1. Voluntary Compliance Encouragement Scheme under
SERVICE TAX LAWS
The Service Tax Voluntary Compliance Encouragement Scheme (VCES) has come into
effect upon enactment of the Finance Bill 2013 on the 10thMay, 2013. The said scheme
provides an opportunity to any person whose service tax is due or has short paid and
has not declared in his service tax return to pay only the service tax amount and get
immunity from interest and penalty. The person availing the opportunity has to declare
his service tax liability for the period 1st October, 2007 till 31st December, 2012. The
declarant has to follow the said steps for compliance of the said scheme in order to get
immunity from interest and penalties under the Finance Act, 1994, which are mentioned
here under:
The procedures to be followed are as under:-
1. The person who wishes to make a declaration under the Scheme, shall, if not
already registered, take registration with the Service Tax Department.
2. The declaration in respect of tax dues under the Scheme shall be made in Form
VCES -1 before 31stDecember, 2013. The calculation of tax dues has to be submitted
as per format of Sr. No. 3F(1) of the ST-3 returns.
3. The Assistant Commissioner on receipt of declaration shall issue
an acknowledgement in Form VCES-2 within a period of seven working days from the
date of receipt of the declaration.
4. The tax due has to be paid in the following manner:
Percentage of tax to be
paid…..
Due date by which tax has
to be paid…. Interest payable if…..
50 % of the Tax Dues Before 31st December,2013 –
Remaining 50% of
the Tax Dues Before 30th June, 2014 –
If remaining 50% was not Before 31st December, Along with interest at the

2. paid before 30th June,2014 2014 rate 15 % or 18% as the
case may be from 1st July,
2014 till the date of
payment.
5. The Assistant Commissioner shall issue an acknowledgement of discharge under in
Form VCES- 3.Theacknowledgement of discharge shall be issued within a period of
seven working days from the date of furnishing of details of payment of tax dues in full
along with interest, if any, by the declarant.
Some FAQ on the said Schemes:
Reference : Circular No. 169/4/2013 dated 13/05/2013.
1. Whether a person who has not obtained service tax registration so far can make a
declaration under VCES?
Ans: Yes, any person who has tax dues can make a declaration in terms of the
provisions of VCES; he will be required to take registration before making such
declaration.
At the time of registration a form of declaration has to be filled up by every person. In
case where a person is taking registration for VCES, kindly attach a covering letter to
the service tax unit Superintendent that the person is taking registration for declaration
in VCES.
2. Whether a declarant shall get immunity from payment of late fee/penalty for having
not taken registration earlier or not filed the return or for delay in filing of return.
Ans: Yes. It has been provided in VCES that, beside interest and penalty, immunity
would also be available from any other proceeding under the Finance Act, 1994 and
Rules made there under.
3. Whether an assessee to whom show cause notice or order of determination has been
issued can file declaration in respect of tax dues which are not covered by such SCN or
order of determination?

3. Ans: The assessee to whom show cause notice is issued can declare his other tax dues
under the Scheme which are not the subject matter of the SCN or Order or which is not
covered under any SCN or order issued to him.
4. Whether CENVAT Credit can be availed for payment of service tax under this
Scheme?
Ans: No, The CENVAT credit shall not be utilised for payment of tax dues under the
Scheme.
5. Whether this Scheme can be availed in case a search or audit or an inquiry is
initiated against the assessee.
Ans. No, the assessee cannot avail the benefit of the said scheme if any inquiry or
investigation initiated against the assessee and is pending as on the 1st day of March,
2013.
6. Whether a communication from department seeking general information from the
declarant would lead to rejection of declaration?
Ans: No merely receiving a letter seeking general information from the declarant would
not lead to rejection of the application. Unless said letter is issued:
i. Under section 14 of the Central Excise Act as made applicable to service tax vide
section 83 of the Finance Act,1994.
ii. Under section 72 of the Finance Act, 1994
iii. Under rule 5A of the Service Tax Rules, 1994
Other communication from the department would not lead to rejection of the declaration.
7. Whether there is any limit regarding the amount of declaration?
Ans: No, there is no monetary limit specified in the Act or rules made under in this
behalf.

4. 8. If the application made by the declarant is rejected, can an inquiry against the
declarant be initiated by the department?
Ans: Yes, an inquiry can be initiated if the declaration is rejected as there is no
restriction in this regard. The information furnish by the declarant can form the basis of
initiation of inquiry against the same.
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