Penalty for late filing of Service Tax Return ST-3

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Under the existing scheme of law, Rule 7 of the Service tax Rules, 1994 read with its sub-rules deals with the provisions relating to the service tax return.

As per Rule 7C; where the return prescribed under rule 7 is furnished after the date prescribed for submission of such return, the person liable to furnish the said return shall pay to the credit of the Central Government, from the date prescribed for submission of return i.e. 25th of the month following the particular half year till the date of furnishing of the said return, the following penalty:

Now, As per Section71 (C) of the Finance Bill 2011 proposed vide Union Budget on February 28, 2011; ‘in Section 70 (1) of the Finance Act, 1994, for the words “two thousand rupees”, the words “twenty thousand rupees” shall be substituted’.

After enactment of Finance Bill 2011, the following position has emerge out:

4.Penalty on late filing of service Tax return 

After enactment of Finance Bill 2011, the following position has emerge out:
Period of Delay
Penalty/late fee before finance ACT 2011
Penalty/late fee After finance ACT 2011
for delay up to 15 days
INR 500
INR 500
for delay beyond 15 days but up to 30 days
INR 1,000
INR 1,000
for delay beyond 30 days
INR 1,000 + INR 100 per day (from 31st daysubject to a maximum amount of Rs 2000.
INR 1,000 + INR 100 per day (from 31st day subject to a maximum amount of Rs 20000.
‘Provided also that where the gross amount of service tax payable is nil, the Central Excise officer may, on being satisfied that there is sufficient reason for not filing the return, reduce or waive the penalty’.
‘Provided also that where the gross amount of service tax payable is nil, the Central Excise officer may, on being satisfied that there is sufficient reason for not filing the return, reduce or waive the penalty’.

Analyzing the effect of this amendment it is clear that the penalty in respect of the non-furnishing of return in due time limits, would now result as multifold financial impact on the assessee as the same is increased to 10 times of the existing amount prescribed. Therefore, if an assessee has not filed his/her return in due period, the financial impact in respect of penalty could be more than the actual tax liability.

Further, as per Notification No. 05/2006-ST, in case any assessee has discontinued his/her business and has to surrender the service tax registration and upon submitting the application for cancellation of registration the Superintendent of Central Excise shall ensure that the assessee has paid all monies due to the Central Government. As per the procedure, the assessee has to file the return for at least two immediately preceding half years. Normally, in such a case, the assessee, due to discontinuation of his/her business, stops filing the returns. Now, as a result of the amended provisions relating to penalty for non-submission/ delayed submission of returns, the assessee in such cases could end up in paying the penalty portion which will be multifold the service tax liability.

Due Date for Filing October,12 to March 2013 ST-3 Service Tax return is 10.09.2013

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