‘Vivad se Vishwas’: New scheme announced in Budget 2020 to reduce tax litigations
Under the proposed “Vivad Se Vishwas” scheme, a taxpayer would be required to pay only the amount of the disputed taxes and will get complete waiver of interest and penalty provided he pays by 31st March, 2020.
Finance minister Nirmala Sitharaman on Saturday announced a new scheme, “Vivad se Vishwas” (no dispute but trust) to resolve 483,000 direct tax disputes pending in various tribunals. The scheme offers waivers off penalty and interest if the disputed amount is paid before March 31, 2020.
“This year, I propose to bring a scheme similar to the indirect tax, Sabka Vishwas, for reducing litigation even in direct taxes,” Sitharaman said in her budget speech.
In her first Budget, presented on July 5, 2019, Sitharaman had proposed the “Sabka Vishwas”’ legacy dispute resolution scheme for litigation related to excise and service tax payments. The finance minister told Parliament that the scheme had resulted in settling of over 189,000 cases.
“Under the proposed “Vivad Se Vishwas” scheme, a taxpayer would be required to pay only the amount of the disputed taxes and will get complete waiver of interest and penalty provided he pays by 31st March, 2020,” she said.
“Taxpayers in whose cases appeals are pending at any level can benefit from this scheme. I hope that taxpayers will make use of this opportunity to get relief from vexatious litigation process,” finance minister said.
Those who avail the scheme after March 31, 2020 will have to pay some additional amount, she said.
A finance ministry official, who requested anonymity said 10% more will be charged as interest and penalty after March 31.
” In cases, where litigation is over interest and penalty, the matter could be settled by paying 25% of the amount by March 31 and 30% after the cut-off date. The offer will remain open till June 30, 2020,” the official said.
Experts said the effectiveness of the scheme depends on the details that would be notified by the Central Board of Direct Taxes (CBDT) soon. “Introduction of “Vivaad se Vishwas” scheme, in line with the “Sabka Vishwas” scheme, for direct tax dispute resolution, is a welcome move. The details would need to be analysed,” said Rajeev Dimri, partner and co-head of the tax practice at KPMG India.
Fatema Hunaid, partner, Grant Thornton India LLP said the proposed scheme “seems appealing as a one-time measure.”
According to data compiled by Dhruva Advisors in its research paper, Tax Dispute Resolution in India: Trends and Insights,at the Income Tax Commissioner (Appeals) level alone, the locked-in amount was Rs 6.38 lakh crore as of March 31, 2018. An additional Rs 4.96 lakh crore is stuck in disputes pending at other forums such as the Income Tax Appellate Tribunal, high courts and the Supreme Court.