Tax Reforms

“Vivad se Vishwas” Scheme


From UPSC perspective, the following things are important :

Prelims level : “Vivad se Vishwas” Scheme

Mains level : Various tax amnesty schemes

The government has introduced The Direct Tax Vivad se Vishwas Bill, 2020.

Direct Tax Vivad se Vishwas Bill

  • In essence, the Bill is aimed at resolving direct tax-related disputes in a speedy manner.
  • 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 Vivad se Vishwas Scheme is to do for direct tax-related disputes exactly what Sabka Vishwas did for indirect tax-related disputes.

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.

What are the specifics of the scheme?

  • A taxpayer would be required to pay only the amount of the disputed taxes and will get a complete waiver of interest and penalty provided he pays by 31st March 2020.
  • Those who avail this scheme after 31st March 2020 will have to pay some additional amount.
  • However, the scheme will remain open only till June 30, 2020. The scheme also applies to all case appeals that are pending at any level.

How much money is at stake?

  • According to reports, over Rs 9 lakh crore worth of direct tax disputes are pending in the courts.
  • The government hopes to recover a big chunk of this in a swift and simple way, while offering the taxpayers the relief of not having to fight the case endlessly.
  • For a government that is staring at a big shortfall in revenues, especially tax revenues, the scheme makes a lot of sense.

What was the response to the Sabka Vishwas scheme?

  • At last count, the government expected to have raised Rs 39,500 crore from the Sabka Vishwas scheme, which was only about indirect tax disputes.
  • 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.

Criticisms of the Bill

  • The bill led to an uproar in Parliament.
  • The opposition criticised the Bill first for the use of Hindi words in its name, arguing that this was government’s way to impose Hindi on the non-Hindi speakers.
  • They also argued that the Bill treats honest and dishonest people equally.

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