No arrest for service tax evasion upto Rs 2 crore: Government

At present, the limit to arrest such evaders is Rs one crore.  Finance Minister Arun Jaitley has proposed to bring in this change through Finance Bill 2016 introduced in Parliament on Monday. 

The power to arrest in service tax law is proposed to be restricted only to situations where the tax payer has collected the tax but not deposited it with the exchequer, and amount of such tax collected but not paid is above the threshold of Rs 2 crore, as per the new proposal which will come into force after passing of the Bill in Parliament. 

The monetary limit was last year increased to Rs one crore and now it has been proposed to be Rs 2 crore.  The monetary limits for arrest and prosecution have been increased to ensure that these powers are not used against small and medium businesses and a taxpayer-friendly atmosphere is created, a senior Finance Ministry official said. Service tax has become focus area of the Finance Ministry. 

In 2015 budget, the Finance Minister had increased the service tax rate from 12.36 per cent to 14 per cent, which was made applicable from June 1, 2015. Thereafter, Swachh Bharat Cess of 0.5 per cent was added in service tax from November 15, last year. 

Now the limit of 14.5 per cent of service tax has been proposed to be increased by 0.5 per cent, in 2016-17 budget proposals, by imposing 0.5 per cent of Krishi Kalyan Cess. The new rate of 15 per cent of service tax is slated to come into effect from June 1, 2016. 

The Ministry has also proposed to increase limitation period for recovery of service tax not levied or paid, or short-levied or short paid, or erroneously refunded, for cases not involving fraud, collusion, suppression etc. is proposed to be enhanced by one year, that is, from 18 months to 30 months in its budget for the next fiscal.