The scheme announced in the Budget last year allowed for the settlement of tax disputes due up to January 31, 2020.
PC Mody, Chairman, CBDT
The government may have managed to resolve nearly 30 per cent of the pending direct tax disputes under the Vivad se Vishwas (VsV) scheme, but only about 10.07 per cent of the disputed tax amount has been settled, clearly suggesting that large players chose to stay away.
In an interview to Business Standard, Central Board of Direct Taxes (CBDT) Chairman P C Mody attributed the trend to ‘large players being able to afford the cost of litigation’. “This scheme has been a grand success. Rather than focusing on collection, the intent of the scheme was the settlement of disputes,” said Mody.
The scheme announced in the Budget last year allowed for the settlement of tax disputes due up to January 31, 2020. The declaration window, after several extensions, closed on March 31 this year, but payments will be allowed till April 30.
Public sector enterprises accounted for 35 per cent of the settled disputed tax, but just 1 per cent of the disputed cases have been cleared.
Of the 510,491 pending dispute cases with a disputed tax amount of Rs 9.7 trillion, nearly 148,690 cases have been settled involving a disputed tax amount of Rs 1.03 trillion, according to the data shared by the CBDT. This signifies that only smaller disputes were settled under the scheme. “Large players have the wherewithal to fight litigation, while a mid-bracket taxpayer would say it is better to settle the issue. Also, in older cases, where penalty and interest burden were higher, they have opted for the scheme. No interest and penalty were good incentives to settle under VsV,” said Mody.
Of the total settled disputes, 97 per cent pertain to cases where appeals have been filed by assessees; in the rest 3 per cent, appeals have been filed by the department. The scheme allowed 50 per cent waiver in disputed tax amount and waiver of interest and penalty where appeal had been filed by the income-tax department, whereas 100 per cent principal tax amount is payable with a waiver in interest and penalty where the income-tax department has filed an appeal.
While the CBDT has received Rs 54,005 crore so far, another Rs 20,000 crore is expected by April 30 — the last date for making payments under the scheme. Since the government will need to issue refunds for the tax amount already paid by the assessees, the net collection for the government from the scheme will be lower. Mody said it would be somewhere close to Rs 50,000 crore.
Mody said that litigation management has been high on the government’s list of priorities.