Finance Minister P. Chidambaram, on Thursday, exhorted service tax defaulters to take advantage of the voluntary compliance encouragement scheme (VCES) and come clean on their tax dues with “no penalty, no interest” or else, face punishment.

In a veiled but terse warning to defaulters while unveiling the VCES campaign running up to December 31 this year, Mr. Chidambaram said: “Pay your service tax...this is an opportunity to put the past behind you and come clean…We think that it is perfectly right and this was an opportune moment to give a once in the life-time opportunity for those who are ‘defaulters’ to come clean, that is the purpose of this campaign”.

Pointing out that about 10 lakh non-filers or stop-filers of service tax were in a way defaulters and “they are liable to punishment”, the Finance Minister noted that the Service Tax Act enacted by the government already provided for monetary penalty and punishment. “Those who have collected service tax in excess of Rs.50 lakh and not deposited to government faces punishment of imprisonment up to seven years,” he said.

Citing an instance to drive home the seriousness of the default in this regard, Mr. Chidambaram said: “One person has been arrested in Kolkata. It seems the message is not going to people. You cannot collect money which is [the] government’s and keep it with yourself as if it was some kind of working capital for you”.

As per the voluntary compliance scheme, service tax defaulters are required to pay at least 50 per cent of their arrears for the five-year period ending 2012 and the balance in another six months, without interest. Till date, 1,400 declarations have been filed with the defaulters owning up to a payment of Rs.650 crore to the government.

Earlier, Mr. Chidambaram released a booklet containing ‘Frequently Asked Questions’ (FAQs) on the service tax VCES as also a logo of the campaign. The FAQs were based on inputs received from various agencies and quarters and would be of immense use for the compliers, he said.

The objective of the voluntary scheme is to encourage disclosure of tax dues and compliance of service tax law by persons who have not paid their dues for the period from October 2007 to December 2012, either on account of ignorance of law or otherwise.

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