Finance Minister Arun Jaitley, through Budget 2016, has proposed to raise the monetary limit for arresting service tax evaders to Rs. 2 crore from Rs. 1 crore. The purpose, of course, is to bring more businesses under the tax net.
This applies to cases wherein the service tax has been collected from customers but not deposited with the exchequer. This proposal will come into effect only after the passing of the Finance Bill in Parliament.
The power to arrest a Service Tax evader was first given in 2013 before which revenue authorities had no power to arrest such persons for non-payment of collected Service Tax. The Finance Ministry had then for the first time amended Service Tax rules to attract the Criminal Procedure Code in line with Customs and Central Excise regulations.
This is the second time the monetary limit has been doubled, after it was introduced at Rs. 50 lakh in Finance Act, 2013. Defaulters failing to make payment of service tax beyond Rs. 2 crore risk imprisonment for up to seven years.
The Finance Minister has also proposed to increase limitation period for recovery of Service Tax not levied or paid or erroneously refunded, for cases not involving fraud, collusion and suppression, to one year (down from 18 to 30 months) in its budget for the next fiscal.