Background of Service Tax Voluntary Compliance Encouragement Scheme (STVCES)?
"...the tax payers were restraint to come forward and declare the tax dues. Considering all these issues the Finance Minister vide Finance Act, 2013 has announced the Service Tax Voluntary Compliance Scheme, 2013..."
Service tax has been introduced vide Finance Act, 1994. Initially 3 services were introduced in Year 1994. Year on Year more services were introduced and the list has finally grown up to 119 services.
Right from the inception the law has created several ambiguities and there were piling disputes regarding taxability, classification and valuation at various forms in the judicial hierarchy. Tax payers were in constant question whether service tax has to be paid or not to be paid, if paid, on what value it has to be paid and what rate is applicable.
Amidst all these ambiguities, certain tax payers have collected but not remitted, have not collected and there are other various combinations of tax defaulters.
These sort of tax payers who wanted to comply and streamline their activities in the areas of service tax were always frightened by the interest and heavy penalties which will affect their cash flows and increase the legal expenses to sort out the issues.
Hence, the tax payers were restraint to come forward and declare the tax dues. Considering all these issues the Finance Minister vide Finance Act, 2013 has announced the Service Tax Voluntary Compliance Scheme, 2013 which grants an immunity from interest, penalty and prosecution subject to certain conditions.
Excerpts of Finance Minister Chidambaram speech in the parliament while announcing "Service Tax Voluntary Compliance Scheme, 2013" during budget sessions on 28th February 2013:
"While there are nearly 17,00,000 registered assessees under service tax, only about 7,00,000 file returns. Many have simply stopped filing returns. We cannot go after each of them. I have to motivate them to file returns and pay the tax dues. Hence, I propose to introduce a one-time scheme called ‘Voluntary Compliance Encouragement Scheme’. A defaulter may avail of the scheme on condition that he files a truthful declaration of service tax dues since 1.10.2007 and makes the payment in one or two instalments before 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."