SynopsisSabka Vishwas (Legacy Dispute Resolution) Scheme, or SVLDR, was introduced to clear the backlog of erstwhile indirect tax disputes for companies to get over with service tax and other ongoing disputes. The scheme, introduced in 2019, was aimed at freeing “a large number of small taxpayers of their pending disputes with the tax administration”.
Many companies that approached the indirect tax department to settle tax disputes under Sabka Vishwas Scheme are now under the taxman’s lens for evading tax. In several notices issued to such companies, the tax department claims its investigations revealed the companies had not paid taxes under the pre-GST tax regime.
Sabka Vishwas (Legacy Dispute Resolution) Scheme, or SVLDR, was introduced to clear the backlog of erstwhile indirect tax disputes for companies to get over with service tax and other ongoing disputes. The scheme, introduced in 2019, was aimed at freeing “a large number of small taxpayers of their pending disputes with the tax administration”.
Little did companies suspect that when they settled their past tax disputes under Sabka Vishwas Scheme, the taxmen will open fresh investigations and notices after their submissions.
Many legal experts are crying foul over the tax department’s stand. “The reopening of the cases settled under the SVLDRS, 2019 is really disturbing,” said Shailesh Sheth, advocate, SPS Legal.
India moved to goods and services tax (GST) on July 1, 2017, and now all other indirect taxes have been subsumed under one umbrella. The intention behind the scheme is to clear the legacy issues so that companies, as well as tax officers, can focus on GST.
In tax notices issued to companies, the tax department claimed that the investigations were initiated after discrepancies were found in the filings under the income tax, excise and service tax.
“The main target appears to be the cases settled under the voluntary disclosure category. On the pretext of the verification of the amounts declared, the taxpayers are being harassed,” said Sheth.
The purpose of the scheme was to reduce litigation; however, the spate of notices could have the reverse effect, warn legal experts. “In some cases, after the company disclosed and gave statements under Sabka Vishwas Scheme, the tax officials rejected the claim under some pretext and issued notices to recover tax amount, fines and interest. The purpose of this scheme was to reduce litigation, but the situation is defeating this purpose and it may have to be looked at pragmatically by courts at some stage,” said Abhishek A Rastogi, partner at Khaitan & Co.
Many companies are now approaching various high courts in this regard.
Some experts point out that such investigations are a result of data analytics and data sharing between direct tax and indirect tax departments.
The notices are a result of the government’s drive to push its revenues amidst the Covid pandemic, said experts. “With the increasing information sharing amongst tax authorities, businesses having significant differences in the data submitted earlier should be prepared with reconciliations and explanations in respect of such mismatches,” MS Mani, partner, Deloitte India.