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Govt proposes compliance scheme for service tax defaulters

Last updated on: February 28, 2013 15:52 IST

Govt proposes compliance scheme for service tax defaulters

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Aiming to "entice" a large number of assessees to return to the tax fold, the government on Thursday proposed a one-time scheme called 'Voluntary Compliance Encouragement Scheme' for service tax defaulters.

A defaulter may avail of the scheme on the condition that he files a truthful declaration of service tax dues since October 1, 2007 and makes the payment in one or two instalments before the prescribed dates.

"In such a case, interest, penalty and other consequences will be waived. I hope to entice a large number of assessees to return to the tax fold. I also hope to collect a reasonable sum of money," Finance Minister P Chidambaram said while presenting Union Budget for 2013-14 in Parliament.

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Highlighting that only 700,000 out of the nearly 17 lakh registered service tax assessees were filing returns, Chidambaram said: "We cannot go after each of them. I have to motivate them to file returns and pay the tax dues."

Besides, there would be no change in the normal rate of service tax levied presently at 12 per cent, he said.

Emphasising on the importance of a stable tax regime, Chidambaram added only two more services into the negative list including vocational courses offered by institutes affiliated to the State Council of Vocational Training and testing activities in relation to agriculture and agricultural produce.

However, the Finance Minister brought all air conditioned restaurants, including those that do not serve liquor which were till now exempt, under the ambit of service tax.

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He also reduced rate of abatement for homes and flats with a carpet area of 2,000 sq.ft. or more or of a value of Rs 1 crore (Rs 10 million) or more from 75 per cent till now to 70 per cent, categorising them as high-end constructions where the component of 'service' is greater.

However, existing exemptions from service tax for low cost housing and single residential units will continue.

Moreover, Chidambaram also limited the benefit of full exemption of service tax to films exhibited in cinema halls.

Last year, at the request of the film industry, full exemption of service tax was granted on copyright on cinematography.

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