Vivad Se Vishwas scheme: CBDT issues FAQs to soothe nerves of curious taxpayers

The FAQs were released in response to various queries received by the tax department after the budget announcement of the scheme.

On Wednesday, the lower house of Parliament had passed the Direct Tax Vivad Se Vishwas Bill. However, the Bill now needs to be passed by Rajya Sabha and the government will have to obtain a Presidential assent before notifying the scheme.

However, highly placed sources told CNBCTV18: “CBDT is ready with rules and procedures for implementation of the scheme, which will be notified immediately after the passage of the Bill in Rajya Sabha as Finance Ministry is likely to obtain the President nod as soon as it gets cleared in the Parliament.”

According to the broad contours of the scheme announced in the Budget, the taxpayers willing to settle disputes will be allowed a complete waiver of interest and penalty if they pay the entire amount of tax in dispute by March 31 this year, and if one pays after March 31 till June 30 then 10 percent additional amount have to be paid over and above the tax liability.

Further, in case of disputed interest or penalty only, then 25 percent of disputed penalty or interest will have to be paid if the payment is made by March 31, and for settlement after March 31, the same will be enhanced to 30 percent if the taxpayer pays till June 30, 2020.

According to the CBDT, 4.83 lakh direct tax cases involving Rs 9.32 lakh crore in disputed taxes are locked in various appellate forums such as Commissioner (Appeals), ITAT, debt recovery tribunals, high courts, and the Supreme Court, which are likely to get unlocked through this scheme.

Interestingly, this amount is the almost 82 percent of the government's direct tax revenue in FY19.

The FAQ clarified that in cases where the revenue department has gone in for appeal, the taxpayer will have to pay 50 percent of the disputed tax (62.5% in search cases) and/or 12.5 percent of the disputed penalty, interest or fee by March 31.

If payment is made after that, the taxpayer will have to pay 55 percent of the disputed tax (67.5% in search cases) and/or 15 percent of the disputed penalty, interest or fee.

The tax department also clarified that wealth tax, security transaction tax (STT), commodity transaction tax (CTT) and equalisation levy would be not be covered under the scheme. “Only disputes relating to income-tax are covered", FAQ said.

Meanwhile, tax experts say that the FAQs are well in time to give clarity.

“The FAQs have provided clarity in certain areas and would help taxpayers. The government is trying its best to provide enough clarity so that taxpayers can go for this scheme. Taxpayers on the hand need to quickly decide whether to go for the scheme or not, “ said Amit Maheshwari, partner at Ashok Maheshwary & Associates LLP.

“Government is eyeing Vivad de vishwas scheme for recovery of tax disputes so as to fill the revenue deficit gap and fund the stabilisation for the economy.

Government has issued over 50 clarifications, explaining the scope and eligibility of the taxpayers to opt for scheme and buy peace of mind from future tax litigations in the businesses. The step is in the right direction,” said Rajat Mohan, Senior Partner, AMRG & ASSOCIATES.

The government has also confirmed that the scheme would cover appeals pending before the appellate forum Commissioner (Appeals), Income Tax Appellate Tribunal (ITAT), High Court or Supreme Court, and writ petitions pending before a high court or Supreme Court or special leave petitions (SLPs) pending before SC as of January 31, 2020.

The scheme can also be availed of in cases of search and seizure operations where the recovery is up to Rs 5 crore and also those which are pending arbitration.

The scheme will not cover disputes pending before the Authority of Advance Ruling (AAR). However, if the AAR has determined the total income and the order has been challenged in high court, it would come under the ambit of the scheme.