SERVICE TAX VOLUNTARY COMPLIANCE ENCOURAGEMENT SCHEME, 2013 with RULES, 2013

Transcription

1 SERVICE TAX VOLUNTARY COMPLIANCE ENCOURAGEMENT SCHEME, 2013 with RULES, 2013

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3 SERVICE TAX VOLUNTARY COMPLIANCE ENCOURAGEMENT SCHEME, 2013 with RULES, 2013 by CA. ATUL KUMAR GUPTA B. Com (H), FCA, AICWA, MIMA

4 First Edition August 2013 AUTHOR PUBLICATION RIGHTS OF SUBSEQUENT EDITIONS WITH THE PUBLISHERS NO PART OF THIS BOOK MAY BE REPRODUCED BY ANY MANNER WHATSOEVER OR TRANSLATED IN ANY OTHER LANGUAGE WITHOUT PERMISSION IN WRITING OF THE PUBLISHERS While every effort has been taken to avoid errors, the author, publishers and their agents/dealers are not responsible for the consequences of any action taken on the basis of this book PRICE ` 300 Printed in India With the Blessings of MATA VAISHNO DEVI

5 PREFACE It has always been our endeavor to provide all the members of society an updated knowledge of service tax. This helps not only in self compliance but also assist all the stakeholders of the profession, may it be peers, industry, clients. Our earlier editions of book titled Introduction of Service Tax, Comprehensive Guide on Service Tax, Convergence of Accrual System of Taxation and Do you Know Series have always tried to provide quality advice and regular updation on service tax matters. Now it gives us immense pleasure to bring out a book on Voluntary Compliance Encouragement Scheme introduced by Finance Act, It contains detailed analysis of the scheme, its rules along with frequently asked questions. The main objective of this book is to evaluate the provisions of the VCES in detail so as to find out the impact on Assessee. Hope, this part will add to the comprehensiveness and assist the readers in their professional endeavours, and will, we doubt not, meet with favour equal to that of the parts previously published. The suggestions for advancement in this book are always welcome and will be highly appreciated. Atul Kumar Gupta New Delhi 12 August, 2013

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7 CONTENTS Chapter 1 Introduction 9 Chapter 2 Amnesty Scheme 11 Chapter 3 Chapter 4 Chapter 5 Chapter 6 How Amnesty Scheme Will Work A Power Point Presentation 15 Service Tax Voluntary Compliance Encouragement Scheme, Service Tax Voluntary Compliance Encouragement Rules, Departmental Circular 169/4/2013 on the Amnesty Scheme 29 Chapter 7 Frequently Asked Questions 32 Chapter 8 Departmental Circular on the Amnesty Scheme Circular No. 170/5 /2013-ST 55

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9 CHAPTER 1 INTRODUCTION To achieve substantial growth in Service Tax Collection and to broaden tax base, Central Government introduced Negative List Approach vide Finance Act, However, even after one year, this step could not achieve its objective in totality; main reason behind this could be non-compliance by tax payers. Therefore, to encourage voluntary compliance and broaden the tax base, The Hon ble Finance Minister in the Budget has announced Voluntary Compliance Encouragement Scheme, 2013 to provide one time amnesty by way of (i) waiver of interest and penalty; and (ii) immunity from prosecution, to the Defaulters i.e. stop filers, non-filers or non-registrants or service providers (who have not disclosed true liability in the returns filed by them during the period from October 2007 to December 2012), who make a truthful declaration of all his pending tax dues (from October1, 2007 to December 31, 2012) and pay the same. The scheme is similar to Extra-ordinary Taxpayer Friendly Scheme announced in the Budget Year vide Board Circular No. 137/39/2004-CX4, dated to be operational upto for instant registration of Service Tax providers. This scheme aimed to register all service providers on the basis of their declaration with regard to his past liabilities towards the Service Tax and interest payable and who had earlier failed to register themselves with the department due to ignorance or any other reason with full waiver of penalty. The new Amnesty scheme is, however, an improved one over the old scheme in so far as assessee gets complete waiver not only of penalty but also of interest obligation. Also, issue of registration is taken care of in an indirect manner unlike old Taxpayer friendly Scheme by ensuring that to make the declaration under scheme, Declarant would be first required to get himself registered with Service Tax Department. While presenting their Budget Speech in Parliament for the session on February 28th, 2013, The Hon ble Finance Minister Shri P. Chidambaram in Para 183 stated that: 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 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

10 10 Introduction Chap. 1 entice a large number of assessees to return to the tax fold. I also hope to collect a reasonable sum of money. In the nutshell, on one hand where the Amnesty Scheme would be benefiting the certain tax-payers/defaulters to pay all their pending dues without any consequential interest and penalty obligations, it would be contributing a lot towards broadening the tax base of Government by bringing a large number of assessees within the purview of Service tax not registered so far and enhancement of Service Tax collection by inviting payment of long awaited dues which could otherwise have escaped from being assessed.

