- Wealth PMS (50L+)
While small service providers are exempt from paying service tax until after they receive Rs. 10 lakh in any year, many such providers earn more and don’t file service tax payments, thinks the Finance Ministry. However, such providers may be very difficult to trace and many simply won’t know they face a penalty for not having filed such taxes. Giving them the benefit of doubt, the FM has announced a “Service Tax Voluntary Compliance Encouragement Scheme, 2013”.
The amnesty scheme allows people to voluntarily disclose and pay service tax, if they might have not filed since 2007, but understand that they need to. They need to:
But this only applies to people who voluntarily file. If they’ve been served a notice or proceedings have been started against them, no such amnesty is available.
Service Tax Collections have been growing fast (ignore the first two years as it was a strong base). In 2012-13, the expected growth is 36% (remember, the year is not over yet). To maintain the same growth, the government will have to collect around 48,000 cr. more next year.
In fact, service tax is now going to be 32% of indirect taxes:
With service tax becoming bigger and bigger as a percentage of taxes, they must expect that this tax will be more and more in focus. Our economy has a huge services focus – and service tax is applicable on nearly everything, from haircuts to credit card interest. This amnesty scheme isn’t really as much to collect tax as to ensure that people who haven’t yet paid up will now join the tax system and pay up in future. I believe that to make this really effective, the way ahead will be to increase enforcement – meaning, more and more notices will be sent out and scrutiny increased.
How will this pan out? In budgetary terms, we’ll only know next year. I believe the “cash” economy will return, slowly, as people tell you to start paying in hard currency instead, and we’ll oblige. After all, who doesn’t want to save 12%?