Budget 2020 India: Given that the indirect tax scheme appealed mostly to smaller taxpayers in the cost-benefit analysis, the same could replicate for the scheme resulting in personal income tax disputes getting resolved.
Union Budget 2020: Buoyed by the success of dispute resolution-cum amnesty scheme Sabka Vishwas for indirect tax-related cases, the finance minister announced a similar scheme for 4.83 lakh cases involving direct tax cases stuck in litigation at different forums for years.
Under the proposed ‘Vivad Se Vishwas’ scheme, a taxpayer would be required to pay only the amount of the disputed taxes and will get complete waiver of interest and penalty provided the assessee pays by March 31, 2020, finance minister Nirmala Sitharaman said.
“Those who avail this scheme after March 31, 2020 will have to pay some additional amount. The scheme will remain open till June 30, 2020. Taxpayers in whose cases appeals are pending at any level can benefit from this scheme,” Sitharaman said.
The proposed scheme could also help government nudge closer to revised estimate for personal income tax, which has been cut by only Rs 9,500 crore from Budget estimates (BE) even though the current trend suggest that it could fall short of BE by as much as Rs 75,000 crore. Given that the indirect tax scheme appealed mostly to smaller taxpayers in the cost-benefit analysis, the same could replicate for the scheme resulting in personal income tax disputes getting resolved.
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The indirect tax amnesty announced in the last Budget resulted in settling over 1.89 lakh cases. It is estimated that the government has would receive about Rs 35,000 crore from these settlements, mainly availed by smaller taxpayers.
Although the fine print of the scheme would be announced later, it seems to be an improvement over a similar scheme announced in 2016 for direct tax cases. The scheme had then recorded lukewarm interest and the government managed to garner only a paltry Rs 1,200 crore.
For instance, the previous scheme didn’t waive off interest on the disputed amount while the new scheme announced in the Budget would offer penalty and interest waiver.
However, the indirect tax scheme was decidedly better than the proposed amnesty scheme.