11 CHAPTER 2 AMNESTY SCHEME 1.1 Scope of the Scheme and Date of its Applicability The Scheme is applicable only for tax due or payable under the Chapter V of Finance Act, 1994 or any other amount due or payable under section 73A thereof, for the period beginning from the 1st day of October, 2007 and ending on the 31st day of December, 2012 including a cess leviable thereon under any other Act for the time being in force, but not paid as on the 1st day of March, Details of the scheme are available in Chapter VI of the Finance Act, 2013 (17 of 2013) given in Chapter 3 and will become operational from 10th May, 2013 i.e. date on which the Finance Bill, 2013 receives the assent of the President till 31st December Person who can apply for the Scheme Any person may declare his tax dues in respect of which no notice or order for determination has been issued or made under Section 72, Section 73 or Section 73A of Finance Act, 1994 before 1st March 2013 except Any person who has furnished return under section 70 of the Chapter and disclosed his true liability, but has not paid the disclosed amount of service tax or any part thereof, shall not be eligible to make declaration for the period covered by the said return; Person on whom notice or order of determination has been issued in respect of any period on any issues can not file declaration on such issue for any subsequent period. 1.3 How to apply for Scheme Any person eligible and wishing to apply for the Scheme shall take the following steps: (a) Take registration under rule 4 of the Service Tax Rules, 1994, if not already registered; (b) Make the declaration to the designated authority in Form VCES -1 on or before the 31st day of December, 2013 in respect of his tax dues ; where Designated Authority shall be an officer not below the rank of Assistant Commissioner of Central Excise as notified by the Commissioner of Central Excise for the purposes of this Scheme. 1.4 Procedure on receipt of Declaration On receipt of declaration from Declarant, the Designated Authority shall issue an acknowledgment thereof, in Form VCES-2 with a period of seven working days

12 12 Amnesty Scheme Chap. 2 from the date of receipt of declaration. However, where a declaration has been made by a person against whom, (a) an inquiry or investigation in respect of a service tax not levied or not paid or short-levied or short-paid has been initiated by way of (i) search of premises under section 82 of the Chapter; or (ii) issuance of summons under section 14 of the Central Excise Act,1944, as made applicable to the Chapter under section 83 thereof; or (iii) requiring production of accounts, documents or other evidence under the Chapter or the rules made thereunder; or (b) an audit has been initiated, and such inquiry, investigation or audit is pending as on the 1st day of March, 2013, then, the designated authority shall, by an order, and for reasons to be recorded in writing, reject such declaration. 1.5 Payment of Tax Dues and Acknowledgment thereof Where the declaration made by a person under Scheme has been accepted by Designated Authority, Declarant shall proceed to make the payment of Tax dues declared by him in VCES-1 as under: To pay not less than fifty per cent of the tax dues so declared along with submission of proof of such payment to the designated authority on or before the December 31st, Balance of the tax due declared but not paid shall be required to be paid by the declarant on or before the June 30th, However, in case a declarant fails to make the balance payment on or before June 30th, 2014, shall pay the same on or before December 31st, 2014 along with the interest thereon for the period of delay starting from No CENVAT credit shall be utilised for payment of tax dues under the Scheme. The declarant shall furnish to the designated authority details of payment made from time to time under this Scheme along with a copy of acknowledgement issued to him in the form VCES-2. On furnishing the details of full payment of declared tax dues and the interest, if any, the designated authority shall issue an acknowledgement thereof, to the declarant in Form VCES-3 within a period of seven working days from the date of furnishing of details of payment of tax dues in full along with interest, if any, by the declarant. No refund of amount paid under the scheme under any circumstances

13 Chap. 2 Amnesty Scheme Immunity from penalty, interest and other proceeding. The declarant, on receipt of acknowledgment from Designated Authority in the Form VCES-3 shall get complete immunity from penalty, interest or any other proceeding under the provisions of Finance Act, 1994 and no matter shall be reopened thereafter in any proceedings under the Chapter before any authority or court relating to the period covered by such declaration. 1.7 Tax dues declared but not paid Where the declarant fails to pay the tax dues, either fully or in part, as declared by him, such dues along with interest thereon shall be recovered under the provisions of section 87 of the Finance Act, 1994 which reads as under. Section 87. Recovery of any amount due to Central Government Where any amount payable by a person to the credit of the Central Government under any of the provisions of this Chapter or of the rules made thereunder is not paid, the Central Excise Officer shall proceed to recover the amount by one or more of the modes mentioned below: (a) the Central Excise Officer may deduct or may require any other Central Excise Officer or any officer of customs to deduct the amount so payable from any money owing to such person which may be under the control of the said Central Excise Officer or any officer of customs; (b) (i) the Central Excise Officer may, by notice in writing, require any other person from whom money is due or may become due to such person, or who holds or may subsequently hold money for or on account of such person, to pay to the credit of the Central Government either forthwith upon the money becoming due or being held or at or within the time specified in the notice, not being before the money becomes due or is held, so much of the money as is sufficient to pay the amount due from such person or the whole of the money when it is equal to or less than that amount; (ii) every person to whom a notice is issued under this section shall be bound to comply with such notice, and, in particular, where any such notice is issued to a post office, banking company or an insurer, it shall not be necessary to produce any pass book, deposit receipt, policy or any other document for the purpose of any entry, endorsement or the like being made before payment is made, notwithstanding any rule, practice or requirement to the contrary; (iii) in a case where the person to whom a notice under this section is sent, fails to make the payment in pursuance thereof to the Central Government, he shall be deemed to be an assessee in default in respect of the amount specified in the notice and all the consequences of this Chapter shall follow;

