Service tax evaders under scanner, warns Chidambaram

The government would focus ''very closely'' focus on sectors that are ''chronic'' service tax evaders, like consultancy, information technology, and real estate, finance minister P Chidambaram said on Saturday.

He said 10 persons had been recently arrested across the country for alleged service tax default. "Government has to send a message, a stern message, that such violations cannot go unpunished. Therefore, we have arrested them," he said.

Speaking at an interactive meet on trade and industry, service associations and chambers of commerce and industry on the Voluntary Compliance Encouragement Scheme (VCES) in Chennai, Chidambaram said the power of arrest was used only in cases where an individual had collected Rs50 lakh and above and did not deposit it in a government account.

He said he had noticed chronic tax evasion in various cities like Chennai in contract services, maintenance and repair services, and sectors like mining, transport operators, advertisement, storage and warehouse, manpower and recruitment and security services.

The minister said he believed this was true all over the country. There was no reason to believe that if one sector was not paying the tax in Kolkata, that sector would be more compliant in Chennai, he said.

"Those who are in these sectors must remember that the (finance) department will have a closer look. These are the tax evasion prone sectors. We are going to look at these sectors very, very closely", he said.

Referring to the VCES scheme, he said it was one of the most generous and fair packages offered by the government.

"I am assuming everyone is an honest citizen. You are honest in most actions. When you make a vow before your favourite deity, you are honest. You go and carry out the vow. You are honest while you are dealing with your spouse, children. Why should you be not honest with the tax department?" he asked.

Urging members to pay the taxes, he said non payment might be out of ignorance or financial pressure. Taxes may have been paid over a period of time or completely stopped. "All that is being washed away by this scheme. The past will be completely closed. No questions will be asked.

''You should file your declaration, pay taxes in the current period and you will not be obliged to pay any interest, any penalty or face any prosecution", he said.

VCES has been introduced with effect from 10 May 2013 as a one-time amnesty scheme for paying service tax dues for the period 1 October 2007 to 31 December 2012 without interest or penalty.