<h1>2011 Budget Proposes Higher Penalties for Service Tax Non-Compliance, Increased Interest Rates, and Reintroduction of Prosecution Provisions.</h1> The 2011 budget proposes significant changes to the service tax compliance mechanism to enhance voluntary compliance and balance revenue interests with legitimate business needs. Key changes include increased penalties for delayed return filings and severe penalties for intentional violations. The maximum penalty for late returns is proposed to rise to Rs. 20,000, and interest on delayed payments will increase to 18% annually. Penalties for fraud and misstatements are being adjusted, with reductions available for timely admission and payment. Prosecution provisions are reintroduced for specific violations, but arrest powers are excluded, requiring Chief Commissioner approval for prosecution.