In a stern warning to service tax defaulters, Finance Minister P Chidambaram on Thursday asked them take advantage of the voluntary compliance scheme and come clean or face punishment.

“Pay your service tax…this is an opportunity to put the past behind you and come clean,” he said while unveiling the Voluntary Compliance Encouragement Scheme campaign which will run up to 31st December, 2013.

“We think that it is perfectly right and this was an opportune moment to give a once in the life-time opportunity for those who are ‘defaulters’ to come clean that is the purpose of this campaign,” he said.

About 10 lakh non-filers or stop filers of service tax “are in a way defaulters and they are liable to punishment”, he said, adding, the government in the Service Tax Act has already provided for monetary penalty and punishment.

Those who have collected service tax in excess of Rs 50 lakh and not deposited to government faces punishment of imprisonment up to 7 years.

“One person has been arrested in Kolkata. It seems the message is not going to people. You cannot collect money which is government’s and keep it with yourself as if it was some kind of working capital for you,” the Minister said.

Under the scheme, defaulters have to pay at least 50 per cent of arrears for the 5-year period ending 2012 and the balance in another six months without interest.

As of today, he said, 1,400 declarations have been filed and they have declared they are liable to pay Rs 650 crore to government. It is working out to be Rs 50 lakh per declaration.

The Finance Minister attributed the large number of defaulters to benign provisions of the Service Tax Act. Service tax has emerged as a major source of revenue and the government proposes to collect Rs 1.8 lakh crore in the current fiscal up from Rs 1.3 lakh crore last fiscal.

The Finance Minister released a booklet containing Frequently Asked Questions (FAQ) on Service Tax Voluntary Compliance Encouragement Scheme (VCES). The scheme has come into effect from 10th May, 2013.

The Minister hoped that the scheme will result in substantial disclosure by non-filers.

The booklet on VCES contains clarifications on doubts and queries about the scheme. For ease of reference, the statutory provisions and the VCES Rules containing the VCES forms are also included in the booklet, an official statement said.