DECEMBER 09, 2019

By Venugopal A P

183. 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. [Excerpt from the Budget Speech 2013-14 of P.Chidambaram, Minister of Finance.]

VCES was introduced from May 10, 2013 as a one-time amnesty scheme to pay service tax dues for the period from October 1, 2007, to December 31, 2012, without interest and penalty.

As per the scheme, a defaulter could declare his tax liabilities for the period between October 1, 2007 and December 31, 2012. They would have to pay 50 per cent of the declared tax dues by December 31, 2013. The balance was to be paid by the declarant on or before the 30 th June 2014 and where the declarant fails to pay said tax dues or part thereof on or before the said date, he shall pay the same on or before the 31 st December 2014 along with interest thereon for the period of delay starting from the 1 st day of July 2014.

"If you think that a scheme will come again next year or a scheme will come in 2015, you are wrong. Such schemes cannot be announced every year. There is a Supreme Court judgement on VDIS (which) actually ties up our hands in announcing a scheme on the lines of VDIS (Voluntary Disclosure of Income Scheme). That is why we have to modulate the scheme, so that it does not violate the directions of the Supreme Court. This is a once in a lifetime opportunity (and) certainly will not come for next 20 years." - P Chidambaram [Source: Economic Times]

Facts and figures tom-tomed:

The government has, so far, received 40,000 applications from service tax evaders owing a total of Rs 5,500 crore under the voluntary compliance encouragement scheme (VCES), which ends December 31. The finance ministry expects to bring around Rs 55,000 crore of revenue under the tax net through the amnesty scheme. [Source: Economic Times]

"The response has been good. There has been a last-minute rush from evaders who want to benefit from the scheme," said finance secretary Sumit Bose, adding that in the last four days alone the government received 16,000 applications for dues of around Rs 1,500 crore.

The stark reality:

A total of 66,062 applications were received under the VCES scheme, amounting to a tax collection of Rs 3,961.51 crore, as per data tabled by Minister of State for Finance J D Seelam in the Lok Sabha. [Source Economic Times - February 2014 ]

Presuming that the balance 50% amount has been paid by 30 th June 2014 or alongwith interest by 30 th December 2014, the total amount would, on a conservative estimate, be around Rs.8000/- crores. Lest we not forget, there are many disputes surrounding the VCES declarations, rejection thereof, and may be some have spilled over to the 2019 SVLDR scheme.

Insofar as the SVLDRS, 2019 is concerned, the Hon'ble Finance Minister, in her Budget Speech, 2019 stated -

141. GST has just completed two years. An area that concerns me is that we have huge pending litigations from pre-GST regime. More than Rs.3.75 lakh crore is blocked in litigations in  service tax and excise . There is a need to unload this baggage and allow business to move on. I, therefore, propose, a Legacy Dispute Resolution Scheme that will allow quick closure of these litigations. I would urge the trade and business to avail this opportunity and be free from legacy litigations.

The aim of Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 is to help taxpayers, including small taxpayers, in clearing the baggage of disputes under legacy taxes (Service Tax and Central Excise), which are subsumed in Goods and Services Tax.  The scheme is in force from 1.09.2019 till 31.12.2019. [Source - Press Releases]

PIB release of November 25 th mentions that the Union Minister of State for Finance & Corporate Affairs, in a written reply to a question in Lok Sabha informed -

The number of applications received from taxpayers, including small taxpayers, and disputes resolved as on 18.11.2019 are as under:

The tepid response received by the Scheme has spurred the Government into exercising the powers conferred by clause (c) of section 122 of the Finance Act, 2019 and bringing under its coverage eight more enactments. Kindly see notification 06/2019-CE(NT) dated 04.12.2019.

Whether, with just over three weeks to go before the Scheme runs out of steam, this notification would create any miracle and increase the revenue kitty is anyone's guess!

Incidentally, a 28 th November, 2019 communication raising concern about the success of SVLDRS, 2019, purportedly from the CBIC is viral these days on WhatsApp with lots of jocular comments. There is no reason to presume that it is a fake or a photoshopped one because of one vital feature, more about that later.

The letter addressed to the Principal Chief Commissioners/Chief Commissioners of Central Tax reads -

Hopefully, the Board should be successful in cajoling some of the parties as well as the bankers to tide over the financial crunch which, both the real estate sector as well the government itself is facing these days.

It would have been nice if the concerned Board would have shared an equal concern in respect of the other failing industries too.

As for the genuinity of the letter, the email id mentioned therein gives it out. Notwithstanding the fear of a spear phishing attack , the officers in the Board continue to repose their trust in GMAIL rather than their very own NIC.

After all Whats-APP(licable) to the sender applies to the recipient too! Pegasus notwithstanding!

The Clock keeps ticking:

One can trace the present timelines for the SVLDRS, 2019 from the following notifications -

4/2019-CE(NT) dated August 21, 2019

In exercise of the power conferred by sub-section (2) of section 120 of the Finance (No. 2) Act, 2019, the Central Government has appointed the 1st of September, 2019 as the date on which the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 shall come into force.

5/2019-CE(NT) dated August 21, 2019

SVLDRS, 2019 Rules framed in exercise of the powers conferred by sub-sections (1) and (2) of section 132 of the Finance (No. 2) Act, 2019.

Rule 3 is extracted below -

3. Form of declaration under section 125 .- (1) The declaration under section 125 shall be made electronically at https://cbic-gst.gov.in in Form SVLDRS-1 by the declarant, on or before the 31st December, 2019.

All said and done, before the CBIC officers and the Trade and the Consultants start burning the midnight oil as the last date for filing the online SVLDRS declaration and inevitably cause the system to crash, it would be in the interest of all concerned, that the last date be extended till 31st March, 2020.

The framers of the SVLDRS, 2019 have apparently kept a provision for this too.

Kindly refer to the following section -

Power to make rules.

132. (1) The Central Government may, by notification in the Official Gazette, make rules  for carrying out the provisions of this Scheme.

So, for carrying out the provisions of this Scheme, the Rules can be made and which obviously includes the date on which the scheme may come to an end/extended etc.

Support can also be drawn from section 132(2) - clause (g) thereof and which reads -

(g) any other matter which is to be, or may be, prescribed, or in respect of which provision is to be made, by rules.

It would, therefore, require only a small tweaking of the SVLDRS, 2019 Rules inasmuch as substituting the date of 31 st December 2019 in the rule 3 (supra) with the date of 31 st March 2020.

I am optimistic that the Central Government would be more than happy to cobble a few more crores of rupees by extending the SVLDRS, 2019 date.

After all, who doesn't need a healthy balance sheet, millennials included.

And, before I end, the jocular comment if you have not already noticed, was at the start!

[The views expressed are strictly personal.]