In what could be a win-win situation for both the industry and the government, North Block is currently assessing the possibility of introducing yet another set of one-time tax dispute resolution scheme to reduce litigation and unlock funds.
According to sources, “Revenue department is currently contemplating such a scheme for both direct and indirect tax disputes and if approved, the schemes could be part of the budget announcement.”
The idea is based on the past success of dispute resolutions schemes which were announced earlier in previous budgets – for indirect tax cases, Sabka Vishwas Legacy Dispute Resolution Scheme (SVLDRS) was introduced in 2019 and the revenue collected under the scheme was around Rs 38000 crore.
Similarly, noting the success of SVLDRS, for direct taxes, Vivad se Vishwas Scheme was announced in 2020 and the revenue collected under this scheme was around Rs 54000 crores.
Though, the revenue department is still working out the contours and nothing is final as yet in terms of whether the scheme will be announced sooner or later and how will it look like, sources said the intent of the government is very clear to reduce the burden of litigation for both industry and the government.
The proposal under works at the central board of direct taxes -- CBDT—the board custodian for direct taxes policy and administration, is “providing an opportunity for self-declaration by taxpayers for settling disputes based on existing tax demand,” sources added.
Other parameters which could be part of the scheme could be the “expansion of disputes covered under Section 270AA, which will also allow cases involving appeals pending before CIT(A) and at other higher appellate fora, “ sources added.
Section 270AA was introduced to provide immunity from a penalty when the assessee accepted the assessment order by paying the tax and interest amount and not filed an appeal against that order.
Apart from this, “Assessee or the taxpayer could be given an option to withdraw the appeal before CIT(A) and other fora if they pay full tax and interest upto the date of assessment together with fixed penalty depending upon the stage of appeal. Say, if matter is pending before CIT(A) a fixed penalty of say 10 percent of tax in dispute may be required to be paid. And for the matters at ITAT, 20 percent may be required.,” sources said.
“In all such cases where taxpayers pay the penalty and taxes with interest into the date of assessment the revenue appeals and other proceedings should stand withdrawn,” sources added.
When it comes to indirect taxes, the proposal is to cover dispute matters with regard to customs duties.
The proposal under consideration by the Central Board of Indirect Taxes and Customs – CBIC -- the board custodian for indirect taxes policy and administration, is considering “the scheme for disputes related to Customs classification, disagreement over valuation and issues regarding applicability of exemption notifications etc,” sources said.
“The scheme too will be providing an opportunity for self-declaration by taxpayers for short/non-payment of Customs dues and in cases of self-declaration, there could be complete immunity from interest and penalty,” sources added.
Again, in this scheme too, if announced, “ the quantum of waiver of tax due, interest and penalty to depend on the stage at which the case is under litigation,” sources added.
The rationale is very clear that the government should look at providing an opportunity for importers/exporters to settle disputes and offload the burden related to any probable future liability, sources said.
According to experts, if the schemes are announced, they will relieve both the industry and the government from the burden of litigation and the money spent on these disputes.
According to Pratik Jain, partner at PWC says, “In the last voluntary compliance scheme, excise and service tax was covered but not customs duty. Customs regulations have gone through various changes over the last few years including HSN classification, the introduction of new FTAs etc. During the 2 years impacted due to COVID, many businesses may not have been able to fulfil the export and other obligations linked with various incentives. Therefore, it would be great if the Government comes up with a scheme wherein businesses can pay past dues and settle disputes. In addition to revenue augmentation, it would significantly reduce the burden on the judiciary.”
Similarly, “The proposed customs scheme will help in bringing down the litigation between the customs department and the taxpayers. It has been an ask of the industry for a long and would surely help in providing much-awaited relief. However, it is important for the industry to analyse all their pending litigations and complete the risk assessment much before the introduction of the scheme to make effective use of the same,” says Saurabh Agarwal, Tax Partner, EY.
The government reports that as of January 1, 2022, there are 33,653 cases concerning customs duty that are pending in various courts and costing a total of around Rs 38,293.32 crore.
It is now to be seen, how soon and what exactly does the government announce on settling disputes.
First Published: Jan 6, 2023 9:13 PM IST
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