In order to resolve 483,000 direct tax disputes pending in various tribunals, Vivad se Vishwas scheme or amnesty scheme was announced by the Finance Minister Nirmala Sitharaman while presenting the union budget for FY20. With this scheme, the government aims to reduce direct tax litigation and unclog the judicial system. The bill was introduced in Parliament as open-ended as it can be availed for a limited time. According to the Finance Minister, the bill seeks to provide a formula-based solution without any discrimination. This amnesty scheme, however, was criticized by the opposition as it allegedly “violates the principle of equality by equally treating honest and dishonest taxpayers.”
What is the bill?
Under the proposed Vivad Se Vishwas scheme, Nirmala Sitharaman had clarified that this scheme applies to all the cases that pending for litigation of direct taxes. Any taxpayer will only have to pay the amount of the disputed taxes. As a result, the taxpayer will get a complete waiver of interest and penalty provided he pays by March 31, 2020. If not paid by March 31, some additional amount will be charged from the taxpayers. According to the government, the scheme is valid only till June 30.
How will it benefit?
The scheme is expected to benefit taxpayers as well as the government and is a welcome move by many industry experts as it will help unclog the judicial system. The scheme proposed that a taxpayer will get a complete waiver from interest and penalty if he settles the dispute before March 31 and June 30, which will help to attract more taxpayers, said Rajesh Gupta, Co-founder & Director, BUSY (Accounting Software). Resonating similar views, Anuj Kakkar, Partner at Vriddhi Advisors said, “This will certainly encourage taxpayers to opt for settling cases for a lower amount and save them time and cost.” According to him, this will also lead to better tax collections for the government which otherwise remains stuck in litigation for years and will allow better administration of justice. Currently, over Rs 9 lakh crore worth of direct tax disputes are pending in the courts.
In the last year’s budget, the government had introduced Sabka Vishwas Scheme to reduce litigation in indirect taxes. According to Sitharaman, that had resulted in settling over 1,89,000 cases. The government is expected to have raised Rs 39,500 crore as indirect taxes from the Sabka Vishwas scheme. The amnesty window for Sabka Vishwas closed on January 15 and around 1.90 lakh crore applications have opted for the scheme.