14 14 Amnesty Scheme Chap. 2 (c) the Central Excise Officer may, on an authorisation by the Commissioner of Central Excise, in accordance with the rules made in this behalf, distrain any movable or immovable property belonging to or under the control of such person, and detain the same until the amount payable is paid; and in case, any part of the said amount payable or of the cost of the distress or keeping of the property, remains unpaid for a period of thirty days next after any such distress, may cause the said property to be sold and with the proceeds of such sale, may satisfy the amount payable and the costs including cost of sale remaining unpaid and shall render the surplus amount, if any, to such person; (d) the Central Excise Officer may prepare a certificate signed by him specifying the amount due from such person and send it to the Collector of the district in which such person owns any property or resides or carries on his business and the said Collector, on receipt of such certificate, shall proceed to recover from such person the amount specified thereunder as if it were an arrear of land revenue. 1.8 Failure to make true declaration Where the Commissioner of Central Excise has reasons to believe that the declaration made by a declarant under this Scheme was substantially false, he may, for reasons to be recorded in writing, serve notice on the declarant in respect of such declaration, before the expiry of one year from the date of declaration, requiring him to show cause why he should not pay the tax dues not paid or short-paid. The power to issue notice is irrespective of declarant has been issued VCES-3 for the period or not. 1.9 Payment of Service Tax liability for the period onwards Any service tax which becomes due or payable by the declarant for the month of January, 2013 and subsequent months shall be paid by him in accordance with the provisions of the Chapter and accordingly, interest for delay in payment thereof, shall also be payable under the Chapter.

15 CHAPTER 3 HOW AMNESTY SCHEME WILL WORK A POWER POINT PRESENTATION Scheme Service Tax Voluntary Compliance Encouragement Scheme, 2013 Applicable from when? Benefit available? Who can apply? What is the Procedure? Application and Benefit 10th May 2013 till 31st December 2013 Tax Due Only tax dues/payable can be deposited. Interest, Penalty and Prosecution will be waived off. Section 108(1) Means the service tax due or payable under the chapter or any other amount due or payable under Section 73A thereof, for the period from 1st day of October 2007 and ending on the 31st day of December 2012 including a cess leviable thereon under any Act for the time being in force, but not paid as on the 1st day of March 2013.

16 16 How Amnesty Scheme Will Work A Power Point Presentation Chap. 3 Who Can t Apply [Section 106(1)] Person who have filed the return u/s 70 and disclosed his true liability but have not paid the disclosed amount of service tax or part thereof can not made declaration for the period covered. Any Person against whom any notice or an order of determination u/s 72, 73 or 73A has been issued or made before 1st March, A person to whom a notice or an order or determination has been issued in respect of any period or any issue, no declaration shall be made of his tax dues on the same issue for any subsequent period. Who Can Apply Department shall reject recording reasons [Sec 106(2)] Persons on whom any enquiry or investigation in respect of service tax not levied, not paid or short levied or short paid has been initiated by way of Search of premises under Section 82 of the Chapter. Issuance of Summon u/s 14 of CEA Requiring production of Accounts, documents or other evidence under the chapter or the rules; or An audit has been initiated. And such inquiry, investigation or audit is pending as on 1st day of March Requiring production of Accounts, Documents or other Evidence under the Chapter or Rule Circular No 169/4/2013 dated 13th May Clarifies: For the above terms only notice issued under Section 72 of the Finance Act and under Rule 5A of the Service Tax Rules 1994 will invoke rejection of declaration. Section 14 of Central Excise Act, 1944 SECTION 14: Power to summon persons to give evidence and produce documents in inquiries under this Act. (1) Any Central Excise Officer duly empowered by the Central Government in this behalf, shall have power to summon any person whose attendance he considers necessary either to give evidence or to produce a document

