Budget 2013: Govt proposes compliance scheme for service tax defaulters. and Changes proposed in service Tax in budget 2013

The Finance Minister proposed a one-time scheme called 'Voluntary Compliance Encouragement Scheme' for service tax defaulters. With this scheme finance minister is aiming to "entice" a large number of assesses to return to the tax fold.

A defaulter may avail of the scheme on the condition that he files a truthful declaration of service tax dues since October 1, 2007 and makes the payment in one or two instalments before the prescribed dates.

"In such a case, interest, penalty and other consequences will be waived. Government hope to entice a large number of assesses to return to the tax fold.

Finance minister highlighted that only 7,00,000 out of the nearly 17,00,000 registered service tax assesses are filing returns, and said: "We cannot go after each of them. I have to motivate them to file returns and pay the tax dues."

Rate of service tax is proposed to be same i.e 12%

Emphasising on the importance of a stable tax regime, Chidambaram added only two more services into the negative list including vocational courses offered by institutes affiliated to the State Council of Vocational Training and testing activities in relation to agriculture and agricultural produce.

However, the Finance Minister brought all air Conditioned (AC) restaurants, including those that do not serve liquor which were till now exempt, under the ambit of service tax.

He also reduced rate of abatement for homes and flats with a carpet area of 2,000 sq.ft. or more or of a value of Rs 1 crore or more from 75 per cent till now to 70 per cent, categorising them as high-end constructions where the component of ‘service is greater.

However, existing exemptions from service tax for low cost housing and single residential units will continue.

Moreover, Chidambaram also limited the benefit of full exemption of service tax to films exhibited in cinema halls.