Vivad se Vishwas scheme shows govt’s eagerness to increase its efforts for collecting taxes, narrow fiscal deficit and reduce taxpayers’ pain of litigation.
By Karishma R Phatarphekar & Rohan Vesuna
The Direct Tax Vivad se Vishwas Bill, 2020 (the scheme), tabled in Parliament on February 5, 2020, proposes an amnesty scheme for litigation pending as on December 31, 2020, before any of the appellate forums. Under the scheme, a taxpayer can settle a litigation by paying the tax on the disputed income, and get a full waiver of interest and/or penalty. The scheme seeks to meet two major objectives:
1 Reduce time and effort spent over long drawn litigation (~5 lakh cases), with the overall objective of improving ease of doing business in India;
2 Facilitate tax collection (~`9 lakh crore of disputed tax) by the government stuck under litigation.
The government has taken various steps, both internally as well as through stakeholder interactions, to amend the unclarified nuances of the scheme into a more attractive package for taxpayers. It is understood that performance of field officers in respect of the scheme has been included as an appraisal parameter, which would play an important factor in determining their future roles and promotions. Further, senior officials of the government have been meeting various stakeholders such as industry stalwarts, tax consultants, etc, to obtain inputs on a practical level, to ensure that the scheme is free from any shortcomings, and all suggestions from stakeholders are appropriately being incorporated before the scheme is passed by Parliament.
In view of the above, it seems that the Cabinet has approved certain key amendments to the scheme, which include:
1 Expansion of scope to include cases where, as on December 31, 2020:
a) time limits for filing an appeal has not expired;
b) have pending status at the Dispute Resolution Panel (DRP);
c) DRP directions have been passed, but final assessment order is awaited; and
d) revision petitions are pending before Commissioner of Income-tax.
Further, search cases where the disputed demand is less than Rs 5 crore, have also been included.
1 The original avatar of the scheme proposed payment of 100% of the disputed tax, or 25% of the disputed interest/penalty. However, the new avatar reduces this by 50% for cases where appeals pending are Revenue appeals, which means the taxpayer has won the case at the lower appellate forum. Further, for search cases below Rs 5 crore, the taxpayer can choose to settle by paying 125% of the disputed tax. These percentages are if he chooses to pay the taxes on or before March 31, 2020. The government has also kept a window open for the taxpayer to opt for the scheme post March 31, 2020, but before June 30, 2020, by paying an additional 10%.
2 The amended scheme also proposes to refund any amount paid (including interest) if it is higher than the amount payable under the scheme.
3 Further, the scheme also proposes a mechanism to either set-off the loss without payment, or pay the notional tax amount, and carry forward the loss against the tax payable.
Certain other procedural aspects also seem to have been addressed. For example, i) withdrawal of appeals are now required only after intimation of payment by the department; ii) settlement under the scheme will not be viewed as a precedence for future cases; and iii) for transfer pricing cases, secondary adjustment provisions will not be applicable.
The above changes are a welcome move and a result of the representations made by stakeholders. This clearly indicates the government’s eagerness to ensure success of the scheme in the light of its efforts to collect taxes, narrow the fiscal deficit and reduce taxpayers’ pain of litigating.
As the scheme is going through an approval process, it would be worth taxpayers’ time to evaluate assessment year/appeal-wise, the tax cost versus the merits/cost of litigating, and come forward and settle the maximum number of disputes. This will not only help the government achieve its tax collection targets but also resolve long pending disputes. Hopefully, it will be a win-win for both, the government and the taxpayer!
Phatarphekar is Partner, Deloitte India & Vesuna, deputy manager, Deloitte Touche Tohmatsu India LLP. Views are personal