The Union Cabinet’s recent approval of an amendment to the ‘Direct Tax Vivad se Vishwas Bill, 2020’ is a significant development. The amendment has expanded the scope of the bill to include litigation pending in various Debt Recovery Tribunals (DRTs) and certain search and seizure cases where the recovery is up to ₹5 crore. Presently, the revised bill allows taxpayers to resolve cases pending before different legal authorities such as the Commissioner (Appeals), Income Tax Appellate Tribunals (ITATs), Debt Recovery Tribunals, High Courts and the Supreme Court.
Scope and Success of the Direct Tax Vivad se Vishwas Bill
The Direct Tax Vivad se Vishwas Bill, 2020 is much like the ‘Sabka Vishwas Scheme’, which was introduced in 2019 to reduce litigation concerning indirect taxes. The scheme was successful in settling over 1,89,000 cases and the government had anticipated raising around ₹39,500 crore through it. However, after the closure of the amnesty window in January 2020, applications concerning taxes worth ₹90,000 crore were received, indicating the immense success of the program.
Bill Objectives and Current Tax Litigation
The fundamental objective of the bill is to offer a simple and speedy resolution mechanism for pending tax disputes related to direct taxes, which include both but not limited to Income Tax and Corporate Tax. According to the Finance Ministry, there are currently 4.83 lakh pending direct tax cases valued at Rs.9 lakh crore. Through this scheme, the government aims to recover this money in a swift and uncomplicated manner.
Addressing Revenue Shortfalls
With a major shortfall in revenues, particularly tax revenues, boosting revenue has become a priority for the government. Direct Tax collections have been lower than their budget targets due to the economic slowdown and a decrease in the corporate tax rate in September 2019.
The Mechanism of the Bill
Under this scheme, a taxpayer would only need to pay the amount of disputed taxes to receive a complete waiver of interest, penalty and prosecution. However, this is only applicable if the payment is made by March 31, 2020. If the tax arrears are related to a disputed penalty or interest, then 25% of the disputed amount will need to be paid. For those who avail this scheme after March 31, 2020, an additional fee will apply although the scheme will remain open until June 30, 2020.
Immunity and Revival of Disputes
Once a dispute is resolved, the designated authority cannot impose any further interest or penalty in relation to that dispute. Additionally, no appellate forum can make a decision on the matter of dispute once it has been resolved. However, cases of dispute may be revived if an appellant provides false information or violates the Income Tax Act, 1961.
Last Modified: February 7, 2024