States, too, keen to resolve tax rows to boost investments

In line with the Centre’s plan to try and expeditiously resolve tax disputes, a number of States too are working on similar proposals to restore business sentiment and attract investments.

Recently, the Maharashtra government had finalised the Maharashtra Settlement of Arrears in Disputes Bill, 2016 that seeks to resolve cases in litigation under a dozen tax laws.

Finance Ministry officials too welcomed the move and said more States are likely to come out with similar schemes soon. Already, States including Rajasthan, Gujarat, Himachal Pradesh and Bihar are understood to have worked out schemes to resolve disputed amounts under State taxes.

“When States are competing with each other for investments, such progressive measures go a long way in promoting ease of doing business,” said a senior government official in New Delhi.

The Maharashtra law proposes to provide amnesty to disputes under litigation up to September 2016 from laws including the Central Sales Tax and Value Added Tax.

Cases prior to April 1, 2005 can be resolved on payment of the disputed tax amount and will provide for waiver of interest and penalty.

For cases after April 1, 2005, the dealer will be expected to pay the disputed tax amount and 25 per cent of disputed interest.

“There is about ₹17,000 crore of taxes locked up in litigation in the last five to seven years. The move will clear up these cases and give a big boost to the economy,” said a State government official, adding that some of them were legacy issues from the automation of the Sales Tax data, while others were defaults. The scheme has no monetary threshold and is open to all cases irrespective of the amounts under litigation.

“The intricacies of the scheme are still to be notified. We expect that it will also come in useful when the goods and services tax is rolled out,” said the official.

Tax experts too welcomed the move and said there has been a lot of interest from clients.

“The Maharashtra law is a beneficial move and will provide much needed relief to the industry as old pending cases can be settled with waiver from payment of interest and penalties,” said Santosh Dalvi, Executive Director, KPMG.

Finance Minister Arun Jaitley too has shown keenness to resolve long standing tax disputes and the Union Budget 2016-17 included a separate section on “reducing litigation and providing certainty in taxation”.

Noting that there are over three lakh tax cases pending with the first appellate authority involving ₹5.5 lakh crore of disputed amounts, Jaitley had announced a Dispute Resolution Scheme for direct as well as indirect tax cases.

Both the Central Board of Direct Taxes and the Central Board of Indirect Taxes had last year also revised upwards the monetary threshold for filing appeals.

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