Service tax evaders face penal action after 31 December: finance secretary

The government has warned service tax evaders to either pay their dues by tomorrow or face penal action, which could include arrest and prosecution even as the Voluntary Compliance Encouragement Scheme (VCES) received over 16,000 applications involving Rs1,500 crore of service tax dues last four days.

The scheme will remain open till midnight of 31 December 2013 and there would be no extension of the scheme since then, finance secretary Sumit Bose told reporters in New Delhi today.

He said the government is making all efforts to help the declarants.

''Tomorrow, the 31st December 2013, the offices will be open till midnight to facilitate acceptance of declarations,'' he said, adding, "I would like to advise that from January 1, 2014 stern action will be taken against service tax evaders and provisions in the Finance Act relating to arrest and prosecution will be enforced in right earnest," said Bose.

The Voluntary Compliance Encouragement Scheme (VCES), which came into effect from May 10, allows a service tax defaulter to pay dues without any penalty or late payment charges.

Under the scheme, a person may make a truthful declaration for the period between 1 October 2007 and 31 December 2013 to the designated authority on or before 31 December 2013 and make payments without penalty, interest or any other penal charges.

Over 40,000 applications, involving tax amount of about Rs5,500 crore, have been filed till 29 December, Bose said, adding, ''This would broadly correspond to Rs55,000 crore of services, which have escaped the tax net.''

He further said, ''today our offices will be open well beyond normal working hours. Tomorrow, our offices will be open till midnight to facilitate acceptance of declaration.''

Pointing out that schemes like VCES are rare opportunities, finance minister P Chidambaram had recently stated, "Countdown has begun and the last date is December 31. Government has made a fair and generous offer, a one-time offer that is not likely to come your way for at least a couple of decades….Therefore, it is in the best interest of everyone to take advantage of the offer."

The scheme was introduced by Chidambaram while presenting the Union Budget for 2013-14.

Of the 1.7 million registered assesses under service tax, only seven lakh were filing returns, Chidambaram had said.

An evasion of service tax of Rs50 lakh and above has now been made a cognisable offence after the passage of current fiscal Finance Bill on 10 May 2013.

The finance ministry has set an indirect tax collection target of Rs5,65,000 crore for 2013-14, through customs, excise and service tax, up from Rs4,73,000 crore collected in the last fiscal.