17 Chap. 3 How Amnesty Scheme Will Work A Power Point Presentation 17 or any other thing in any inquiry which such officer is making for any of the purposes of this Act. A summons to produce documents or other things may be for the production of certain specified documents or things or for the production of all documents or things of a certain description in the possession or under the control of the person summoned. (2) All persons so summoned shall be bound to attend, either in person or by an authorised agent, as such officer may direct; and all persons so summoned shall be bound to state the truth upon any subject respecting which they are examined or make statements and to produce such documents and other things as may be required: Section 72 Best Judgment Assessment If any person, liable to pay Service Tax (a) fails to furnish the return under section 70; (b) having made a return, fails to assess the tax in accordance with the provisions of this Chapter or rules made there under, the Central Excise Officer, may require the person to produce such accounts, documents or other evidence as he may deem necessary and after taking into account all the relevant material which is available or which he has gathered, shall by an order in writing, after giving the person an opportunity of being heard, make the assessment of the value of taxable service to the best of his judgment and determine the sum payable by the assessee or refundable to the assessee on the basis of such assessment. Section 73 Recovery of Service Tax not levied or paid or Short levied or Short-paid or Erroneously Refunded (1) Where any service tax has not been levied or paid or has been shortlevied or short-paid or erroneously refunded, the Central Excise Officer may, within eighteen months from the relevant date, serve notice on the person chargeable with the service tax which has not been levied or paid or which has been short-levied or short-paid or the person to whom such tax refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice.

18 18 How Amnesty Scheme Will Work A Power Point Presentation Chap. 3 Section 73A Service Tax Collected from any person to be deposited with Central Government (1) Any person who is liable to pay service tax under the provisions of this Chapter or the rules made thereunder, and has collected any amount in excess of the service tax assessed or determined and paid on any taxable service under the provisions of this Chapter or the rules made there under from the recipient of taxable service in any manner as representing service tax, shall forthwith pay the amount so collected to the credit of the Central Government. (2) Where any person who has collected any amount, which is not required to be collected, from any other person, in any manner as representing service tax, such person shall forthwith pay the amount so collected to the credit of the Central Government. (3) Where any amount is required to be paid to the credit of the Central Government under sub-section (1) or sub-section (2) and the same has not been so paid, the Central Excise Officer shall serve, on the person liable to pay such amount, a notice requiring him to show cause why the said amount, as specified in the notice, should not be paid by him to the credit of the Central Government. Procedure 1/4 Person will apply in Form VCES 1 to designated authority (DA) on or before 31st December Section 106(1) DA will acknowledge within 7 days for receipt. Section 106(2) Declarant shall pay on or before 31st Dec 2013 not less than 50% so declared and has to submit proof of such payment to DA. Section 106(3) Remaining Part to pay on or before 30th June Section 106(4)

19 Chap. 3 How Amnesty Scheme Will Work A Power Point Presentation 19 Procedure 2/4 In case fail to pay before 30th June 2014, then can pay till 31st Dec 2014 with interest as applicable under section 75 [Section 106 (4)] Meaning thereby there is no interest provision for amount payable till 31st December 2013 Procedure 3/4 After furnishing details of full payment of declared tax and interest if any, the DA shall issue an acknowledgment of discharge of such dues. Section 106(7) Once the acknowledgment of discharge of such dues Section 106(7), no matter shall be reopened thereafter in any proceedings to the period covered by such declaration. [Section 108(2)] Any amount paid in pursuance of declaration made shall not be refundable under any circumstances. [Section 109] Procedure 4/4 Where declarant fails to pay due tax either fully or partly as declared by him, such dues along with interest shall be recovered as under Section 87 of the Act. [Section 110] Where the CCE has reason to believe that the declaration made was substantially false, he may issue Show cause notice, within one year from date of declaration. Thank You and Your Query Please. CA. Atul Kumar Gupta (M) atul@servicetax.net pctl@rediffmail.com

20 CHAPTER 4 SERVICE TAX VOLUNTARY COMPLIANCE ENCOURAGEMENT SCHEME, 2013 THE FINANCE ACT, 2013 (17 of 2013) CHAPTER VI Service Tax Voluntary Compliance Encouragement Scheme, Short title. This Scheme may be called the Service Tax Voluntary Compliance Encouragement Scheme, Definitions. (1) In this Scheme, unless the context otherwise requires, (a) Chapter means Chapter V of the Finance Act, 1994; (b) declarant means any person who makes a declaration under subsection (1) of section 97; (c) designated authority means an officer not below the rank of Assistant Commissioner of Central Excise as notified by the Commissioner of Central Excise for the purposes of this Scheme; (d) prescribed means prescribed by rules made under this Scheme; (e) tax dues means the service tax due or payable under the Chapter or any other amount due or payable under section 73A thereof, for the period beginning from the 1st day of October, 2007 and ending on the 31st day of December, 2012 including a cess leviable thereon under any other Act for the time being in force, but not paid as on the 1st day of March, (2) Words and expressions used herein and not defined but defined in the Chapter or the rules made thereunder shall have the meanings respectively assigned to them in the Chapter or the rules made thereunder Person who may make declaration of tax dues. (1) Any person may declare his tax dues in respect of which no notice or an order of determination under section 72 or section 73 or section 73A of the Chapter has been issued or made before the 1st day of March, 2013: Provided that any person who has furnished return under section 70 of the Chapter and disclosed his true liability, but has not paid the disclosed amount of service tax or any part thereof, shall not be eligible to make declaration for the period covered by the said return:

