Vivad se Vishwas – Amnesty scheme for Direct Taxpayers

Vivad se Vishwas Bill, 2020 was introduced by our esteem Finance Minister Ms. Nirmala Sitharaman to address Direct Tax disputes. Taxes under dispute were more than Rs. 9.32 lakh crore as on 30th Nov 2019.

With the introduction of this Bill Government wishes to encash upon the huge amount of disputed tax money which is locked up in the various appellate bodies.

These prosecutions of these disputes are very time consuming for both the government as well as party involved.

Sops offered are waiver of interest, penalty, and prosecution for settlement related to Direct Tax disputes. Bill gifts a complete waiver of interest and penalty for payments made till 31st March 20. Time is less but the offer is worth giving a shot.

Bill allows taxpayers to settle cases pending before the Commissioner (Appeals), Income Tax Appellate Tribunals (ITATs), Debt Recovery Tribunals (DRTs), High Courts and Supreme Court.

 Few quick checkpoints:

1.      It’s only related to Income Tax matters

2.    Who is the beneficiary- any person( includes corporate body /legal entity) in whose case an appeal or a writ petition or special leave petition has been filed either by him or by the income-tax authority or by both, before an appellate forum and such appeal or petition is pending as on the specified date i.e., 31.01.2020

3.      Time period 1st on till 31st March 2020 and subsequently with modifications till 30.06.2020

4.     Objective:-The Bill provides for resolution of pending/litigating direct taxes cases in an easy and convenient manner. Government expects to conclude more than 90% of the cases thru the introduction of this bill.

5.      Conclusion and my take:- through this scheme, the government wants to recover this money and is also able to address the revenue deficit. Government is trying to bridge the gap between the budgeted target versus the total revenue collection. This gap got created due to economic slowdown and reduction in corporate tax rates (announced in Sep 2019). Generation of Revenue is one of the major priority for the Finance Ministry as on date.

How will this culminates:

Assesses would be required to pay only the amount of the disputed taxes and will get a complete waiver of interest and penalty and prosecution provided he/she pays by March 31, 2020.

But, if the tax arrears relate to disputed interest or penalty only, then 25% of disputed penalty or interest will have to be paid.

Post March 31, 2020 taxpayers have to pay a higher amount as full rebate concludes on 31st March. Validity of this scheme is till June 30, 2020.

Once an issue is resolved under this scheme, the said authority is disempowered related to the said case and the said case is closed once and for all post the resolution. However, providing false information will empower the concerned authority to revive the case. The idea is to come with clean intentions.

Matter once settled and resolved is resolved forever. Jurisdiction of all appellate forum will cease immediately.

Extract of STATEMENT OF OBJECTS AND REASONS from the said Bill.

Over the years, the pendency of appeals filed by taxpayers as well as Government has increased due to the fact that the number of appeals that are filed is much higher than the number of appeals that are disposed. As a result, a huge amount of disputed tax arrears is locked-up in these appeals. As on the 30th November, 2019, the amount of disputed direct tax arrears is Rs. 9.32 lakh crores. Considering that the actual direct tax collection in the financial year 2018-19 was Rs.11.37 lakh crores, the disputed tax arrears constitute nearly one year direct tax collection. 2. Tax disputes consume copious amount of time, energy and resources both on the part of the Government as well as taxpayers. Moreover, they also deprive the Government of the timely collection of revenue. Therefore, there is an urgent need to provide for resolution of pending tax disputes. This 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. 3. It is, therefore, proposed to introduce The Direct Tax Vivad se Vishwas Bill, 2020 for dispute resolution related to direct taxes, which, inter alia, provides for the following, namely:— (a) The provisions of the Bill shall be applicable to appeals filed by taxpayers or the Government, which are pending with the Commissioner (Appeals), Income tax Appellate Tribunal, High Court or Supreme Court as on the 31st day of January, 2020 irrespective of whether demand in such cases is pending or has been paid; (b) the pending appeal may be against disputed tax, interest or penalty in relation to an assessment or reassessment order or against disputed interest, disputed fees where there is no disputed tax. Further, the appeal may also be against the tax determined on defaults in respect of tax deducted at source or tax collected at source; (c) in appeals related to disputed tax, the declarant shall only pay the whole of the disputed tax if the payment is made before the 31st day of March, 2020 and for the payments made after the 31st day of March, 2020 but on or before the date notified by Central Government, the amount payable shall be increased by 10 per cent. of disputed tax; (d) in appeals related to disputed penalty, disputed interest or disputed fee, the amount payable by the declarant shall be 25 per cent. of the disputed penalty, disputed interest or disputed fee, as the case may be, if the payment is made on or before the 31st day of March, 2020. If payment is made after the 31st day of March, 2020 but on or before the date notified by Central Government, the amount payable shall be increased to 30 per cent. of the disputed penalty, disputed interest or disputed fee, as the case may be. 4. The proposed Bill shall come into force on the date it receives the assent of the President and declaration may be made thereafter up to the date to be notified by the Government.

Extracted from: THE DIRECT TAX VIVAD SE VISHWAS BILL, 2020. Page 8