Government Notifies Amnesty Scheme To Settle Pending Indirect Tax Cases

The government notified a dispute resolution scheme for taxpayers to settle legacy central excise and service tax cases.

The scheme, introduced in the budget, allows taxpayers to pay outstanding tax dues without interest, fine or penalty. It can be availed from Sept. 1 to Dec. 31, said a statement by the Ministry of Finance.

According to a recent report by Comptroller and Auditor General of India, 45,749 central excise appeals involving revenue of Rs 1.04 lakh crore were pending at various fora as on financial year 2017-18. About 43,718 service tax appeals worth Rs 1.20 lakh crore were pending at various courts as on March 31, 2018.

The government rarely comes up with a scheme that allows complete waiver of interest and penalty, said Sumit Lunker, a partner at PwC India, said. Taxpayers need to consider savings in litigation costs if they avail the scheme, he said.

According to Krishan Arora, a partner at Grant Thornton India LLP, while the scheme provides for a significant relief to taxpayers, the government could also benefit by churning additional revenue in cases where its probability of winning is less.

Called the Sabka Vishwas - Legacy Dispute Resolution Scheme, 2019, it offers a relief of 70 percent if the total tax due is up to Rs 50 lakh for cases pending in adjudication or appeal in any forum. For demand of more than Rs 50 lakh, taxpayers will get a relief of 50 percent.

What that means is if the tax department has raised a demand of Rs 25 lakh, excluding interest and penalty, a taxpayer will only have to pay 30 percent of Rs 25 lakh.

The relief is available for cases under investigation and audit where the duty involved is quantified and communicated to the taxpayer or admitted in a statement by June 30, 2019.

In cases where duty demand is confirmed and there is no appeal pending, the relief offered is 60 percent of the tax due is up to Rs 50 lakh, and 40 percent if the tax due is over Rs 50 lakh. In cases of voluntary disclosure, the person availing the scheme will have to pay only the amount of disclosed duty.

The scheme is specially tailored to free the large number of small taxpayers of their pending disputes with the tax administration, the Finance Ministry statement said.

But Arora of Grant Thornton, also had a word of caution. “While taxpayers should assess their individual cases and use the amnesty opportunity to the fullest, government should ensure that this dispute resolution scheme is implemented fairly and does not itself become a cause for further harassment and unwanted litigation.”