21 Chap. 4 ST Voluntary Compliance Encouragement Scheme, Provided further that where a notice or an order of determination has been issued to a person in respect of any period on any issue, no declaration shall be made of his tax dues on the same issue for any subsequent period. (2) Where a declaration has been made by a person against whom, (a) an inquiry or investigation in respect of a service tax not levied or not paid or short-levied or short-paid has been initiated by way of (i) search of premises under section 82 of the Chapter; or (ii) issuance of summons under section 14 of the Central Excise Act, 1944, as made applicable to the Chapter under section 83 thereof; or (iii) requiring production of accounts, documents or other evidence under the Chapter or the rules made thereunder; or (b) an audit has been initiated, and such inquiry, investigation or audit is pending as on the 1st day of March, 2013, then, the designated authority shall, by an order, and for reasons to be recorded in writing, reject such declaration Procedure for making declaration and payment of tax dues. (1) Subject to the provisions of this Scheme, a person may make a declaration to the designated authority on or before the 31st day of December, 2013 in such form and in such manner as may be prescribed. (2) The designated authority shall acknowledge the declaration in such form and in such manner as may be prescribed. (3) The declarant shall, on or before the 31st day of December, 2013, pay not less than fifty per cent. of the tax dues so declared under sub-section (1) and submit proof of such payment to the designated authority. (4) The tax dues or part thereof remaining to be paid after the payment made under sub-section (3) shall be paid by the declarant on or before the 30th day of June, 2014: Provided that where the declarant fails to pay said tax dues or part thereof on or before the said date, he shall pay the same on or before the 31st day of December, 2014 along with interest thereon, at such rate as is fixed under section 75 or, as the case may be, section 73B of the Chapter for the period of delay starting from the 1st day of July, (5) Notwithstanding anything contained in sub-section (3) and sub-section (4), any service tax which becomes due or payable by the declarant for the month of January, 2013 and subsequent months shall be paid by him in accordance with the provisions of the Chapter and accordingly, interest for delay in payment thereof, shall also be payable under the Chapter.

22 22 ST Voluntary Compliance Encouragement Scheme, 2013 Chap. 4 (6) The declarant shall furnish to the designated authority details of payment made from time to time under this Scheme along with a copy of acknowledgement issued to him under sub-section (2). (7) On furnishing the details of full payment of declared tax dues and the interest, if any, payable under the proviso to sub-section (4), the designated authority shall issue an acknowledgement of discharge of such dues to the declarant in such form and in such manner as may be prescribed Immunity from penalty, interest and other proceeding. (1) Notwithstanding anything contained in any provision of the Chapter, the declarant, upon payment of the tax dues declared by him under sub-section (1) of section 97 and the interest payable under the proviso to sub-section (4) thereof, shall get immunity from penalty, interest or any other proceeding under the Chapter. (2) Subject to the provisions of section 101, a declaration made under sub-section (1) of section 97 shall become conclusive upon issuance of acknowledgement of discharge under sub-section (7) of section 97 and no matter shall be reopened thereafter in any proceedings under the Chapter before any authority or court relating to the period covered by such declaration No refund of amount paid under the Scheme. Any amount paid in pursuance of a declaration made under sub-section (1) of section 97 shall not be refundable under any circumstances Tax dues declared but not paid. Where the declarant fails to pay the tax dues, either fully or in part, as declared by him, such dues along with interest thereon shall be recovered under the provisions of section 87 of the Chapter Failure to make true declaration. (1) Where the Commissioner of Central Excise has reasons to believe that the declaration made by a declarant under this Scheme was substantially false, he may, for reasons to be recorded in writing, serve notice on the declarant in respect of such declaration requiring him to show cause why he should not pay the tax dues not paid or shortpaid. (2) No action shall be taken under sub-section (1) after the expiry of one year from the date of declaration. (3) The show cause notice issued under sub-section (1) shall be deemed to have been issued under section 73, or as the case may be, under section 73A of the Chapter and the provisions of the Chapter shall accordingly apply Removal of doubts. For the removal of doubts, it is hereby declared that nothing contained in this Scheme shall be construed as conferring any benefit, concession or immunity on the declarant other than the benefit, concession or immunity granted under section 98. Immunity 113. Power to remove difficulties. (1) If any difficulty arises in giving effect to the provisions of this Scheme, the Central Government may, by order, not inconsistent with the provisions of this Scheme, remove the difficulty:

23 Chap. 4 ST Voluntary Compliance Encouragement Scheme, Provided that no such order shall be made after the expiry of a period of two years from the date on which the provisions of this Scheme come into force. (2) Every order made under this section shall, as soon as may be after it is made, be laid before each House of Parliament Power to make rules. (1) The Central Government may, by notification in the Official Gazette, make rules for carrying out the provisions of this Scheme. (2) Without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matters, namely: (a) the form and the manner in which a declaration may be made under subsection (1) of section 97; (b) the form and the manner of acknowledging the declaration under sub-section (2) of section 97; (c) the form and the manner of issuing the acknowledgement of discharge of tax dues under sub-section (7) of section 97; (d) any other matter which is to be, or may be, prescribed, or in respect of which provision is to be made, by rules. (3) The Central Government shall cause every rule made under this Scheme to be laid, as soon as may be after it is made, before each House of Parliament, while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the rule or both Houses agree that the rule should not be made, the rule shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule.

