VCES, 2013 Rules and forms notified
VIDE D.O.F. No. 334/3/2013-TRU dated 28th February, 2013, the JS(TRU) inter alia informed -
"D. Voluntary Compliance Encouragement Scheme, 2013 (VCES)
6.1 A new scheme is proposed to be introduced to encourage voluntary compliance with the following main features:
(i) The scheme can be availed of by non-filers or stop-filers or persons who have not made a truthful declaration in their return. However it will not be applicable to persons against whom any inquiry or investigation is pending by the issue of search warrant or summon or by way of audit;
(ii) The defaulter will be required to make a truthful declaration of all his pending tax dues (from October1, 2007 to December 31, 2012) and pay at least half of that before December 31, 2013; remaining half to be paid by:
(a) June 30, 2014 without interest; or
(b) By December 31, 2014 with interest from July 1, 2014 onwards;
(iii) On compliance with all the requirements the person will have immunity from interest (as specified), penalties and other proceedings;
6.2 The scheme will come into force when the Finance Bill is enacted. It is clarified that the tax-payers will need to settle their dues for the period after December 31, 2012 under the present law."
The Finance Bill, 2013 was enacted on the 10th May, 2013 and the "scheme had very much come into force" except that…there were no rules framed on that day regarding the form and manner of declaration, form and manner of acknowledgement of declaration, manner of payment of tax dues and form and manner of issuing acknowledgement of discharge of tax dues under the Service Tax Voluntary Compliance Encouragement Scheme, 2013.
Nonetheless, no ‘declarant' would have been eager to achieve the distinction of becoming the first to opt for the VCES, 2013 when the fact remains that he has to pay 50% of the declared tax dues by 31 st December, 2013.
Be that as it may, the Central Government has issued a notification 13/2013-ST on the 13th May, 2013 in this regard and has also issued a Circular 169/4/2013-ST informing one and all in the Department (except the general public/tax payer who would be informed through a Trade Notice/Public Notice in the days to come).
The Board has taken this as an opportunity to clarify a few issues as a few references were received by them, obviously from the field formations. They are as below -
S. No. | Issues | Clarification |
|---|---|---|
1 | Whether a person who has not obtained service tax registration so far can make a declaration under VCES? | Any person who has tax dues to declare can make a declaration in terms of the provisions of VCES. If such person does not already have a service tax registration he will be required to take registration before making such declaration. |
2 | Whether a declarant shall get immunity from payment of late fee/penalty for having not taken registration earlier or not filed the return or for delay in filing of return. | Yes. It has been provided in VCES that, beside interest and penalty, immunity would also be available from any other proceeding under the Finance Act, 1994 and Rules made thereunder. |
3 | Whether an assessee to whom show cause notice or order of determination has been issued can file declaration in respect of tax dues which are not covered by such SCN or order of determination? | In terms of section 106 (1) of the Finance Act, 2013 and second proviso thereto, the tax dues in respect of which any show cause notice or order of determination under section 72, section 73 or section 73A has been issued or which pertains to the same issue for the subsequent period are excluded from the ambit of the Scheme. Any other tax dues could be declared under the Scheme subject to the other provisions of the Scheme. |
4. | What is the scope of section 106 (2)(a)(iii)? Whether a communication from department seeking general information from the declarant would lead to invoking of section 106 (2) (a)(iii) for rejection of declaration under the said section? | Section 106 (2) (a)(iii) of the Finance Act, 2013 provides for rejection of declaration if such declaration is made by a person against whom an inquiry or investigation in respect of service tax not levied or not paid or short-levied or short paid, has been initiated by way of requiring production of accounts, documents or other evidence under the chapter or the rules made thereunder, and such inquiry or investigation is pending as on the 1 st day of March, 2013. The relevant provisions, beside section 14 of the Central Excise Act as made applicable to service tax vide section 83 of the Finance Act,1994, under which accounts, documents or other evidences can be requisitioned by the Central Excise Officer for the purposes of inquiry or investigation, are as follows,- (i) Section 72 of the Act envisages requisition of documents and evidences by the Central Excise Officer if any person liable to pay service tax fails to furnish the return or having made a return fails to assess the tax in accordance with the provision of the Chapter or rules made thereunder. (ii) Rule 5A of the Service Tax Rules, 1994 prescribes for requisition of specified documents by an officer authorised by the Commissioner for the purposes specified therein. The provision of section 106 (2)(a)(iii) shall be attracted only in such cases where accounts, documents or other evidences are requisitioned by the authorised officer from the declarant under the authority of any of the above stated statutory provisions and the inquiry so initiated against the declarant is pending as on the 1 st day of March, 2013. No other communication from the department would attract the provisions of section 106 (2)(a)(iii) and thus would not lead to rejection of the declaration. |
We are certain that in the currency of the VCES, 2013 many more clarifications would see the light of the day and wish that the issues that were highlighted in & 2100 also be dwelt upon.
As for the rules, one may opine that the Rule 3 of the VCES, 2013 may act as a dampener.
It reads -
"3. Registration. - Any person, who wishes to make a declaration under the Scheme, shall, if not already registered, take registration under rule 4 of the Service Tax Rules, 1994."
When the fact of the matter is that the scheme envisages a "voluntary disclosure of tax dues', requiring a ‘declarant' to get himself registered would saddle him with the responsibility of keeping his ‘registration' alive and file ST-3 returns long after the sun has set on the scheme.
But this is exactly what the Finance Minister wanted. Take a closer look at the content of paragraph 183 of the budget speech -
"183. While there are nearly 17,00,000 registered assessees under service tax, only about 7,00,000 file returns. Many have simply stopped filing returns. We cannot go after each of them. I have to motivate them to file returns and pay the tax dues. Hence, I propose to introduce a one-time scheme called ‘Voluntary Compliance Encouragement Scheme'. A defaulter may avail of the scheme on condition that he files a truthful declaration of service tax dues since 1.10.2007 and makes the payment in one or two instalments before prescribed dates. In such a case, interest, penalty and other consequences will be waived. I hope to entice a large number of assessees to return to the tax fold. I also hope to collect a reasonable sum of money."
Rule 6(2) appears to be draconian. It says CENVAT credit shall not be utilised for payment of tax dues under the Scheme. It is settled law that even in cases of clandestine clearances, CENVAT Credit is allowed. It is not known what is the intention behind such condition, but it will surely take the ENCOURAGEMENT out of the scheme if there is really any.What about the receiver of the services? Can they take CENVAT Credit of service tax paid under VCES?
Notification , Dated; May 13, 2013 & Circular , Dated; May 14, 2013