Amnesty offer for pre-GST litigation

The scheme is attractive, since the tax relief is 40-70% of the amount in dispute

In her Budget speech, the finance minister flagged litigation pending from the pre-Goods and Services Tax period a matter of concern, saying Rs 3.75 trillion in service tax and excise dues was blocked. She proposed an amnesty-cum-dispute resolution scheme to unload this baggage and allow business to move on. 

The details are in 15 clauses (119 to 134) of the Finance (Number 2) Bill. Called the Sabka Vishwas (Legacy Dispute Resolution) Scheme, it covers excise duty, service tax and various levies under 26 other laws —education cess, secondary and higher education cess and so on. It applies to claims of the government under litigation pending before any forum, tax claims quantified after an investigation or audit pending as on end-June 2019; also, tax dues confirmed by an order where no appeal is preferred by an assessee. It excludes cases where an appeal or showcause notice has been finally heard or where the issue pertains to refunds. 

An assessee interested in taking recourse to the scheme must first compute the tax due and make a declaration to a designated committee, claiming the percentage of dues specified in the scheme as tax relief. The committee is then to verify the statement. 

If satisfied with the correctness, specify the amount payable. If the committee is not satisfied, it shall issue an estimate of the amount due; after giving the assessee an opportunity to be heard, state what is payable. The assessee must deposit this stipulated amount within 30 days of getting this statement, withdraw the reply or appeal, and furnish proof of the payment. The committee will issue a discharge certificate within 30 days of such proof.

The scheme is attractive, since the tax relief is 40-70 per cent of the amount in dispute. The extent of relief varies by type of cases and amount of tax dues – there is higher relief for dues up to Rs 5 million and less for above this amount. 

On getting the discharge certificate, the assessee gets immunity from the remaining amount of tax dues, interest and penalty with respect to the matter. Also, the government will not prosecute under the relevant enactment or later reopen the matter. An important restriction is that the tax amount cannot be paid by using input tax credit; nor can the amount paid be taken as input tax credit. 

Any amount paid under the scheme shall not be refunded in any circumstance. Any amount of pre-deposit during litigation may be deducted to compute the amount payable. 

However, where the pre-deposited amount exceeds what is payable under the scheme, the difference cannot be claimed as a refund.

Introduction of the scheme conveys anxiety of the government to somehow garner revenue. As also a message that when in doubt, it is better to litigate and await an amnesty scheme, rather than to pay up.

E-mail: tncrajagopalan@gmail.com