Direct Tax Vivad Se Vishwas Bill

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Context: The Vivad se Vishwas scheme was announced by Union Finance Minister during her budget speech on February 1, 2020. Direct Tax Vivad Se Vishwas Bill was recently tabled in Lok Sabha. 

Relevance: 
Prelims: 

  • Current events of national and international importance.
  • Economic and Social Development Sustainable Development, Poverty, Inclusion, Demographics, Social Sector initiatives, etc.

Mains: GS II- Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

Direct Tax Vivad Se Vishwas Bill, 2020:

  • The bill seeks to cut down on nearly 4.8 lakh tax disputes involving an amount of Rs 9.32 lakh crore (up to November 30, 2019) by giving the taxpayers the facility to escape interest on the disputed tax amount and any penalty.
  • The vivad se vishwas scheme embedded in the bill, offers a complete waiver on interest and penalty to the taxpayers who pay their pending taxes by March 31.
  • Objective: The scheme aims to benefit those whose tax demands are locked in dispute in multiple forums.
  • Beneficiaries: All direct tax-related cases pending before the Commissioner (Appeals), Income Tax Appellate Tribunal, high courts or the Supreme Court as on January 31, 2020 are eligible for the scheme.
  • The scheme provides that if a taxpayer avails it by March 31, 2020, then he would get complete waiver of interest and penalty.
    • However, a taxpayer who chooses the scheme post this cut-off date will have to pay the disputed tax and 10% of it extra.
    • In case it is just the interest and the penalty which is in dispute, the taxpayer will have to pay 25% of the disputed amount till March 31, and subsequently after the cut-off date, it will be 30%.
  • Certain cases including tax in arrears relating to undisclosed foreign income/asset, assessment or reassessment made on the basis of information received under Double Taxation Avoidance Agreement (DTAA) are out of the ambit of the scheme.
    • Further, cases where prosecution for any offence under the Indian Penal Code/Prevention of Money Laundering Act/Prohibition of Benami Property Transactions Act has been instituted or a person who has been convicted under the Acts can’t avail the scheme. 
  • Significance:
    • This can be a very beneficial scheme for settlement for cases such as additions of unexplained cash deposited during demonetisation period, additions for penny stocks, etc. where factually the taxpayers have high exposures.
    • It would be beneficial for such taxpayers, to pay the tax amount and settle the disputes without imposition of interest and penalty.

Background

  • The vivad se vishwas scheme is similar to the 'Indirect Tax, Sabka Vishwas' scheme which was introduced by Finance Minister BUdget 2019-20 to reduce litigation in indirect taxes.
  • The “Sabka Vishwas” legacy dispute resolution scheme was aimed at reducing disputes related to excise and service tax payments.
  • It resulted in settling over 1,89,000 cases which in turn provided in over Rs 35,000 crore of revenue for the government.
  • The total revenue stuck in such cases was, of course, estimated to be Rs 3.6 lakh crore.



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