"We have reached the tipping point where we have to pause, take stock, talk to you, offer a fair and generous transition method and persuade as many of you to come over to paying taxes before the tax is enforced in a strict manner.

"VCES is just that. The one who has not paid service tax to draw a curtain on the past and move on to a new chapter in his business. That is what VCES is," he said.

He was meeting representatives of various trade and industry associations and chambers of commerce and industry to encourage them to take advantage of the service tax amnesty scheme -- Voluntary Compliance Encouragement Scheme (VCES).

Chidambaram said that of the total 17 lakh registered service tax payers, only seven lakh of them were paying the levy. "This scheme is aimed at 10 lakh people who either are non filer or stop filer. Many of the 10 lakh have not filed at all, or not paid service tax at all. Many have paid from certain period and then stopped paying. I don't know who is cleverer, the guy who never pays or who stops paying," he said.

The Finance Minister, who earlier had a similar interaction in Chennai, said he does not believe in harsh penalties, but "sometimes it is necessary to send a stern message". Both the non-filer and stop-filer are treading on dangerous ground, he cautioned.

"We have enough information today about business companies, firms, partnerships. We have the PAN numbers. We have digitised most of our operations," he said.

PTI