The scheme, which was kicked off on Sept 1, will be valid till Dec 31 and will waive all interest, fine and penalty on the disputed amount
The government expects a windfall of `16,000-20,000 crore from the legacy dispute resolution scheme for indirect tax cases. The scheme, which was announced in the Budget and will run from September 1 to December 31, is different from any relief-cum-amnesty scheme offered earlier by the government.
According to official data, nearly `1.5 lakh crore of revenue demand was stuck in erstwhile indirect tax (excise, service and customs) litigations in various forums at the end of FY18. As per an estimate, even if half of this amount gets channelled into the scheme, the government could garner over `15,000 crore.
The scheme provides substantial relief in tax dues for all categories of cases as well as full waiver of interest, fine, penalty. In all these cases, there would be no other liability of interest, fine or penalty. There is also a complete amnesty from prosecution.
“Many large firms are positively considering it as they feel that they might end up paying the government less than the legal cost in pursuing these cases up to the Supreme Court. This is because the government makes companies that enter litigation against assessment pre-deposit a portion of the demand raised,” Rajat Mohan, partner at AMRG & Associates, said.
The pre-deposit means all these firms already have some amount, which is estimated to be about 10-20% of the demand based on nature of the case, locked with the tax department.
The payment at the end of the resolution would account for this, making the total payout rather small.
For all the cases pending in adjudication or appeal — in any forum — this scheme offers a relief of 70% from the duty demand if it is `50 lakh or less and 50% if it is more than `50 lakh, the government had earlier said. The same relief is available for cases under investigation and audit where the duty involved is quantified and communicated to the party or admitted by the entity him in a statement on or before June 30, 2019.
“The scheme by virtue of the multiple benefits offered would certainly lead to a reduction in litigation proceedings before various forum — the next few months would give a sense of the quantum of such reduction. However several matters having settled precedents where businesses are confident of the outcome may not be withdrawn,” MS Mani, partner at Deloitte India, said.
A tax official said the scheme is generous but the small taxpayers might find the procedural complexity an hindrance. However, the large firms, which are litigating the majority of the sum involved should take take up this scheme as it may not come around again, the official said.
Another official said dispute resolution schemes were also launched in 1998 and 2013 but they were not accepted widely due to inherent flaws but the latest offering offers no penalty, no interest and no prosecution which was lacking earlier, the official said.