| Moving swiftly to give effect to her budgetary announcement, Finance Minister, Smt. Nirmala Sitharaman introduced the Direct Tax Vivad Se Vishwas Bill, 2020 in the Lok Sabha on February 5, 2020. The Bill is aimed at expeditious resolution of the direct tax disputes pending in tribunals and courts. Because of the stiff deadlines proposed by the Minister in the Bill, the legislation is likely to be approved by Parliament soon. |
| Tax Arrears |
| The Bill seeks to substantially reduce the huge tax arrears which are locked in litigation between the taxpayers and the revenue at the level of Commissioner (Appeals), Income Tax Appellate Tribunal (ITAT), High Courts and the Supreme Court. |
| According to the Minister, the amount of disputed direct tax arrears totalled Rs. 9.32 lakh crores as on November, 2019. Considering that the actual direct tax collection in 2018-19 was Rs.11.37 lakh crores, the disputed tax arrears constitute nearly one year’s direct tax collection. This is a huge amount and needed to be freed so that it can be used productively. |
| “This (the expeditious resolution of tax disputes) will not only benefit the Government by generating timely revenue but also the taxpayers who will be able to deploy the time, energy and resources saved by opting for such dispute resolution towards their business activities,” said the statement of objects and reasons of the Bill. |
| The scheme |
| The biggest advantage of the scheme is that the taxpayer would be required to pay only the amount of the disputed taxes. The taxpayer will get a complete waiver of interest and penalty in case he pays the due amount by March 31, 2020. |
| For disputed penalty, interest and fee not connected with the disputed tax, the taxpayer would be required to pay only 25 per cent for settling the dispute. |
| The amount to be paid would be higher, in case the taxpayer opts for the scheme late and pays after March 31, 2020. A taxpayer will be required to pay 110 per cent of the disputed tax (the excess 10 per cent shall be limited to the amount of related penalty and interest, if any) and 30 per cent of penalty, interest and fee in case of payments made after the end of the current financial year. |
| The provision is aimed at encouraging the taxpayers to settle the dispute within the current financial year itself which ends on March 31, 2020. |
| The scheme, it may be mentioned, will not cover persons in respect of whom prosecution has been initiated for offences punishable under specified Acts or have been convicted. These include the Indian Penal Code, the Unlawful Activities (Prevention) Act, 1967, the Narcotic Drugs and Psychotropic Substances Act, 1985, the Prevention of Corruption Act, 1988, the Prevention of Money Laundering Act, 2002 and the Prohibition of Benami Property Transactions Act, 1988. |
| Conclusion |
| This is a sequel to the similar tax immunity scheme for indirect taxes – the Sabka Vishwas Scheme –, which was launched by the government last year. As many as 1.89 lakh cases were settled under the indirect tax scheme. |
| Enthused by the response to the scheme, the government this time came up with a similar scheme to reduce tax litigation with regard to direct taxes. The litigants, however, will have to work overtime to take advantage of the scheme as the deadline of 31-03-2020 is approaching fast. Source: Taxmann |
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