The Parliament has given its nod to Direct Tax Vivad se Vishwas Bill, 2020. The Bill intends to provide a one-time opportunity to end disputes related to personal income tax and corporate tax.

This Bill was passed by the Lok Sabha last week and returned by the Rajya Sabha on Friday. It will now have to be approved by the President before it becomes an Act. The Vivad se Vishwas scheme intends to provide an opportunity to taxpayers to settle disputes by paying due taxes with complete waiver of interest and penalty till March 31, and with some additional payment till June 30.

As on the November 30, 2019, the disputed direct tax arrears amount to ₹9.32-lakh crore. Considering that the actual direct tax collection in FY2018-19 was ₹11.37-lakh crore, the disputed tax arrears constitute nearly one-year direct tax collection.

Time short for tax payers

Commenting on the passage of the Bill, Rohinton Sidhwa, Partner, Deloitte India, said there is very little time for tax payers to take advantage of the scheme prior to March 31. “The forms to avail of the scheme are required to be filed with the designated authorities, who have 15 days to decide the amount due. After that, the assessee should get another 15 days to pay taxes and withdraw appeals,” he added.

Gouri Puri, Partner, Shardul Amarchand Mangaldas & Co, said the government has kept its ear to the ground and addressed several concerns surrounding the scheme. “The rules on set off of loss against amounts payable under VVS are still awaited. Given that March 31 is around the corner, an extension would have been helpful,” she added.

Replying to the debate on the Bill in the Upper House, Finance Minister Nirmala Sitharaman said the government is taking all steps to address the issue of reduction of litigation on a priority basis. She categorically stated that this is not an amnesty scheme as the taxpayer has to pay 75 per cent of the undisclosed amount deposited during demonetisation as tax.

Sitaraman said cases above ₹5 crore have been excluded — large evasion-related and fraud cases — and cannot take advantage of this scheme. There are two kinds of appeals — one, filed by taxpayers and, two, by the I-T department (or when the department has lost a case). For the first kind of appeal, if the payment is made by March 31, the declarant has to pay the full amount of the disputed tax (and 125 per cent of the disputed tax in cases where there has been a search by the I-T department). There will be no interest or penalty. If the dispute relates only to penalty, interest or fee, then only 25 per cent of it is to be paid.

However, under the second category of appeal, the amount will be halved if the payment is made by March 31. Here, the declarants have to pay 50 per cent of the disputed tax (62.5 per cent in cases where there has been a search by the I-T department). The penalty and interest will be waived. If the matter involves only the interest, penalty or fee, the declarant has to pay only 12.5 per cent of the disputed amount.