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Will Govt raise cap for service tax evasion arrest to Rs 2 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 for filing complaints for punishable offences is proposed to be enhanced to Rs 2 crore, it said. 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.

In the case of the offence, where the amount exceeds Rs 50 lakh, a defaulter will get imprisonment for a term which may extend to seven years, as per the Finance Act 2013. The monetary limit was last year increased to Rs one crore and now it has been proposed to be Rs two 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 shortlevied 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. 

GAAR: CBDT says tax officers have not been given unfettered powers
CBDT has said the taxman has not been given any “unfettered” power and adequate safeguards have been deployed for regulating the provisions aimed to check tax evasion from overseas locations. The Central Board of Direct Taxes (CBDT) expressed hope that the General Anti Avoidance Rules (GAAR) would be implemented from next fiscal. 

“There is no reason why it shouldn’t come (from April 1 next year). GAAR provisions are there in several countries and as Finance Minister also mentioned there is a very thin line between tax avoidance and evasion. 
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