24 CHAPTER 5 SERVICE TAX VOLUNTARY COMPLIANCE ENCOURAGEMENT RULES, 2013 Notification No. 10/2013-ST, dated In exercise of the powers conferred by sub-sections (1) and (2) of section 114 of the Finance Act, 2013 (17 of 2013), the Central Government hereby makes the following rules 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, namely: 1. Short title and commencement. (1) These rules may be called the Service Tax Voluntary Compliance Encouragement Rules, (2) They shall come into force on the date of its publication in the Gazette of India. 2. Definitions. (1) In these rules, unless the context otherwise requires, (a) Act means the Finance Act, 2013; (b) Form means the Forms annexed to these rules. (c) Scheme means the Service Tax Voluntary Compliance Encouragement Scheme, 2013 as specified in the Act; (2) Words and expressions used but not defined in these rules but defined in the Scheme shall have the meanings respectively assigned to them in the Scheme. 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, Form of declaration. The declaration under sub-section (1) of section 107 of the Act, in respect of tax dues under the Scheme shall be made in Form VCES Form of acknowledgment of declaration. The designated authority on receipt of declaration shall issue an acknowledgement thereof, in Form VCES -2, within a period of seven working days from the date of receipt of the declaration. 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.

25 Chap. 5 ST Voluntary Compliance Encouragement Rules, (2) The CENVAT credit shall not be utilised for payment of tax dues under the Scheme. 7. Form of acknowledgement of discharge. (1) The designated authority shall issue an acknowledgement of discharge under sub-section (7) of section 107 of the Act, in Form VCES-3. (2) The acknowledgement of discharge shall be issued within a period of seven working days from the date of furnishing of details of payment of tax dues in full along with interest, if any, by the declarant. FORM VCES-1 Declaration under sub-section (1) of section 107 of the Act 1. Name of the declarant [See rule 4] [In duplicate] (Please read the instructions carefully before filling the form) 2. Address of the declarant 3. Telephone No. 4. id 5. Service Tax Code (STC No.) 6. Details of tax dues* A Service tax ` B Education cess ` C D Secondary & Higher Education Cess Amount under section 73A of the Finance Act, 1994 ` ` E Total Tax dues* [A+B+C+D] ` *Furnish a calculation sheet separately [for the purposes of calculation of tax dues, the manner of calculation as prescribed in S. No. 3F(I), or as the case may be, the Part B of Form ST-3, as existed during relevant period may be used and calculation of tax dues may be furnished tax return period wise, and service wise if the tax dues relates to more than one service.]

26 26 ST Voluntary Compliance Encouragement Rules, 2013 Chap. 5 VERIFICATION I...(name in block letters) son/daughter of Shri... solemnly declare that I have read and understood the Service Tax Voluntary Compliance Encouragement Scheme as contained in Chapter VI of the Finance Act, 2013, and to the best of my knowledge and belief, (a) the information given in this declaration and the enclosures accompanying it are correct and complete and the amount of tax dues and other particulars shown therein are truly stated; (b) the tax dues declared above do not attract the provisions of sub-section (1), including the provisos thereto, of section 106 of the Act; (c) no inquiry, investigation or audit is pending against the declarant as on the 1st day of March, 2013 as envisaged in sub-section (2) of section 106 of the Act; I further declare that I am authorised to make this declaration and verify it on behalf of the declarant in the capacity as... Enclosures: S. No. Details of enclosure/statement annexed 1 Calculation sheet in respect of tax dues (refer S. No. 6 above and the instructions) 2 Any other documents (please specify) Signature of the declarant/authorised person with stamp Place: Declaration No. (To be assigned by the department) Instructions: Date Date: 1. The Scheme has been prescribed in the Chapter VI of the Act. The provisions contained therein may please be read carefully (refer 2. This Form shall be submitted to the Central Excise Officer notified as designated authority under section 105(c) of the Act. 3. The tax dues may be computed separately for each service if the tax dues relates to more than one service during the period of declaration. 4. For calculation of tax dues, the manner as prescribed at S. No. 3F(I), or as the case may be the Part B of the Form ST-3, as existed during the relevant period, may be used and calculation of tax dues may be furnished tax return period wise 5. Calculation sheet showing the tax dues calculation may please be enclosed with this declaration. 6. Obtain an acknowledgment from the designated authority in Form VCES The declarant may approach the designated authority for any clarification.

