Summary : Close to 50,000 businesses, which have signed up for the service tax amnesty scheme by paying half of their past five-year dues
Close to 50,000 businesses, which have signed up for the service tax amnesty scheme by paying half of their past five-year dues, will have to begin paying their regular service tax liability from January 1 to avoid punishment.
According to the government, declaring past dues and availing of amnesty for default also implies willingness of businesses to be part of mainstream and pay regular tax liability from this year onwards.
The finance ministry, which is taking tough action against service tax defaulters after the scheme’s conclusion on December 31, 2013, will not take it lightly if beneficiaries of the service Tax Voluntary Compliance Encouragement Scheme avoid their current tax liability, sources told FE. Service tax evasion is punishable with imprisonment of seven years. The amnesty scheme offered waiver from interest, penalty and all other legal proceedings to those who pay half of their dues by last December and the remaining half this year.
Mainstreaming the defaulters could add close to Rs 2,000 crore to the annual service tax collection, considering the fact that businesses have disclosed default of about Rs 7,700 crore, which represent only 10-12% of the services rendered in the last five years. Service tax rate was raised from 10% to 12% in 2012.
The Service Tax Administration has, in the mean time, launched a major crackdown on defaulters that have not availed of the amnesty scheme despite the wide publicity finance minister P Chidambaram personally gave the scheme in all metro cities. Some of the defaulters who have disclosed their past dues under the scheme, but have failed to pay up half of their dues by December 31, too, are facing the heat.
Sources said that in the first fortnight of January 2014 alone, seven people have been arrested for not remitting to the exchequer taxes exceeding Rs 50 lakh collected from consumers on behalf of the government. This contrasts with just 20 arrests made in the five months from August 2013 to December 31, 2013.
The arrests made so far are in cities like Ahmedabad, Surat, Mumbai and Bangalore. The department found tax evasion rampant in businesses like fitness and health services, site preparation services, mining services and security services. These sectors are now under closer scrutiny.
Official sources said that it was made clear earlier that service tax laws would be enforced very strictly after December 31. “Immediately after that date, the department pursued the cases vigorously and made the arrests. As per preliminary investigations, the average amount defaulted in these cases is Rs 35 crore,” said the official.
As per reports, the businessmen so far arrested for alleged service tax defaults include Talwalkars gym owner Rohit Talwalkar, Entask Consultancy Services MD M G Satish Kumar and the executive director of a hotel in Chennai. The Delhi Service Tax Commissionerate arrested the CFO of an Aviation Company in the business of helicopter chartering services on January 18 for service tax evasion amounting to more than R1 crore. This is the second arrest by DSTC this fiscal.
Source: financialexpress
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