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Uday N. Kajaria

Salient Features of Service Tax VCES – Voluntary ComplianceEncouragement Scheme 2013

Finance Act 2013 has announced VCES 2013 to provide an opportunity to a person to pay service tax,which he was required to pay, but was not paid; and the same was not detected by tax department as on1st March, 2013. Under the scheme, the person will get exemption f rom payment of Interest and Penaltywhich he was required to pay under the Service Tax provisions.

Based on Notif ication no 10 dated 13th May, 2013, circular no 169 dated 13th May, 2013 and circular no 170dated 8th August, 2013, salient f eature of are given below-

1. Eligibility

A person who was required to pay Service Tax under the Service Tax provisions f or the period1st October 2007 to 31st December, 2012, but remains outstanding as on 1st March, 2013 is eligibleto get benef it of the scheme provided the same was not detected by Service Tax Department as on1st March, 2013.

2. Benefit of the scheme

No interest f or delay in payment of Service Tax. Interest rate was 13 % and 18 % during the schemeperiod.

No Penalty which may be equal to 50% of Service Tax payable

3. VCES Period

The declaration can be f iled f rom 1st October, 2007 to 31st December, 2012. Strictly speaking, thedept cannot compel a person to pay Service Tax af ter a period of 5 year. Hence, no Service Tax maybe paid f or the period 1st October, 2007 to 31st March 2008. However, it may be avoided to avoidlit igation cost.

4. Declaration in f orm VCES-1 (f ormat is given in the notif ication 10) where total amount of Service Tax,Education Cess and SAHE Tax is payable is to be stated.

The Declaration must be supported by working of total dues stated in the VCES-1.

The Declaration must be f iled on or bef ore 31st December, 2013. Since the scheme is ef f ective f rom10th May, 2013, no extension may be expected.

As per clarif ication given in circular 170, show cause notice f or rejection of declaration will be issuedwithin 30 days of f iling of declaration with the dept.

Hence, it is advisable to f ile the declaration at the earliest. Rejection of the declaration means thatthe declarant cannot get benef it of the scheme.

5. VCES 2

Within 7 days of f iling of declaration VCES 1, the dept will issue acknowledgement f or the declarationin VCES 2. ( Pl see notif ication no 10)

6. Payment of Tax Dues declared by the scheme

50 % of total dues declared in the declaration f iled must be paid on or bef ore 31st December,2013. Amount paid under the scheme will not be refunded.

If 50 % amount declared is not paid on or bef ore 31st December, 2013, the declarant cannot getbenef it of the scheme, and the amount may be adjusted against his service tax liability.

Balance 50% is to be paid on or bef ore 30th June, 2014.

Balance amount, if any, as on 1st July, 2014 is to be paid on or bef ore 31st December, 2014 with18% interest.

Balance amount, if any, as on 1st January, 2015 can be recovered by the dept as if it is Service Tax due but not paid.

Details of payment made under the scheme is to be intimated to the dept with details of VCES-2 andamount paid under the scheme

If total amount declared under the scheme is not paid, the person will not get benef it of the scheme.

7. Rejection of the Declaration

The dept may reject the declaration if it f eels that the declaration is “substantially f alse”. In suchcase, the declarant may be required to revise upward “Tax Dues” amount stated in the declarationf iled by him.

Otherwise, he may be required to pay Service Tax with Interest and Penalty.

8. VCES 3

Af ter making total payment under the scheme and af ter getting intimation of the amount paid thedeclarant, the department will issue acknowledgment of discharge of liability in VCES 3 which meansthat the declarant has complied with all requirements and no action can be taken against him “f or thematter” under Service Tax Provisions.

VCES -3 will be issued within 7 days of submission of details of “total dues” paid under the scheme.

Please note that above are only salient f eatures of the scheme. For detailed requirements, please gothrough above mentioned notif ications and circulars which are available on www.servicetax.gov.in.

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Author: Uday N. Kajaria | Chartered Accountant | B.Com, FCA, ACS | Email: uday.kajaria@gmail.com