Legacy Dispute Resolution scheme to aid MSMEs settle service tax, excise litigation cases: CBIC

With Rs 3.75 lakh crore locked up in service tax and excise duty litigation, the government has sought to give relief to MSMEs by setting a cut-off of Rs 50 lakh for deciding on the extent of relief on tax dues that would be provided under the proposed dispute resolution-cum-amnesty scheme, an official said.

About 1.30 lakh legacy cases of service tax and excise duty amounting to Rs 3.75 lakh crore are locked up in litigation, wherein Rs 2.5 lakh crore is service tax and the remaining Rs 1.25 lakh crore is excise.

The 'Sabka Vishwas Legacy Dispute Resolution Scheme, 2019' announced in Budget 2019-20 provides for waiver of interest and penalty in excise and service tax cases which are locked up in litigation in various forums whether adjudicating authority or High Court or Supreme Court. These businesses would also not face prosecution in case they avail the scheme.

"We expect small and medium taxpayers to have duty demands of up to Rs 50 lakh. No hard and fast rules, but that's the thinking which went into it. So, the relief is in terms of 70 per cent of the duty or 60 per cent of the duty," Central Board of Indirect Taxes and Customs (CBIC) member-GST Sandeep Bhatnagar said at a CII event here.

The relief under the scheme would vary from 40 per cent to 70 per cent of the tax dues, depending on the amount involved, and the proposed dispute resolution-cum-amnesty scheme covers past cases involving taxes which have got subsumed in GST, namely Central Excise, Service Tax and cesses.

"The government's intent was since GST has come, our businessmen should not waste time or labour on litigation of legacy taxes which have been subsumed in GST. Even the government would be free of the burden of chasing these (revenues). It is a great scheme and another plus point is it is a fully automated scheme," Bhatnagar said.

In Budget 2013, the government had come out with Service Tax Voluntary Compliance Encouragement Scheme (VCES) to give an opportunity to service tax defaulters to pay dues and come clean. VCES was introduced as one-time amnesty scheme for paying service tax dues for the period October 1, 2007, to December 31, 2012, without interest and penalty.

"We had another scheme in 2013 VCES. Those are schemes which did some good, but frankly they were not well accepted by the trade. There were fundamental problems in the scheme," Bhatnagar said, adding that the CBIC has learnt from that experience and has drafted the new scheme announced in 2019-20 Budget.