Government plans one-time amnesty to resolve legacy income-tax disputes: Report

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In order to make doing business in India easier, a government appointed task force could recommend a one-time amnesty to resolve legacy income-tax disputes worth at least Rs 8 lakh crore.

Experts said that if this happens, it will reduce the volume of tax litigations significantly, and also help taxpayers spend their time and effort on more productive matters, but added a caveat that its success will depend on the actual details of the amnesty. Daksha Baxi, head – international taxation, Cyril Amarchand Mangaldas told the leading daily, “Litigation of this nature, especially in case of cross-border tax issues and transfer pricing, makes it difficult for companies to do business in India. Bringing about a scheme to resolve such long pending litigation would be very welcome. Taxpayers would unlock so much of their time, energy and resources to focus on their businesses and the intricacies of solving them rather than resolving repeated tax issues.”

But “till the scheme is out, it is difficult to say how effective it would be in resolving long-drawn litigations which have been stuck for many years, some for more than 12 years,” she added. The leading daily’s report, further said that the task force has been asked to draft the Direct Tax Code, one of whose aims is to reduce the number of tax cases. The scheme is likely to be a one-time amnesty window of three-four months as was proposed in the case of indirect taxes in the Union Budget presented earlier this month.

The government has unveiled an amnesty scheme to resolve excise and service tax disputes pertaining to the period before the introduction of the goods and services tax to clear the backlog of cases and improve the ease of doing business. The ‘Sabka Vishwas Legacy Dispute Resolution Scheme, 2019’ announced in Budget 2019-20 provides for waiver of interest and penalty in excise and service tax cases which are locked up in litigation in various forums whether adjudicating authority or High Court or Supreme Court. These businesses would also not face prosecution in case they avail the scheme.

The relief under the scheme would vary from 40 percent to 70 percent of taxes due, depending on the amount involved, and the proposed dispute resolution-cum-amnesty scheme covers past cases involving taxes which have got subsumed in GST, namely Central Excise, Service Tax, and cess.

Nikhil Rohera, partner-corporate and international tax, PwC told the Hindustan Times, “A litigation resolution scheme [for direct taxes] that was introduced three years back could not be successful because it demanded full payment of disputed tax, with full interest, and it only reduced penalty amount. It was something like I win and you lose.”