Voluntary Compliance Encouragement Scheme (VCES)”

  1. Sudhir says:

    I eligible for your VCES Scheme, now i payment of tax dues but which challan (GAR-7)use for payment of tax dues.

  2. catarannum says:

    the article is based on faq of vces scheme. which has released by p chidambaram.

  3. Vijaya says:

    There is one major issue with service tax. Let me cite an example.
    We had a building contractor repair and paint our residential building in a CHS. We had obtained from him a service tax registration number that we now realise is a temporary number. He has submitted bills with service tax charge and we have paid the same. When we asked him for a copy of the challan by which he has paid it to the treasury, he refuses to provide it and says he has not paid the tax. His argument is that if he does not pay he will have to pay penalty or go to jail and that is his problem and not our lookout. He is confident that he can be under the radar. So we have paid around Rs 5 lakhs worth of Vat and Service tax which will never reach the government.

    Similarly we have no way of knowing if the service tax charged by the security company reaches the tax authorities or is being pocketed by them.

    The only way to counter such problems is to allow a deduction in the income tax return at a percentage of service tax paid on production of the challan of payment of service tax. Only if the end tax payer is given a benefit will it be possible for them to insist on service tax challan copy without which such deduction can not be taken by them.

    Please share your thoughts on the above.

  4. MKS says:

    what about if no Service tax liability can assesse opt for this?

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