Finance Minister hints at real-time mechanism to resolve tax disputes

Our Bureau New Delhi | Updated on November 23, 2020

Finance Minister Nirmala Sitharaman

Sitharaman also expresses concern over delay in finalising Advance Pricing Agreement

Finance Minister Nirmala Sitharaman on Monday indicated that a real-time mechanism to resolve tax disputes will be in place soon. She also expressed concern over the delay in finalising the Advance Pricing Agreement (APA).

“I understand we need to have a robust mechanism by which disputes can be resolved. There should be simultaneous tracking of disputes and, if possible, prevent them from becoming disputes or, if they are indeed disputes, settle them at the earliest through real-time kind of mechanism,” Sitharaman said, while responding to queries during the CII National MNC Conference 2020.

Two resolution schemes

In 2019, the government came out with the ‘Sabka Vishwas (legacy dispute resolution) Scheme’ for old cases of erstwhile service tax and central excise duty. At the time of launch, a total of ₹3.6-lakh crore was locked up in 1.83-lakh cases at various quasi-judicial, appellate and judicial forums under service tax and central excise put together. Under the scheme, more than 1.61-lakh applications worth over ₹87,000 crore were received and the government is expected to realise around ₹40,000 crore.

During the current fiscal, the government launched the ‘Vivad se Viswas’ scheme to resolve direct tax cases. As on November 30, 2019, there were 4.83-lakh cases pending with tax arrears amounting to ₹9.32-lakh crore. Until date, the government has managed to collect over ₹72,000 crore under the scheme. “We have made our intent clear and that is why we came up with two schemes — Viswas scheme and Vivad se Viswas scheme — so that at least some of the disputes which were festering for very long time could be settled,” Sitharaman said.

Advance pricing mechanism

At the meeting, the Finance Minister expressed concern over the 800-odd applications that were pending for finalisation under the APA, some of which were as old as five years. Sitharaman agreed with the concern of industry members that this was defeating the purpose. “APAs can be expedited, otherwise it defeats the very purpose and five years is definitely not acceptable because it is rather loo long rather than being advanced,” she said.

An APA is an agreement between a tax payer and tax authority to determine the transfer pricing methodology for pricing the tax payer’s international transactions for future years. The methodology is to be applied for a certain period of time based on certain terms and conditions (called critical assumptions) being fulfilled.

The Minister also assured industry captains that the momentum of reforms has continued even during the pandemic and this will continue. “PM has not lost the opportunity for reforms even at this time,” Sitaraman said.

Published on November 23, 2020

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