Vivad Se Vishwas Scheme UPSC NOTES

  • The Direct Tax ‘Vivad se Vishwas’ Act, 2020 was enacted on March 17, 2020, with the objective to reduce pending income tax litigation, generate timely revenue for the government and to benefit taxpayers.
  • The scheme aims to end litigation and legacy disputes under the direct taxes category as ₹9.32 lakh crore worth of revenue is blocked in approximately 4.8 lakh appeals pending at various income tax appellate forums.
  • The entities who opt for the scheme have to pay a requisite tax following which all litigation against them are closed by the tax department and penal proceedings dropped.

Significance of the Scheme:

It should be noted that the response to the scheme gains significance given earlier schemes like Kar Vivad Samadhan Scheme, 1998 (KVSS) and Direct Tax Dispute Resolution Scheme, 2016 (DTDRS) did not yield much results.

Benefits of Vivad se Vishwas Scheme

  • Brings certainty: It ends ambiguity around the likely outcome of disputes. 
  • Instant relief: The resolution process can be completed within a month, bringing an expeditious end to protracted disputes. 
  • Tangible savings: The Scheme provides for waiver of interest, penalty and prosecution.
    • In disputes involving penalty, interest or fine, only partial amounts need to be paid which will also have a bearing on the ongoing cost of litigation. 
  • Flexibility: The Scheme provides taxpayers with the option to choose the years of payment (even if the dispute is pending at the behest of the tax authorities), without creating a precedent. 
  • Focus on core activities: Frees the management from allocating time and resources towards ongoing disputes and allows organisations to focus on strategic business matters.

  • It provides for the settlement of disputed tax, interest, penalty or fees in relation to an assessment or reassessment order.
  • It grants immunity to taxpayers from levy of interest, penalty and institution of any proceeding for prosecution for any offence under the Income-Tax Act in respect of matters covered in the declaration.
  • Its primary objectives are to reduce pending income tax litigation, generate timely revenue and provide taxpayers peace of mind.
  • It has been a successful scheme that resolved several litigations quickly and settled the matter amicably.

 The vivad se vishwas scheme offers a complete waiver on interest and penalty to the taxpayers who pay their pending taxes by March 31.

 The scheme aims to benefit those whose tax demands are locked in dispute in multiple forums.

 The vivad se vishwas scheme was announced by Union Finance Minister Nirmala Sitharaman during her budget speech on February 1, 2020. The scheme aims to settle the huge number of pending direct tax cases.

 The Vivad Se Vishwas scheme offers to settle pending direct tax-related disputes.

 The scheme aims to resolve 483,000 direct tax-related disputes pending in various appellate forums.

 The scheme offers waivers on interest and penalty if the disputed tax amount is paid before March 31, 2020.

 If a taxpayer is not able to pay direct taxes by March 31st then, he will get further time till June 30th. However, in that case, he would have to pay 10 percent more on the tax.

 In case it is just the interest and the penalty which is being disputed, the taxpayer will have to pay 25 percent of the disputed amount till March 31, after which, it will be 30 per cent.

 Background

 The vivad se vishwas scheme is similar to the ‘Indirect Tax, Sabka Vishwas’ scheme, which was introduced by Finance Minister Nirmala Sitharaman during her maiden budget presentation in July 2019.

 There are 4,83,000 direct tax cases pending in various appellate forums i.e. Commissioner (Appeals), ITATs, High Courts and the Supreme Court.

 In the last Budget, Sabka Vishwas Scheme was brought in to reduce litigation in indirect taxes.

 It resulted in settling over 1,89,000 cases.

 The “Sabka Vishwas” legacy dispute resolution scheme was aimed at reducing disputes related to excise and service tax payments.

 Why need such a scheme?

 At present, there are as many as 4,83,000 direct tax cases pending in various appellate forums i.e. Commissioner (Appeals), ITAT, High Court and Supreme Court.

 The idea behind the scheme is to reduce litigation in the direct tax arena.

 Proposals in the Bill

 A taxpayer would be required to pay only the amount of the disputed taxes.

 he will get complete waiver of interest and penalty

 he pays by 31st March, 2020.

 Those who avail this scheme after 31st March, 2020 will have to pay some additional amount.The scheme will remain open till 30th June, 2020. Taxpayers in whose cases appeals are pending at any level can benefit from this scheme.

 Objectives of the Bill

 It aims at reducing vexatious litigations in a speedy manner that are related to the direct taxes payments.

 As per several reports, over Rs 9 lakh crore worth of direct tax disputes are pending in the courts.

 The government aims to recover a big share of the amount in a swift and simple way.

 It also aims to bridge the gap with regard to shortfall in revenues, especially tax revenues.

 Performance of earlier amnesty schemes

 Key Points

 Objective: The Bill provides a mechanism for resolution of pending tax disputes related to direct taxes (Income Tax and Corporate Tax) in simple and speedy manner.

 Criticisms of the Bill

 Standout successes of this scheme:

 Settlement of controversial tax dispute of Mondelez India Foods Pvt Ltd (which was earlier known as Cadbury India) The 580 crore (excluding taxes and penalties) dispute was settled at 439 crore payment by Mondelez India Pvt Ltd.

 Concern raised

 The amnesty window for Sabka Vishwas closed on January 15 and close to 1.90 lakh crore applications, in relation to taxes worth Rs 90,000 crore was received. One of the standout successes of this scheme was Mondelez India Foods Pvt Ltd (which was earlier known as Cadbury India) settled one of its most controversial tax disputes. The firm was accused of evading taxes to the tune of Rs 580 crore (excluding taxes and penalties). In the end, Mondelez paid Rs 439 crore on January 20 under the amnesty scheme.

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