'Vivad Se Vishwas' - Union Budget’s new scheme seeks to reduce tax litigations

• The central government has launched a new scheme ‘Vivad Se Vishwas’ to reduce the number of tax litigations pending with different courts.
  
  
• The scheme permits the taxpayers to settle the dispute by paying only the disputed tax amount with the penalties.
  
  
• Any interest will be waived off if the payment is made before March 31, 2020.

Finance minister Nirmala Sitharaman announced a new scheme called Vivad Se Vishwas (no dispute but trust) for resolving direct tax disputes pending with different tribunals during her Budget 2020 speech. “Taxpayers in whose cases appeals are pending at any level can benefit from this scheme. I hope that taxpayers will make use of this opportunity to get relief from vexatious litigation process,” she said.

It is evident that those who wish to avail of the scheme after 31 March 31 2020 will have to pay extra amount towards interest and penalty.

“In cases, where litigation is over interest and penalty, the matter could be settled by paying 25% of the amount by March 31 and 30% after the cut-off date. The offer will remain open till 30 June 2020,” she explained.

Nature of the scheme

As per Sitharaman’s statement, the bill has been introduced with the objective of resolving disputed taxes and its connected issues by focusing on trust-building. The finance minister also said the bill introduced now will be open-ended but can only be availed for a limited time. The scheme seeks to offer a formula-based solution and will take effect once it receives the assent of the President of India.

Statistics show a huge amount is locked in

In their research paper titled “Tax Dispute Resolution in India: Trends and Insights”, Dhruva Advisors reveal that the amount that is found locked-in at the Income Tax Commissioner (Appeals) level was ₹ 6.38 crore as of 31 March 2018.

In addition, around ₹ 4.96 lakhs crore is struck in disputes that are pending with other bodies like the Income Tax Appellate Tribunal, High Courts and Supreme Court.

Expert views on the scheme

“It covers all appeals except where assessments have been made under section 153A or 153C. Thus Search cases have been kept outside the purview of this scheme. Further only those cases where appeals are pending have been covered,” explained Ved Jain, former ICAI President.

However, disputes pending with the AO have not been covered. “Exclusion of such cases and not giving an option to settle disputes which are before AO, doesn't appear to be a good idea. Ideally, when Settlement of dispute is the objective, the scheme should have been extended to cover all disputes and also where disputes are likely to occur,” he said.


According to Jain, the inclusion of AO cases would have encouraged people to come out clean not only where disputes have come up and appeals are pending. However, G. Murlidhar, managing director of Kotak Mahindra Life Insurance Company, feels that it’s still a step in the right direction.

"Incorporation of a taxpayer charter in the laws is a positive step and message, that rights of taxpayers are respected and honest taxpayers need not worry about procedures or tax harassment," he said.