Budget 2020

Budget: Vivad se Vishwas will help close pending litigation

Lokeshwarri SK BL Research Bureau | Updated on February 01, 2020 Published on February 01, 2020

The Finance Minister announced a legacy dispute resolution scheme for direct taxes, as widely expected. The Vivad se Vishwas Scheme follows the Sabka Vishwas Scheme for settlement of legacy disputes in excise duty and service taxes, which was quite successful and closed on January 15, 2020.

The exact amount of funds raised through the Sabka Vishwas scheme is not yet known and media reports about the amount range from ₹15,000 crore to ₹38,000 crore. But it is reported that almost 1,89,000 declarations were filed and nearly 95 per cent of the excise duty and service tax cases are reported to be closed. 

This means that of the collectible arrears in indirect tax disputes of ₹28,809 crore towards the end of August 2019, according to the Standing Committee on Finance report, a large chunk has already been collected. 

The Revenue Department had said that arrears classified as ‘difficult to collect’ were worth ₹2,45,956 crore towards the end of last August. This means that part of the difficult to collect arrears were also collected by the Sabka Vishwas scheme.

The Finance Minister has said that currently there are 4,83,000 direct tax cases being fought in various courts and appellate forums. The value involved is also large. The report of the Standing Committee of Finance had said that corporate tax demands under dispute currently account for ₹5,02,157 crore and income tax cases under dispute amount for ₹4,94,671 crore. The total disputed demand therefore amounts to ₹9,96,829 crore. A large chunk of these disputes have been pending between 1 and 2 years.

But the Revenue Department has said that direct tax arrears that can be collected amount to a very small, ₹12,452 crore, as on August 31, 2019. This means that most of the disputed amount is irrecoverable. 

While the Centre may not be able to raise much money from a direct tax dispute resolution scheme, it will help close at least a large part of litigated cases, thus giving a respite to courts.

A complete waiver

 The Vivad se Vishwas scheme proposes that a taxpayer will get a complete waiver from interest and penalty if he settles the disputes before March 31, 2020. Those who avail the scheme between March 31 and June 30, will have to pay an additional amount.

While the Budget is silent about any waiver of tax dues, it will help if generous tax waivers, akin to the allowances given by the Sabka Vishwas scheme, help attract more taxpayers. 

Waivers under the Sabka Vishwas scheme were as high as 70 per cent in certain cases.

The final contours of the scheme are awaited. But making it completely web-based and easily accessible will ensure better success.

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Published on February 01, 2020
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