The service tax department of the Government of India is coming up with a one-time amnesty scheme called Voluntary Compliance Encouragement Scheme (VCES), to benefit service tax defaulters from July this year.

 
In this scheme, the professionals will have to pay their due without any penalty or late payment charges. The service tax defaulters can avail of this scheme by the end of this year.

However, according to tax experts, in order to avail amnesty from this scheme, the professionals will either start paying service taxes from the amount that had been collected already, or provide a supplementary bill to customers to recover the same. Since, service tax is not paid from the professionals’ pocket, they will start sending the bills from July onwards.

“To get benefits of the scheme, a defaulter will have to declare his outstanding tax liabilities, including the cess charges, for services provided between October 1, 2007 to December 31, 2012, and subsequently pay it to the Government, after making a truthful declaration. Therefore, it will be able to avoid penalty, interest or any other penal proceedings,” said Neeraj Punmiya, a chartered accountant from Mumbai.

To seize this opportunity, the service tax department has swung into action to provide the necessary information and
infrastructure. “Our department has issued trade notices to all the concerned parties, guiding them on the modalities of payments at two of our Mumbai Commissionerate centres. We are fully prepared with our infrastructure,” said Sushil Solanki, service tax commissioner of Mumbai.

However, experts are not very optimistic about the benefits under this amnesty scheme. “This scheme is not useful as big defaulters would not want to pay the huge backlog of the service tax amount. But those who have defaulted between `1 lakh and `5 lakh, may pay up,” added Mr Punamiya.

The VCES scheme was introduced by finance minister P. Chidambaram in the annual budget proposals for the year 2013-14. While proposing this scheme in the budget, he had said that, of the 17 lakh registered under service tax, only seven lakh were filing returns.