Salient Features of Service Tax VCES – Voluntary Compliance Encouragement Scheme 2013

Finance Act 2013 has announced VCES 2013 to provide an opportunity to a person to pay service tax, which he was required to pay, but was not paid; and the same was not detected by tax department as on 1st March, 2013. Under the scheme, the person will get exemption from payment of Interest and Penalty which he was required to pay under the Service Tax provisions.

Based on Notification no 10 dated 13th May, 2013, circular no 169 dated 13th May, 2013 and circular no 170 dated 8th August, 2013, salient feature of are given below-

1. Eligibility

  • A person who was required to pay Service Tax under the Service Tax provisions for the period 1st October 2007 to 31st December, 2012, but remains outstanding as on 1st March, 2013 is eligible to get benefit of the scheme provided the same was not detected by Service Tax Department as on 1st March, 2013.

2. Benefit of the scheme

  • No interest for delay in payment of Service Tax. Interest rate was  13 % and 18 % during the scheme period.
  • No Penalty which may be equal to 50% of Service Tax payable

3. VCES Period

  • The declaration can be filed from 1st October, 2007 to 31st December, 2012. Strictly speaking, the dept cannot compel a person to pay Service Tax after a period of 5 year. Hence, no Service Tax may be paid for the period 1st October, 2007 to 31st March 2008. However, it may be avoided to avoid litigation cost.

4.  Declaration in form VCES-1 (format is given in the notification 10) where total amount of Service Tax, Education Cess and SAHE Tax is payable is to be stated.

  • The Declaration must be supported by working of total dues stated in the VCES-1.
  • The Declaration must be filed on or before 31st December, 2013. Since the scheme is effective from 10th May, 2013, no extension may be expected.
  • As per clarification given in circular 170, show cause notice for rejection of declaration will be issued within 30 days of filing of declaration with the dept.
  • Hence, it is advisable to file  the declaration at the earliest. Rejection of the declaration means that the declarant cannot get benefit of the scheme.

5.  VCES 2

  • Within 7 days of filing of declaration VCES 1, the dept will issue acknowledgement for the declaration in VCES 2. ( Pl see notification no 10)

6. Payment of Tax Dues declared by the scheme

  • 50 % of total dues declared in the declaration filed must be paid on or before 31st December, 2013. Amount paid under the scheme will not be refunded.
  • If 50 % amount declared is not paid on or before 31st December, 2013, the declarant cannot get benefit of the scheme, and the amount may be adjusted against his service tax liability.
  • Balance 50% is to be paid on or before 30th June, 2014.
  • Balance amount, if any, as on 1st July, 2014 is to be paid on or before 31st December, 2014 with 18% interest.
  • Balance amount, if any, as on 1st January, 2015 can be recovered by the dept as if it is Service Tax  due but not paid.
  • Details of payment made under the scheme is to be intimated to the dept with details of VCES-2 and amount paid under the scheme
  • If total amount declared under the scheme is not paid, the person will not get benefit of the scheme.

7. Rejection of the Declaration

  • The dept may reject the declaration if it feels that the declaration is “substantially false”. In such case, the declarant may be required to revise upward  Tax Dues amount stated in the declaration filed by him.
  • Otherwise, he may be required to pay Service Tax with Interest and Penalty.

8. VCES 3

  • After making total payment under the scheme and after getting intimation of the amount paid  the declarant,  the department will issue acknowledgment of discharge of liability in VCES 3 which means that the declarant has complied with all requirements and no action can be taken against him “for the matter” under Service Tax Provisions.
  • VCES -3 will be issued within 7 days of submission of details of “total dues” paid under the scheme.

Please note that above are only salient features of the scheme. For detailed requirements, please go through above mentioned notifications and circulars which are available on www.servicetax.gov.in.

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Author: Uday N. Kajaria Chartered Accountant | B.Com, FCA, ACS | Email: uday.kajaria@gmail.com

Tags: 31stDecember 2013DeclarantFinance ActPaymentTaxUnion duesVCES-1VCES-2

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About Uday N. Kajaria

Uday N. Kajaria | Chartered Accountant

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