27 Chap. 5 ST Voluntary Compliance Encouragement Rules, FORM VCES-2 [Acknowledgment of declaration issued under sub-section (2) of section 107 of the Act] [See rule 5] No. Receipt of a declaration filed under sub-section (1) of section 107 of the Act, as per the details below, is acknowledged. 1 Declaration No. Date 2. Name of the declarant 3. Address of the declarant 4. STC No. 5. Tax dues declared ` 6. Schedule for payment of tax dues A B C Minimum amount to be paid on or before the 31st Dec, 2013 (50% of the tax dues) Remaining tax dues to be paid on or before the 30th June, 2014 [Amount at S. No. 5(-) Amount at S. No. 6A] Any tax dues remaining unpaid as on 1st day of July,2014 shall be paid before the 31st December,2014 along with interest, as prescribed under section 75 or as the case may b, section 73B of the Finance Act, 1994 for the period of delay starting from the 1st day of July, 2014 ` ` Signature, name and seal of designated authority Place: Date: Instructions: 1. This acknowledgment has been issued on the basis of declaration furnished by the declarant and it does not certify the correctness of the declaration made. This declaration does not certify payment of any tax dues. 2. Certificate of discharge in Form VCES -3 shall be issued only upon full payment of tax dues along with interest if any, as per the details at S. No. 6 above. 3. If any amount declared as tax dues under the Scheme remain unpaid as on , the same shall be recoverable under section 87 of the Finance Act, For any clarification, the declarant may get in touch with the designated authority.

28 28 ST Voluntary Compliance Encouragement Rules, 2013 Chap. 5 FORM VCES-3 Acknowledgement of Discharge [Issued under sub-section (7) of section 107 of the Act] [See rule 7] No. This acknowledgment of discharge has been issued under sub-section (7) of section 107 of the Act, to ACKNOWLEDGE that the tax dues declared under sub-section (1) of section 107 of the Act have been paid, in respect of declaration so made as per the following details. 1 Declaration No. Date 2. Name of the declarant 3. Address of the declarant 4. STC No. 5. Tax dues declared under the Scheme 6. Payment of tax dues A Tax dues paid on or before B Tax dues paid after but on or before C Tax dues paid after but on or before D Interest paid under section 107 (4) on amount mentioned at 6C E Total amount paid (A+B+C+D) ` 7. Details of challan(s) Challan No(s)(CIN) ` ` ` ` Amount Signature, name and seal of designated authority Place: Date:

29 CHAPTER 6 DEPARTMENTAL CIRCULAR ON THE AMNESTY SCHEME Circular No. 169/4/2013-ST, dated The Service Tax Voluntary Compliance Encouragement Scheme Clarifications regarding The Service Tax Voluntary Compliance Encouragement Scheme (VCES) has come into effect upon enactment of the Finance Bill, 2013 on the 10th May, The Service Tax Voluntary Compliance Encouragement Rules, 2013 has been issued to bring into effect the Scheme. Some references have been received seeking clarification as regards the scope and applicability of the Scheme. 2. The issues have been examined and clarifications thereto are as follows: S. No. Issues Clarification 1 Whether a person who has not obtained service tax registration so far can make a declaration under VCES? 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. 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? 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. 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. 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.

30 30 Departmental Circular on the Amnesty Scheme Chap. 6 S. No. Issues Clarification 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 shortlevied 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 1st day of March, 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 1st day of March, No other communication from the department would attract the provisions of

31 Chap. 6 Departmental Circular on the Amnesty Scheme 31 S. No. Issues Clarification section 106(2)(a)(iii) and thus would not lead to rejection of the declaration. 3. Trade Notice/Public Notice may be issued to the field formations and tax payers. Please acknowledge receipt of this Circular. Trade Notice No. 09/ST/2013, dated Notification of 'Designated Authority' for the purpose of Service Tax Voluntary Compliance Encouragement Scheme Reg. Attention of all trade associations and stake holders is invited to the Trade Notice No. 08/ST/2013, dated 21/05/2013 issued by the Commissioner, Service Tax, Delhi, regarding Service Tax Voluntary Compliance Encouragement Scheme Please refer to the details of Voluntary Compliance Encouragement Scheme 2013 (VCES). In terms of section 105 and section 107 of the Finance Act, 1994, as amended, a declaration has to be made before the 'Designated Authority'. The Commissioner, Service Tax Delhi, hereby notifies Sh. KARAN THAPAR, Assistant Commissioner of Central Excise & Service Tax as the 'Designated Authority' for the purpose of declaration under the VECS, 2013 amnesty scheme. His official address is as 'IAEA HOUSE, 17-B, I.P. ESTATE M.G. MARG, NEW DELHI " and Phone No. is All the Trade Associations are requested to give wide publicity to the contents of this Trade Notice amongst their members and constitutes.

