Government to offer amnesty for commercial tax disputes


new delhi: The Union government is set to open a three-month window for taxpayers to resolve existing excise and service tax disputes on a “no penalty, no interest, no prosecution” principle in a new one-time scheme that aims to monetise a chunk of the Rs 3.75 lakh crore of disputed taxes stuck in various tribunals, according to two officials familiar with the matter.
The Union finance ministry, which is working on the details of the scheme, will announce it soon to fulfil two objectives augment its revenue in the current financial year, and settle old legacy issues from the previous indirect tax regime added the officials who asked not to be identified.
Announcing a legacy dispute resolution scheme, Sabka Vishwas, in the Union Budget last Friday, finance minister Nirmala Sitharaman said: “GST (Goods and Services Tax) has just completed two years. An area that concerns me is that we have huge pending litigations from the pre-GST regime.”
One of the officials cited above said that, even at a conservative estimate, the government can recover about 40% to 50% of the amount currently under litigation to make up for any shortfall in indirect tax collection at a time when the GST regime has not fully stabilised.
“The full benefits of GST reforms should start accruing from FY 2020-21, and completely stabilise thereafter to ensure sustainable fiscal path,” according to the government’s medium-term fiscal policy statement presented along with the budget. The GST collection estimate in 2019-20 full budget has been brought down from Rs 7.61 lakh crore in the interim budget to Rs 6.63 lakh crore. The second official said that the amnesty scheme will be limited to pending disputes related to excise and service tax, but litigations pertaining to customs duties will not be covered under Sabka Vishwas. Speaking at a conference organised by the Confederation of Indian Industry, Central Board of Indirect Taxes and Customs (CBIC) member-GST, Sandeep Bhatnagar, said out of the total sum of about Rs 3.76 lakh crore, nearly Rs 2.5 lakh crore is because of service tax disputes and the rest because of excise-related litigations.
“The currently proposed scheme seems quite attractive, especially with the government proposing an alluring initiative for the businesses to settle litigations of pre-GST era wherein tax up to 40 to 70%, and penalty, interest and prosecution would be waived. It is difficult to hazard a guess as to how much revenue the government can generate under this scheme because that would depend on how many cases come up for settlement, ” said Abhishek Jain, tax partner at EY.
Jain added that customs has not been included under the scheme because it not been subsumed under GST and the entire government machinery pertaining to customs continues to operate. Ritesh Kanodia, partner, Dhruva Advisors, however, said an ideal scheme should not have excluded disputes related to customs and been more inclusive. “For example, one of the conditions mentioned is that if hearings have been concluded before 30th June, 2019, the benefit of the scheme is not available,” he said. Parag Mehta, partner at NA Shah Associates, said it should be a “fairly simple scheme” that requires minimum documents. He said it is difficult to predict the response. “The amount of Rs 3.75 lakh crore is the amount in dispute and with approximate waiver of 70% to 40%, the tax dues will be in the range of Rs 75,000 to Rs 1 lakh crore,” he said.
“I think, it is a most attractive voluntary compliance scheme. Earlier, the scheme [on service tax] took care of only penalty and interests,” said Pratik Jain, partner and leader indirect tax, PwC India. He, however, estimated the total collection would be around 20% of the Rs 3.75 lakh crore litigation amount.
Before the ‘Sabka Vishwas’ legacy dispute resolution scheme, the Union government had launched a Kar Vivad Samadhan Scheme in 1998 and a Voluntary Compliance Encouragement Scheme (VCES) in 2013 with limited success.

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