Faced with 70% rise in service tax evasion cases in the last two years, the revenue department has decided to make it mandatory for all the assessees to file online returns of their transactions from October onwards.
At present, the online filing of returns is mandatory only when the service tax payment is over R10 lakh annually.
A finance ministry official said that online returns would facilitate tracking of documents more efficiently.
The revenue department has a software called Automation of Central Excise and Service Tax (ACES) for electronic filing of returns. However, experts said the software and hardware should be upgraded as there had been problems in the past. ?The electronic filing of returns would definitely bring efficiency in the system. However, the hardware supporting the ACES software needs to be upgraded as the trade has faced difficulties in the past,? said Ernst & Young tax partner Bipin Sapra.
There are 15 lakh registered service tax payers in the country. However, only six lakh service tax payers are filing returns. According to Central Board of Excise and Customs (CBEC) Chairman S Dutt Majumder, the government is trying to locate the rest to find out whether they have stopped providing services or there is tax evasion.
The government aims to increase the share of service tax mop-up in the overall revenue kitty. The contribution of services to GDP at current prices in 2010-11 was about R50 lakh crore or 63%. However, the total collection from service tax was just R70,000 crore in the last financial year, which is nearly 10% of the overall collections.
To bring in more services under the tax net, the government recently floated a concept paper on negative list of services. It proposes to tax all except 27 services, which is a significant increase from the 119 services being taxed currently.
Service tax is currently levied at 10.3%, inclusive of the education cess.
Besides, the finance ministry is considering introducing tax deduction at source (TDS) provisions for around two-dozen services, which might include transportation, security agency and utility services. The move is aimed to bring under the tax net those fly-by-night service providers which are not registered with the tax department.