32 CHAPTER 7 FREQUENTLY ASKED QUESTIONS Question 1: Question 2: Question 3: In what form to make declaration to apply for Amnesty Scheme? The Assessee has to file VCES-1 to Designated Authority with relevant calculation of period covered under the scheme. Who is the designated officer for Submission of form VCES- 1? Is there any relevant notification for the same? As per the scheme, every Commissionerate will appoint one Designated Authority to receive the VCES-1 and issue necessary Forms. Has Designated Authority been appointed under the scheme till date? Yes, In each Commissionerate the same has been appointed and Trade Notice for the same is being issued. Question 4: The assessee received summon u/s 14 of excise on Can he go for the scheme? Question 5: Question 6: Yes, since in the scheme it is mentioned that in case the assessee has been served a notice under Section 14 of Central Excise Act 1944 which is pending on 1 st March 2013, then declaration so filed in the scheme will be rejected. Is the assessee required to get himself registered for availing this scheme or he can avail the scheme and afterwards get himself registered? Yes, as mentioned in Rule 3 of Service Tax Voluntary Compliance Encouragement Rules, 2013 and further clarified in Circular No 169/4/2013 dt , the assessee has to obtain the registration to opt for the scheme and deposit tax under the scheme. Is service tax to be paid by an assessee who wishes to avail benefit of the scheme, before filing VCES-1 or after filing VCES-1 but before receiving acknowledgement in VCES-2? It is on the option of Assessee to pay during the pendency of VCES 2. It is provided that assessee has to pay more than 50% of tax due before 31st December 2013.

33 Chap. 7 Frequently Asked Questions 33 Question 7: Question 8: Question 9: Question 10: Question 11: Question 12: Is it necessary to deposit the entire tax liability for period covered in declaration or even a partial deposit will work to obtain proportional benefit. Say the actual liability is Rs. 50 Lacs but client is disclosing liability of only Rs.40 Lacs. What will be the consequence? No, there is no scheme for proportional benefit. Assessee has to pay entire amount of tax due to avail for the scheme. I have paid some tax on 28 Feb, 2013 which was relatable to Jan and Feb, Can the department refuse me the scheme benefit saying that you have made some payment of the dues as on Dec 12 in Feb 13? No, If the assessee can prove that the amount so deposited relates to Jan and Feb 2013 and the tax due pertaining upto December 2012 is still due after 1st March 2013, then he can go for this scheme. Is it necessary that the return of Oct 12 to Mar 13 should be of only Jan- Mar 13 for an assessee availing benefit of scheme? The same is not a pre requisite rather will be a consequential. If a person has taken registration in F.Y but has not charged service tax for previous 5 years (when he was supposed to charge) so will he be able to take the benefit of this scheme? Yes, he can opt for this scheme. An Assessee has received an inquiry from the department for Non filing of return for the F.Y before 1st of March, 2013 and The Assessee does not filed any return since Oct Is it open for the assessee to apply for the scheme for the period since Oct, 2007? Yes, in case the Notice is not issued under Section 14 of Central Excise Act, Section 72 of Finance Act 1994, or under Rule 5A of the Service Tax Rules 1994, then assessee can opt for this scheme. One has to check the Notice and Section cited on the same. Whether NIL tax returns, not filed earlier, can be filed now for the period covered under the scheme. The scheme is not for the filing of Service tax return in arrears. To opt for the scheme assessee must have some of the tax due in the relevant period. Rather he may use Para 6.1 of Circular No 97/2007 to claim relief from penalties.

34 34 Frequently Asked Questions Chap. 7 Question 13: Question 14: Question 15: Question 16: Question 17: Question 19: An assessee has Export turnover of Rs. 60,00,000/-. Is he liable to get registration? If yes, can he now take registration and file returns for past years under VCES without penalties and interest? He has no local business at all. No, the benefit under VCES scheme is available only to those assessee who have not paid or have short paid service tax. Only non-registration or non filing defaulters are not eligible to avail benefit under VCES scheme. Assessee has NIL tax dues and has not filed any returns. Can he opt for VCES scheme? The assessee who are liable to pay tax and have not paid for the period October 2007 to December 2012 can avail this scheme. If the service tax liability is nil, he shall not be eligible for the scheme for non filing of returns. A person who has paid service tax dues and filed late return was issued a demand letter for the late filing Penalty & interest. Can he go for VCES now? Mere non-filing of return will not allow an assessee to opt for VCES. However, if there is some part of Service Tax due which still needs to be paid and no demand letter issued before , he can go for VCES now. Whether an assessee who has paid service tax, but has not filed return for a part of the period covered by the scheme, can he claim waiver of additional fees/ penalty payable on delayed return filing under this scheme? No, since the VCES scheme is introduced for giving benefit of penalty and interest only in the cases where the service tax has not been paid/short paid. Can an assessee opt for the scheme where the assessee has paid tax mistakenly on cash basis and not on accrual basis? Yes, provided Service Tax amount disclosed In ST-3 had been fully paid and there is some amount of tax short paid consequent to payment of service tax on cash basis rather than accrual basis. If service tax for is paid in March, 2013 without interest and penalty, whether assessee can go for the amnesty scheme. Returns are still not filed. Yes, the assessee can opt for the scheme, if the tax was unpaid upto 1st March 2013 and after Scheme came into force.