Chennai
The scheme has been rolled out with a view to benefit assesses to enable them to settle tax disputes without having to undergo the cumbersome and long drawn task of litigating with the Appellate Authorities and in the process help the Revenue Department to recover as much tax dues possible, clogged up in pending litigations. The Scheme is not available for Customs duty, obviously due to non-migration of the duty in to GST Regime.
Although the primary aim is to redress legacy indirect tax litigations carried forward into the GST Regime, the scheme seems to be devoid of rationale and seems to be incentivising dishonest tax payers. The Scheme has classified the disputes in to three phases of an Indirect Tax Litigation.
Any Indirect tax litigation starts with an investigation of an assessee’s records, returns, his/her operations post which may result into a demand. This is usually quantified by the investigating agency and communicated to the assessee for appropriate payment, with interest.
This phase can be called the investigation phase, where quantification of demand has been made and communicated and yet a show cause cum demand notice maybe issued as per Section 11 (A) of the Central Excise Act, 1944 or Section 73 of the Finance Act, 1994 in respect of demands arising out of the Central Excise & Service Taxes respectively.
In this phase, an assessee can opt to settle the dispute under the proposed scheme by paying 30% of the tax dues in case the amount involved in the dispute is under Rs 50 lakh & 50% of the tax dues, if the amount involved is over Rs 50 lakh.
Thus, it appears that a declarant (assessee) having a disputed amount of Rs 50 lakh will end up coughing up Rs 15 lakh as tax under this scheme, where as a declarant having a disputed amount of Rs 50,00,001 will have to shell out Rs 25 Lakhs. This not only defies logic, but will encourage the declarants to keep tax dues below Rs 50 lakh in borderline cases by manipulating his records .
Instead, the government could consider a fixed percentage of relief irrespective of Tax dues. Alternatively, it could even consider granting relief upto 70% in respect of disputes upto Rs 50 lakh and beyond Rs 50 lakh, 50% relief could be given in respect of disputes which involves more than Rs. 50 Lac.
For example, a dispute involving Rs 1 crore, for the first Rs 50 lakh, relief could be given at the rate of 70% of the duty, and for the next Rs 50 lakh, relief could be extended upto 50% of the duty.
The second phase of the dispute is where a Show Cause Notice or an appeal arising out of such notice is pending as on June 30, 2019. The aforementioned logic would apply and the government should have considered a fixed percentage or relief up to 50% or 70% for a declarant having more than Rs 50 lakh as payable and on the balance demand, he should be asked to pay 50% of the tax dues.
Now comes the arrears stage. At this phase, there is a scope for heavy misappropriations. Arrears have been defined as duty payable by a declarant, when no appeal has been filed by him against an adjudication order demanding tax or his Order in appeal has attained finality or when he has voluntarily declared in his return that so much amount is payable but not paid.
Thus, declarants in the arrears category have no recourse or choice but make payment with interest and penalties. In an eagerness to collect taxes, by and large, the government could have granted relief from levying penalty and interest but there is no case made whatsoever for it to encourage such declarants to pay much lesser tax than what is due from them particularly when he has no choice or recourse but to pay tax.
Thus, the entire scheme basically proposes to unlock disputed taxes and allow the government to collect whatever they can quickly. But it is ill-conceived, defying logic and rationale, thereby encouraging dishonesty. Before the bill is passed, one hopes the government will make appropriate changes to make it more feasible and equitable.
The writer is a Chartered Accountant and Managing Partner at DAA LLP
Visit news.dtnext.in to explore our interactive epaper!
Download the DT Next app for more exciting features!
Click here for iOS
Click here for Android