Voluntary compliance scheme full of ambiguities, says CAG

The comptroller and Auditor General (CAG) has picked holes in the Voluntary Compliance Encouragement Scheme (VCES), an amnesty for service tax assesses, saying the scheme introduced in financial year 2013-14 Budget was full of ambiguities and the intention was only to “rake in” revenues without an intention to improve tax revenues.

The report tabled in Parliament on Friday said, VCES was done in an undue haste and was not to motivate defaulters to come back into tax fold.

“The performance audit revealed that the scheme was drafted with a number of ambiguities and deficiencies which could have been removed through use of section 113 and by issuing appropriate clarifications. Instead clarifications were issued contrary to spirit of the scheme,” the report said.

The report further said that even elementary checks and balances were not put in place to ensure filing of truthful declarations. The amnesty scheme was introduced for the first time after the introduction of tax on services.

“As per Budget speech of the finance minister delivered on February 28, 2013, the scheme was aimed to motivate around 10,00,000 stop/non-filers to file returns and pay tax dues. However, only 66,072 declarations were received involving tax of Rs 7,750.30 crore under the scheme,” the CAG said on why they chose to audit the scheme.

The 2013-14 Budget was presented by the previous UPA government and P Chidambaram was the finance minister.