Sabka Vishwas legacy dispute scheme may not add much to govt coffers

Govt faces uphill task of meeting indirect tax target despite scaling it down

The indirect tax department, facing a challenging revenue target for the current fiscal year (FY20), may get little cover from a pre-GST resolution scheme as about 65 per cent of the taxes declared has already been paid, said an official.
 
Of the Rs 39,000-crore tax disclosed under the legacy dispute resolution scheme -Sabka Vishwas - the department will receive only Rs 14,000 crore, with Rs 25,000 crore already deposited by the applicants.
 
Almost 190,000 assesses came forward for settlement under the scheme.
 
“We have received applications and are sending out notices to them for payment. However, the dues will not add up to much as far as revenues are concerned as a large part was already given to the department as pre-deposit at the stage of investigation, enquiry or audit, leaving just about Rs 14,000 crore to be collected,” said the government official.
 
The indirect tax target was cut by Rs 1.8 trillion in the Revised Estimates (RE) compared to the Budget Estimates for FY20, yet it appears on the higher side considering the rate of collection so far.
 
Central Goods and Services Tax (GST) grew 10.4 per cent in the April to January period and will need to grow by 21 per cent in the last two months of FY20 to meet the RE, which was scaled down by Rs 1 trillion in the recent Budget.
 
Customs collections shrank 12 per cent in the April to December period and will need to grow by a whopping 90 per cent between January and March. The duty was raised on a slew of items in Budget, including electronics and household items, which may help the exchequer.
 
Similarly, excise duty revenue contracted by 2 per cent in the first nine months of FY20 and will need a growth of 27 per cent in the remaining three months.
 
A senior Central Board of Indirect Taxes and Customs (CBIC) member told Business Standard: "I don't think the projections are off the mark. We may fall short by a maximum of Rs 5,000-6,000 crore, but not more than that as we are expecting to see GST collections of over Rs 1.1 trillion in February, just like the previous month."
 
"Collections from Sabka Vishwas will add to excise duty collections as payments for the applications made will start flowing in from February."
 
He added that large companies stayed away from the scheme as they felt they could fight it out legally, with the government having a winning rate of just about 10 per cent in litigation.
 
The scheme was launched in September to resolve pending tax disputes under excise duty and service tax under litigation, arrears, or investigation worth around Rs 3.75 trillion. Taxpayers were offered deep discounts to the tune of 40-70 per cent, relief from payment of interest and penalty and complete relief from prosecution.  Services tax and a large part of the excise duty were subsumed under the GST regime from July 2017.
 
The CBIC had clarified that any amount paid as pre-deposit at any stage of appellate proceedings under the indirect tax enactment or as deposit during inquiry, investigation or audit, will be adjusted against the taxes declared under the scheme.
 
The scheme gives a deep discount of 70 per cent for cases pending appeal where tax demand is more than Rs 50 lakh, and 50 per cent waiver beyond that amount. Even in the case of arrears, the discount is a lucrative 60 per cent for tax demands below Rs 50 lakh, and 40 per cent above it. In addition, the scheme waives any interest, fine, and penalty pending, and absolves taxpayers of any prosecution.