The finance ministry has decided to beef up the proposed amnesty scheme for service tax evaders by empowering officers to reject an amnesty request and initiate an investigation into the evasion if the admitted tax evaded amount is suspected to be ?untruthful?, said highly placed sources.
The idea is to prevent hardened offenders from getting immunity from penal proceedings related to tax evasion by admitting to just a fraction of the actual amount of taxes they had evaded.
?We want potential subscribers to the scheme to come clean about their acts. This is not a blanket amnesty scheme with no questions asked,? said a person privy to the development. The ministry expects honest declarations of the service tax dues from October 1, 2007, in order to allow waiver on interest, penalty and other penal consequences.
Commissioner-level officers who handle service tax will be given the power to ?open? a declaration (of tax evasion) made by an amnesty seeker that is suspected to be untruthful within one year of its filing. The officer will then investigate the matter to find out the real magnitude of evasion. If the real amount of evasion turns out to be higher than the declared amount, then the normal legal procedure dealing with service tax evasion will follow including the issue of show-cause notice, tax demand and prosecution. The defaulter will be asked to pay the true amount tax due in such instances along with interest and penalty.
Besides, if the investigations reveal that the defaulter had collected R50 lakh or more of service tax on behalf of government and had not paid it for more than six months, then he or she could be arrested, assuming this deterrent provision introduced in Finance Bill 2013-14 becomes law by then. The Finance Bill is expected to get the President?s assent sometime in April.
The service tax voluntary compliance encouragement scheme is unlike the hugely successful Voluntary Disclosure of Income Scheme of 1998 that accepted declarations of unaccounted wealth of more than Rs 7,000 crore by about 3.5 lakh people without any questions.
The finance ministry will also make the scheme more flexible to encourage amnesty seekers. As per this, the amount of tax evaded money can be remitted in two instalments. The first instalment can be paid by December 31, 2013, when the scheme will close. The second instalment can be paid in seven months from then, up to June 2014, said a person privy to the development.
Experts said there is a case for widening the scope of the proposed service tax voluntary compliance scheme, which in the current form is restricted to people who have not disclosed their service income. ?The scheme is not available to assessees who have furnished returns and disclosed their tax liability but have not paid for various reasons including financial difficulty. If the government wants to encourage such assesses to be compliant, the scheme should be extended to them as well,? said Prashant Deshpande, senior director, Deloitte.
No free service
* Finmin expects honest declarations of service tax dues from Oct 1, 2007
* Amnesty declaration could be opened within one year of its filing
* Officers to investigate matter to get to the real magnitude of evasion
