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Focus: GS-II Governance

Why in news?

The Direct Tax Vivad se Vishwas Bill that seeks to expedite resolution of pending tax disputes was passed by the Lok Sabha on 4th March 2020, even as normal proceedings in both houses of Parliament remain paralysed for the third day in a row over the Opposition’s demand for an immediate discussion on the Delhi riots.

Direct Tax – Vivad Se Vishwas Bill, 2020

  • In February 2020, the Union Cabinet had approved an amendment to the ‘Direct Tax Vivad se Vishwas Bill, 2020’ in order to widen its scope to cover litigation pending in various Debt Recovery Tribunals (DRTs).
  • The Bill provides a mechanism for resolution of pending tax disputes related to income tax and corporation tax.
  • The Bill in current form allows taxpayers to settle cases pending before the Commissioner (Appeals), Income Tax Appellate Tribunals (ITATs), Debt Recovery Tribunals (DRTs), High Courts and the Supreme Court.
  • The Direct Tax Vivad se Vishwas Bill, 2020 is similar to the ‘Sabka Vishwas Scheme’, which was brought in to reduce litigation in indirect taxes in the year 2019. It resulted in settling over 1,89,000 cases.

Important Points about the Vivad Se Vishwas Bill

  • The Bill provides a mechanism for resolution of pending tax disputes related to direct taxes (Income Tax and Corporate Tax) in simple and speedy manner.
  • ccording to the Finance Ministry, at present there are 4.83 lakh pending direct tax cases worth Rs.9 lakh crore in the courts. Through this scheme, the government wants to recover this money in a swift and simple way.
  • The government is witnessing a big shortfall in revenues, especially tax revenues, hence, increasing revenues in one of the priorities of the government.
  • Direct Tax collections have been lower than their budget targets due to the overall economic slowdown and a cut in the corporate tax rate in September, 2019.

Mechanism of Vivad se Vishwas

  • In case of payment of tax, a taxpayer would be required to pay only the amount of the disputed taxes and will get complete waiver of interest, penalty and prosecution provided he/she pays by March 31, 2020.
  • But, if the tax arrears relate to disputed interest or penalty only, then 25% of disputed penalty or interest will have to be paid.
  • Those who avail this scheme after March 31, 2020 will have to pay some additional amount.
  • However, the scheme will remain open till June 30, 2020.
  • Once a dispute is resolved, the designated authority cannot levy interest or penalty in relation to that dispute.
  • Further, no appellate forum can make a decision in relation to the matter of dispute once it is resolved.
  • Revival of Disputes: However, if an appellant provides false information or violates the Income Tax Act, 1961, then case of dispute can be revived.

April 2024