Chidambaram rues laxity in payment of service tax

• Last chance to come clean on service tax
• 17 lakh people registered for the tax
• But only 7 lakh are paying regularly
• Service sector constitutes 57% of GDP
• People need to take service tax seriously
• No penalty if people pay 50% of arrears by December 31
• Remaining amount can be paid by June 2014

Hyderabad: Making a fervent appeal to industry and traders to pay service taxes regularly, Finance Minister P Chidambaram on Wednesday the Voluntary Compliance Encouragement Scheme (VCES) announced by the central government would provide best opportunity for all those who had not yet paid service tax, to come clean and start afresh.

“Under this initiative, people or companies which had not paid service taxes between the years 2007 2012 can do so without any penalty or interest. The best part of the scheme is that the service tax arrears can be paid in installments as well after making voluntary declarations,” the Finance Minister said at an interactive session with industry and trade on the VCES here.

Pointing out that service sector now accounted for 57 per cent of the country’s GDP, he said: “The service tax is no different from sales tax or VAT. However, people have doubts about it. With service sector accounting major chunk of our GDP, we can’t but tax the service sector as we do on goods,” he explained.

The Minister said there was a conscious decision not to enforce harsh Excise laws when the service tax was introduced. “We wanted people to get used to it. Therefore, we deliberately adopted benign attitude. It had its benefits and nearly 17 lakh persons had voluntarily registered for the tax. That’s not a small number as the number of excise assessees is only about 1.4 lakh,” he said.

But only seven lakh of the registered people paid service tax while the remaining 10 lakh did not pay. “We can classify them as no-filers or stop-filers. No-filers are those who have never filed service tax, stop- filers are those who have paid for a year or two, but later stopped filing service tax,” he explained.

Leveling a veiled threat at the service tax evaders, the Minister said: “I don’t whether no-filer is cleverer than stop-flier or stop-filer is clever than the no-filer. But all I want to tell you that ultimately the department is cleverer than the both. How long people can evade tax? It may be for a day, a month, a year or two years. At the end, law will reach them,” he said.

He said there would be no more generous scheme for people than the VCES to come clean on service tax. “This is once-in-a-lifetime opportunity to clean the service tax record. If people think that such schemes will come again in 2015 or in future, they are wrong. Government can’t be more generous than this and there may be no such scheme in next two decades,” he said.

The Minister urged people to make declarations and pay 50 per cent of the service tax by December 31. “The remaining half can be cleared by June 2014 without interest,” he added.

According to him, more than 9,000 declarations were received under the scheme till now. Of them, 107 have been rejected. “Our intention is to accept all the declarations made under the scheme. We will appoint a committee of senior officials who will look into the rejected declarations after December 31,” he said.