VCES, 2013 - The carrot and guillotine policy?
A Netizen writes in -
"In paragraph 183 of the Budget speech, the Finance Minister mentioned -
"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."
A careful reading of the above would reveal that the FM hopes to entice a large number of assessees to RETURN to the tax fold. The verb "Return"read in juxtaposition to the opening sentence would mean that the scheme is for "MOTIVATING" the 10,00,000 registered assessees who have stopped filing returns to come back to the tax fold.
If this be so, then the ST Voluntary Compliance Encouragement Rules, 2013 also speaks of a category distinct than those that are being lured back into the tax fold.
These are "first-timers"who have managed to hide their Service Tax liability all these years viz. from 1 st October, 2007 to 31 st December, 2012.
And this is clear from a reading of Rule 3 of the Rules which 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."
So, the fact of the matter is that the Service Tax Voluntary Compliance Encouragement Rules, 2013 have expanded their brief thanks to the provisions of section 114 of the FA, 2013 which allows the Central Government to make rules for carrying out the provisions of the scheme.
The next question is about the manner of payment of the "tax dues" that would be declared under the VCES, 2013.
Rule 6 of the ST VCE Rules, 2013 provides an answer -
6. Payment of tax dues.- (1) The tax dues payable under the Scheme along with interest, if any, under section 107 of the Act shall be paid to the credit of the Central Government in the manner prescribed for the payment of service tax under the Service Tax Rules, 1994.
(2) The CENVAT credit shall not be utilised for payment of tax dues under the Scheme .
Why complicate and create confusion by mentioning '…in the manner prescribed for payment of service tax under the STR, 1994 '.
For Example:. If a 'declarant' who is also registered under rule 4 of the STR, 1994 chooses to follow the manner prescribed in rule 6 of the STR, 1994 what is the Central Government going to do about it?
It would have been prudent to mention in clear terms that the "dues"declared under the Voluntary Compliance Encouragement Scheme should be paid in "CASH"in a similar fashion as was prevalent under the KVSS, 1998.
The contents of rule 6(2) can also be interpreted in the following manner -
+ Admittedly, the CENVAT credit cannot and would not be used for payment of "tax dues"under the VCES, 2013;
+ For an existing registered assessee, it is a possibility that he has availed CENVAT credit on the Inputs as well as Input Services etc. but has not discharged Service Tax on a service which was hitherto hidden from the knowledge of the department. In such a case, the CENVAT credit availed, the assessee would be/may be able to utilize once his "tax dues"are settled;
+ However, for a declarant who registers himself pursuant to the mandate of Rule 3 of the Rules, 2013 (supra), he would be a loser, inasmuch as such he may be in possession of duty paid/tax paid invoices but has not availed CENVAT credit and is also barred from utilizing such credit for payment of the "tax dues". The only recourse he would have is that after payment of the tax dues, he could/would take CENVAT credit of duty/tax paid on all such inputs/input services that were utilized/consumed during the period 1 st October, 2007 to 31 st December, 2012 and for which period he has opted for the VCES.
As mentioned in yesterday, even in cases of clandestine clearances of excisable goods, CENVAT credit is allowed once the duty liability is accepted and paid. In such an eventuality, there ought not to have been any bar on utilisation of CENVAT for payment of "tax dues"under VCES, 2013.
So also, the question, whether upon payment of the "tax dues"under VCES the same is CENVAT able at the end of the service receiver, by applying or otherwise, the provisions of rule 9 of the CENVAT is also not answered.
It is felt that a "Help Desk" be formed at the Board level and a toll-free number be allotted for prospective 'declarants' to seek answers to their queries.
The CBEC may also consider bringing out a FAQ booklet on VCES, 2013 quickly but ensure that it contains "succinct answers"to all possible queries a prospective declarant and the 'designated authority' can think of!"
DDT feels that the Board should respond before the VCES, 2013 engine starts gathering momentum.