Procedure for availing the Voluntary Compliance Encouragement Scheme VCES Scheme

To widen the revenue base from indirect tax collections, the finance ministry has implemented a one-time amnesty scheme for service tax defaulters to pay their dues without any penalty or late payment charges. The Voluntary Compliance Encouragement Scheme (VCES), which came into force after the passage of the Finance Bill on May 10, can be availed by a service tax defaulter by the year end. Such a scheme has been first time introduced by finance minister P. Chidambaram while presenting the budget for 2013-14 as there are 17 lakhs registered assesses under the service tax but only 7 lakhs were filing returns. Hence one-time Voluntary Compliance Encouragement Scheme has been introduced.

This scheme is for all those assessees who have neither paid the service tax, neither filed any return nor have been served any notice or order. The defaulters may declare their tax liabilities, including the cess charges, for a period between October 1, 2007 and December 31, 2012 and pay it to the government after making a truthful declaration, thereby avoiding penalty, interest or any other penal proceedings.

For which such Assessees can Apply on or before 31.12.2013 in the prescribed format.

Section 107- Procedure for availing the VCES scheme

Step 1

If the declarant  is not registered, then he is first required to get himself registered and then apply for this scheme.

Step 2

After registration, the declarant shall make a declaration (sec 107) in form VCES-1 to the designated authority (AC/DC Technical, Head quarter office) on or before 31.12.2013.

Step 3

On receipt of Form VCES- 1, the designated authority will issue acknowledgement of declaration in Form VCES-2 within 7 working days from the date of receipt of declaration.

Step 4

The defaulter can pay his tax dues without interest and penalty into installments. The defaulter is required to pay 50% of tax dues by 31st, December, 2013 and rest 50% by 30th June, 2014.

Cenvat credit cannot be utilized for payment of dues (Rule 6(2)).

Amount paid shall not be refundable.

Step 5

On full payment of taxes, the designated authority will issue acknowledgement of discharge in VCES-3 within 7 working days from the date of furnishing of details of tax dues paid in full, along with interest if any. Last date for payment of first installment of 50% of total tax dues is 31.12.2013 and balance amount by 30.06.2014 or 31.12.2014 (with interest).

Persons not eligible for the scheme

I. Person cannot make declaration of tax dues for which

a) Show Cause Notice (u/s 73 or 73A)

b) Order (u/s 72, 73, 73A)

has been issued on or before 01-03-2013. [section106(1)]

II. A person who has filed return, declared tax liability but not paid [106(1) proviso]

If a SCN or order has been issued on any issue (say taxability or valuation), declaration can not be filed on same issue for subsequent period [106 (1) proviso]

A. Where any inquiry or investigation has been initiated and is pending as on 01.03.2013 by way of

a)     Search u/s 82 of FA 1994

b)    Issue of summons u/s 14 of CEA 1944

c)     Issue of notice requiring production of accounts or documents u/s 72 (for best judgment assessment) or under Rule 5A of STR  1994 [Section 106(2)]

B. Where audit has been initiated.

However, letters requiring production of documents, not mentioning sections 14 (CEA), 72(FA) and rule 5A(STR), would not be treated as covered under section 106(2). [ TRU Circular dated 13.05.2013]

Section 108 – Benefit of availing the scheme

•  The declarant upon payment of amount in default shall get immunity from – interest, penalty, any other proceedings under Service Tax.

On issuance of acknowledgement of discharge no matter shall be reopened thereafter in any proceedings before any authority or court relating to the period covered by such declaration, subjected to the provisions of Section 111-Failure to make true declaration.

Section 109- No refund of amount paid under the Scheme

Any amount paid in pursuance of a declaration made under sub-section (1) of section 107 shall not be refundable under any circumstances.

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