There can never be a scheme like VCES, Grab IT: FM
YOU can never find a Finance Minister like him anywhere in the world. Yesterday evening he had to attend the crucial Group of Ministers (GOM) Meeting on Telangana, Parliament starts its winter session today and amidst all this busy schedule, the one and only Palaniappan Chidambaram, takes off to Bangalore and the epicentre of the Telangana storm - Hyderabad - to sell his favourite scheme - Service Tax VCES. A GOM Member being present in the capital of the future Telangana State is itself a little adventure - no wonder he asked the Press to leave the place before his interaction with the Trade and a kind Service Tax officer informed the Press that their refreshments and vehicles were waiting for them outside.
'No interest, No penalty and No questions asked, VCES is a once in a life time offer; therefore take full advantage of it', the FM said. Schemes like this never come quite often. Last time VDS scheme for central excise was announced in 1998 and it took 16 years for the government to come up with another voluntary compliance scheme like VCES. While explaining the need for it, he said there are around 17 lakh registered Service Tax assesses, out of which only around 7 Lakh assesses are filing returns. [When will somebody tell him that the mythical 10 lakh assessees don't exist?] All these stop filers/non filers should make use of the scheme, come clean and pay service tax. He said till today about 9000 declarations have been received out of which only 107 declarations were rejected, which means about 98.85% of declarations were accepted. Clearing the apprehensions about rejection of declaration, he said the effort is to accept the declaration not to reject it. He said instructions were given to field formations to accept the declarations and collect taxes and not to reject the declarations by giving any wider interpretation to the Section 106 of FA. He further added that all the rejected declarations would be re examined again by a committee to be constituted somewhere in January 2014 and if need be, he himself would examine the rejected declaration so as to give an opportunity to the assessees to avail benefit of the scheme. While cautioning the fence sitters, he said so far 15 arrests have been made under service tax for not depositing the tax collected and said he did not want any more arrests to be made as the department is having information about 360 degrees transaction of service providers through various sources. Calling the Service Tax Voluntary Compliance Encouragement Scheme (VCES) a rare opportunity to make a "fresh start", Finance Minister asked those in trade and industry to seize the offer, even as he made it clear that tax evaders would eventually be "reached". Countdown has begun and the last date is December 31, he added.He questioned, 'when you are honest in most of your transactions in day to day life, then why don't you be honest when it comes to payment of tax?.'
After a brief speech for about five minutes, the FM invited questions from the assessees. While replying to a question he clarified categorically that service tax paid under VCES is available as input credit to service recipient and the amount paid can be passed on to service recipient as credit.The FM mentioned about this in the Mumbai meeting too but no assurance from the Board in this regard. Later it is feared that the same department will argue in Court that the Public Statement (for that matter even the budget speech) of the Finance Minister is not the LAW. Many senior Central Excise officers told us that there is no question of allowing CENVAT Credit. Board should give a clarification immediately.
A representative of the Tradeasked that if the government comes out with a clarification that no tax be paid for residential constructions done before 1/07/2010, then many builders are ready to file VCES declarations for the period after 1/7/2010.
The FM said law couldn't be changed for the purpose of VCES. It is the duty of the competent authorities to decide liability. FM cannot decide liability across the table.
A representative of Trade asked if the government included the cases where notices issued but adjudication was not done so far also under VCES, many assessees are likely to come forward.
The FM replied that law couldn't be changed and said that there are Supreme Court directions that during VDS government cannot give blanket amnesty scheme.
To a question whether VCES declaration can be filed for the period for which ST-3 filed without paying service tax (ST-3 filed for 2012-13 but service tax not paid but declared in the return as due), he replied, 'You cannot file declaration for the period for which ST-3 has been filed, but you can file declaration for the period where no ST-3 is filed.'
The FM's understanding and knowledge over intricate details of service tax law was clearly visible during the interactive session, where even senior officers holding the field quite often fumble.
While concluding the FM said that if he were a lawyer or Chartered Accountant or a tax consultant he would have advised his client to take full advantage of the scheme, as there can be no better scheme than this.
"The root is declarations will be accepted... I'm here to collect money; I'm here to collect tax. As far as possible accept the declaration and collect the tax. We are not interested in punishing you and make life difficult for you. We are here to collect tax, we will collect it fairly- we want you to seize this opportunity and pay the service tax," he said.
The FM is serious about the Scheme - now it is for the officers to make the Scheme a success.
Embarrassing moments for Department:
The meeting also witnessed some embarrassing moments for senior officers of the Department.
When one of the assessees raised an issue that the Assistant Commissioner has issued order imposing fine and penalty when he filed VCES declaration. The FM was visibly serious and enquired from the Commissioner how this could happen. He directed the Commissioner to give the assessee an appointment today and sort out the issue immediately.
A representative from the film industry said that they were not sure of their liability on an activity which would come under Copy Right Act and stated that they sought for clarification from the Commissioner, which is pending with him. The FM asked the Commissioner concerned to find out the reasons for delay in giving clarification. The Commissioner replied that he made a reference to the Chief Commissioner on the issue two months ago and he is yet receive any reply from him. The FM immediately turned to the Chief Commissioner and the Chief Commissioner had to admit that he was not aware of receiving any such reference from the Commissioner, but he has to verify. The FM asked the Chief Commissioner how far his office was from the Commissioner's office - it is in the same building. The FM asked the Chief Commissioner to give appointment to the assessee today and give the clarification immediately on the issue.
The FM did not allow the assessees to deviate from the agenda-VCES- by not allowing any questions other than those concerning with VCES or issues concerning taxation policies.
An assessee who attended the meeting and briefed TIOL about the proceedings was simply floored with the FM's understanding and knowledge over intricate details of service tax law.