Budget 2013 – Amnesty Scheme In Service Tax

Author:Ms Surbhi Premi
Profession:Lakshmikumaran & Sridharan Attorneys

In 1997, the Government of India introduced the Voluntary Disclosure of Income and Wealth Scheme, 1997 (VDIS), an amnesty scheme under the direct taxes which unearthed approximately Rs. 33,000 Crores worth of black-money yielding tax revenue of approximately Rs. 10,000 Crores. The amnesty scheme was criticized on the ground that it was discriminative as it gave premium to the dishonest taxpayers. However, the Supreme Court in the case of All India Federation of Tax Practitioners v. UOI [(1998) 2 SCC 161] upheld the constitutional validity of the amnesty scheme rejecting the contention that it was arbitrary and violative of Article 14 of the Constitution of India.       

Budget, 2013 has proposed an amnesty scheme under service tax law (Chapter VI of the Finance Act, 1994) by way of waiver of interest, penalty and immunity from prosecution to stop filers and non filers, who declare their tax dues for the period from 1st October, 2007 to 31st December, 2012 by 31st December, 2013 and pay at least 50% of the outstanding amount by 31st December, 2013 and balance by 30th June, 2014 or by 31st December, 2014 with interest.         

Service Tax Voluntary Compliance Encouragement Scheme

The Service Tax Voluntary Compliance Encouragement Scheme, 2013 (VCES) provides that any person who has furnished service tax return 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. In other words, the persons eligible are those who have either failed to furnish the return or not disclosed the true liability in case where return was furnished.         

Persons eligible or otherwise

The scheme does not provide any benefit to honest taxpayers, ones who have filed the returns and paid the true liability disclosed therein. Defaulters of payment of tax dues can be categorized into three. First are those who have not filed the return. Second are those who have filed the return but have not disclosed the true liability. Third are those who have filed the return and disclosed the true liability. Out of these, first two are entitled to the benefit under the scheme but the third category of persons is not entitled to the benefit. The scheme not only discriminates between honest and dishonest taxpayers, it also creates separate categories within the dishonest taxpayers which indicates that the scheme targets to incentivize...

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