Govt offers chance to pay disputed tax arrears without interest or penalty
If the scheme is successful, it will offer relief to the govt, which has estimated that FY20 fiscal deficit will slip to 3.8%
New Delhi: The finance ministry on Wednesday unveiled details of a new scheme that could fetch the exchequer part of the ₹9.32 trillion direct taxes under dispute and free up courts and tribunals crippled by prolonged litigation.
The Direct Tax Vivad se Vishwas Bill, 2020, tabled in Parliament by finance minister Nirmala Sitharaman, offers immunity from prosecution to those who sign up for the scheme, which opens on the date it is signed into law.
The scheme offers companies a chance to pay disputed tax arrears without interest and penalty if paid before 31 March. If paid later, but before a due date to be announced later, the amount due will go up by 10%, Sitharaman said in a statement explaining the provisions of the Bill.
If the scheme is successful in collecting revenue, it will offer relief to the Narendra Modi administration, which has estimated that its fiscal deficit for FY20 would slip from the earlier projected 3.3% of GDP to 3.8% of GDP.
A similar scheme announced last year to settle indirect tax disputes related to central excise duty, service tax and various cesses had collected more than ₹39,000 crore, Mint reported on 30 January.
This is an opportunity for assessees to clear long-pending disputes and many tax payers, especially those having small amounts under dispute, are likely to lap it up, according to Neeru Ahuja, partner at Deloitte India.
In case the tax dispute is over penalty, interest or fee, the settlement amount payable is 25% of the dues if paid before the end of March.
If paid subsequently, but before the date to be announced in due course, the payable amount would be 30% of the dues, the statement explained.
The scheme, however, will not cover tax demands related to undisclosed foreign income or assets or tax demands raised after the government secured information from other countries.
“Tax disputes consume copious amount of time, energy and resources both on the part of the government and taxpayers. Moreover, they also deprive the government of the timely collection of revenue," said the government statement. “This will not only benefit the government by generating timely revenue but also taxpayers who will be able to deploy the time, energy and resources saved by opting for such dispute resolution towards their business activities."
The proposed scheme is applicable to appeals filed by taxpayers or the government, which are pending before the commissioner (appeals), tribunals, high courts or the Supreme Court as on 31 January.
Central Board of Direct Taxes chairman P. C. Mody said at a post-budget industry interaction organized by the PHD Chamber of Commerce and Industry on Wednesday that it has been the government’s intention to settle disputes to the extent possible and that it had recently raised the monetary threshold for filing of appeals.
The tax department had also decided not to contest certain judicial pronouncements to reduce litigation, said Mody. “All taxpayers should review their issues and take the benefit of the scheme."
According to Rakesh Nangia, chairman of Nangia Andersen Consulting, the scheme can be beneficial for settling cases such as additions of unexplained cash deposited during the demonetization period and additions for penny stocks.
“It would be beneficial for such taxpayers to pay the tax amount and settle the disputes without imposition of interest and penalty," he said.