Introduced in 2019, the scheme, which was aimed at freeing “a large number of small taxpayers of their pending disputes with the tax administration”, has been challenged in the Madhya Pradesh High Court.
The scheme offered tax payers settlement of pending central excise and sales tax issues by paying a portion of the tax demanded.
The point of contention is whether the amount in arrears defined in the scheme would cover the disputed interest of the earlier regime.
The petitioner has challenged the tax department claiming that the interest charged on the pending tax should be included in the scheme.
As per the scheme, the name of the taxpayer has to be kept under the wraps. ET has refrained from naming the petitioner.
The scheme was brought in to clear the backlog of erstwhile indirect tax disputes.
India has moved to Goods and Services Tax (GST) since July 1, 2017, and all the other indirect taxes have been subsumed under one umbrella. The intention behind the scheme is to clear the legacy issues so that companies as well as tax officers can focus on GST.
The petitioner had sought that accumulated interest on the pending tax amount should also be included in the settlement scheme. The tax department had however rejected the petitioner’s contention and issued a rejection order thereafter.
The petitioner has challenged the rejection order which denied the applicability of scheme in cases where the entire liability is only with respect to interest. This comes after several companies had opted for the settlement scheme with respect to the pending interest disputes with the tax authorities.
The court case could have larger implications on several other cases where the taxpayers want their interest amount to be waived off. As per the current tax regulations, the tax department starts levying interest and penalty on the amount that is under dispute. In some situations where the tax dispute goes on for years, the original tax dispute amount is often small and the major portion includes accumulated interest and penalty amount.
So far, the Sabka Vikas scheme has attracted substantial attention and positive response, officials said adding that 55,693 applications have been received with tax dispute amounting to Rs 29,557.3 crore, PTI reported in December 2019.
The government had first taken commitments from the taxpayers and then asked them to make payments to that effect. Due to Covid pandemic the government had extended the last day to make payments to June 30.
In many cases the tax department had even rejected the applications filed by the taxpayers and in certain cases rejected a particular stand taken by them. Sabka Vikas scheme was thought to be a success, and it was replicated to resolve the direct tax disputes as well. The government in the 2020 budget introduced — ‘Vivad se Vishwas– a direct tax dispute settlement scheme.