Lok Sabha Unanimously Passes Bill To Settle Pending Tax Disputes

The Lok Sabha today passed without a debate a new law that aims to settle pending tax disputes, as the House functioning continued to remain paralysed over violence in Delhi.

Finance Minister Nirmala Sitharaman had initiated the Direct Tax Vivaad se Vishwas Bill, 2020 in the Lok Sabha amid din on Monday.

Amid a similar din created by opposition parties protesting alleged government inaction during the Delhi violence that left at least 46 dead and several others injured, Ms Sitharaman on Monday moved the Bill and introduced certain amendments.

Today she moved that the law be passed with the official amendments.

The House, where the ruling BJP has an absolute majority, passed the law by voice vote amid vociferous protests. Proceedings were adjourned for the day soon after that.

Proceedings in the Lok Sabha and Rajya Sabha have been paralysed since Parliament opened in the second half of the Budget session as a united opposition sought to corner the government over the recent clashes.

On Monday, the finance minister had stated that the law was aimed to "give settlement option to all those with disputed tax".

This, she said, "will be of great help because people spent a lot of time and money in settling cases".

As many as 4.83 lakh direct tax cases involving Rs 9.32 lakh in disputed taxes are locked in various appellate forums such as Commissioner (Appeals), ITAT, debt recovery tribunals, high courts, and the Supreme Court.

This amount is the equivalent of 82 per cent of the government's direct tax revenue in FY19. Not just in case of tax disputes, the scheme can also be availed in search and seizure operations where the recovery is up to Rs 5 crore.

Under the proposed scheme, taxpayers willing to settle disputes will be allowed a complete waiver of interest and penalty if they pay the entire amount of tax in dispute by March 31 this year, following which a 10 per cent additional disputed tax will have to be paid over and above the tax liability.

Further, where arrears related to disputed interest or penalty only, then 25 per cent of disputed penalty or interest will have to be paid if the payment is made by March 31, beyond which the same will be enhanced to 30 per cent. The scheme would remain open till June 30, 2020.

It was necessary to pass the Vivaad Se Vishwas Bill at the earliest as the last date for availing waiver of interest and penalty under it is March 31.

The bill will now go to the Rajya Sabha even though it does not require the explicit approval of the Upper House as it has been classified as "money bill".

Money bills only need to be passed or approved by the Lok Sabha. Rajya Sabha can debate on them and it can only suggest changes in it for the consideration of the Lok Sabha.

In her Budget speech on February 1, Ms Sitharaman had said that "in the past, our Government has taken several measures to reduce tax litigations. In the last budget, Sabka Vishwas Scheme was brought in to reduce litigation in indirect taxes. It resulted in settling over 1,89,000 cases".

She then unveiled the Vivad se Vishwas Scheme, which was to do for direct tax-related disputes exactly what Sabka Vishwas did for indirect tax-related disputes.

Commenting on the passage, Samir Kanabar, Tax Partner, EY India, said, "Taxpayers have limited timeframe to take advantage of the Vivaad Se Vishwas (VSV) Scheme by March end, an extension to April 30, 2020 would be a welcome move.

"Rules and FAQs will have to be issued to clarify operational as well as administrative aspects. Also, VSV does not cover "Issue" based resolution; this could hold back taxpayers where they have a strong case on some of the issues amongst other issues in the same appeal," he said.

Gokul Chaudhri, Partner, Deloitte India said: "The revised terms reflect a serious and determined initiative by the Government to reduce the tax litigation build-up. This can enable companies to truly achieve a litigation free status, which will free up management time and attention to focus on their business. This scheme aligns well with the tax proposals that have lowered the corporate tax rates and eliminated dividend distribution tax".