Startups may look to take advantage of Service Tax Voluntary Scheme 2013
The Finance Ministry realized that, with the advent of Negative List, collection of Service Tax is quite an uphill task, given its weak infrastructure considering size of our Indian Economy. But the idea of Negative List was primarily aimed at increase in Revenue and the vision could not be compromised with. Within its machinery of collection, there had to be some way of going about it that was friendly as well as result oriented.Further, an entrepreneur, with his vision, mission and goals centered around effective commencement and ambitious growth targets often ignores auxiliary factors impacting its business like Levy of Service Tax. A Factor considered not so important can often be a headache in the first couple for years for a start up entrepreneur when non compliance on being noticed attracts Show Cause Notices and its accompaniments.
The idea behind Negative List is excluding certain services, rest is taxable subject to Mega Exemption Notifications. The services not in the list, in consequence are taxable.
Service Tax is applicable on all businesses having turnover over Rs.10 Lakh in a Financial Year; registration being compulsory on the turnover touches Rs. 9 Lakh.
Showing understanding in the woes of the service providers and serving its Revenue Collection mission, the Ministry of Finance has come up with Voluntary Compliance Encouragement Scheme, vide Notification NO. 10/2013-ST, DATED 13-5-2013.
This scheme targets existing defaulters and newer entrepreneurs to come out with true and full information on their tax dues, get themselves registered in case they hadn’t, pay the tax without any interest/fine and have their past files (subject to the time period mentioned in the scheme) closed!
According to the Finance Ministry, it targets about 10 Lakh Service Providers who though liable to file his returns haven’t filed returns and gives them an opportunity to do so without fines, penalties interest or penal proceedings.
A few things you need to know:
Who is eligible to for claiming benefit under this scheme?
According to this scheme, a service provider not having declared his details now has An option to declare his due tax liabilities, including the cess charges for a period Between October 1, 2007 and December 31, 2012 and pay it to the government after Making a truthful declaration and can avoid penalty, interest or any other penal proceedings.
Can a person, who has furnished return and disclosed his true liability, but has not paid the disclosed amount of service tax or any part thereof, avail of this Scheme?
It is clarified that a person who has furnished return and disclosed his true liability, but has not paid the disclosed amount of service tax or any part thereof, will not be eligible to make declaration for the period covered by the said return. The reason being obvious, to give benefit only to person genuinely unaware of the Laws rather than persons purposely withheld payment of service tax after disclosing the same.
Can any Enquiry/Investigation be carried on simultaneously in respect?
The cherry on the cake is rejection by the Ministry in respect of enquiry or Investigation against an evader, if he comes forward to make truthful declaration under this Scheme.
Can CENVAT Credit be used to adjust Service Tax Liability?
It is clarified that Service Tax has to be paid in Cash and CENVAT Credit cannot be availed.
What about CENVAT credit erroneously claimed in Returns?
The service tax not having been paid, such interest is only claimed/booked not Utilized, hence there is no levy of interest/penalty.
What is the period for which this scheme would be applicable?
This scheme is applicable till 31st December 2013 to make disclosures for the period October 1, 2007 and December 31, 2012.
Is this scheme applicable to persons who are in receipt of Show Cause Notice for the same?
No this scheme is restricted to persons who have not received any show cause notice for the period.
Can an application for this scheme be made when Investigation on an issue of application of Service Tax?
No, if any investigation is pending on any issue that is upto issue of Show Cause Notice, any application made under this scheme would be rejected. However, after the investigation is concluded and SCN has been issued on a certain sissue, application can be made for other issues not covered by the SCN.
Can an application for this scheme be made during the pendency of Audit Proceedings?
Application to this scheme is prohibited during the pendency of Audit Proceedings but it can be applied once the audit is concluded on satisfying other requirements of the scheme
What is the procedure for availing this scheme?
The person desiring to opt for the scheme needs to follow a specific procedure enumerated below:
- Desired person should make an application on or before 31st December 2013 in Form No. VCES – 1 as prescribed vide Notification No. 10/2013 dated 13th May 2013.
- The designated authority shall acknowledge receipt of the application in Form No. VCES – 2 as prescribed vide Notification No. 10/2013 dated 13th May 2013, within 7 working days from the date of receipt of the declaration.
- 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. 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
- On submission of details of full payment of declared service tax and interest if applicable, designated authority shall issue an acknowledgement of discharge of the liability in Form No. VCES – 3 as prescribed vide Notification No. 10/2013 dated 13th May 2013, within 7 working days from the date of receipt of the tax payment details.
To Conclude : This scheme should be viewed as a welcome move by the new players in the Service Industry who are encouraged to come forward with disclosures on their financial details not disclosed before and save from interest and stringent penal provisions.