The Government is providing waiver on service tax, excise disputes. Should you go for it?
While most tax amnesty schemes provide relief from interest and penalty, the Sabka Vishwas (Legacy Dispute Resolution) Scheme goes a step ahead by providing waiver even on the tax due.
“An area that concerns me is that we have huge pending litigations from pre-GST regime. More than Rs 3.75 lakh crore is blocked in litigations in service tax and excise. There is a need to unload this baggage and allow business to move on,” said Nirmala Sitharaman in her Budget speech.
The scheme waives of up to 70% of the tax dues and 100% of interest and penalty. This scheme is different from past various schemes such as Voluntary Compliance Encouragement Scheme (VCES) since earlier only interest and penalty was waived, LDS is, however, offering waiver of the tax itself along with interest, penalty and prosecution. So should you go for it?
Relief proposed by LDS is as follows:
· The Scheme specifies that the following persons would not be eligible for the scheme:
A) If show cause notice (SCN) or appeal has been heard finally on or before 30 June 2019
B) Person who has been convicted for any offence for the said matter
C) Where SCN has been issued for an erroneous refund
D) In cases of enquiry, investigation or audit where amount of duty has not been quantified on or before 30 June 2019 or voluntary disclosure made after such audit/investigation
E) Where amount declared in the return has not been paid
F) Matters before settlement commission and
G) Person seeking to make declarations with respect to petroleum and tobacco products
· The amount determined needs to be paid within 30 days from the date of determination
· Discharge certificate to be conclusive for the matter and time period
- no further duty, interest or penalty shall be payable
- no prosecution can be initiated
- no reopening in any other proceedings
However, there are some open issues that need further clarification. While the scheme appears to be quite helpful and well framed out, there are still certain anomalies/ issues as highlighted below that might befuddle the assessee for want of clarity.
- The scheme does not specify the start and end date, manner of application, the procedural aspects and does not throw light on the constitution of the Designated Committee
- The scheme does not provide clarity on the aspect as to what is the remedy available to the declarant in case he wishes to dispute the decision of the Designated Committee
- In a scenario, where the declarant wishes to partially apply for a foreclosure, will that be permissible under the scheme
- The scheme provides that a person who has been issued a SCN and the final hearing has taken place on or before June 30, 2019 would not be eligible for the scheme. However, the scheme does not provide any guideline to determine whether the hearing has been concluded before June 30, 2019
“The scheme is not available, if SCN or appeal has been heard finally on or before 30 June 2019. When can it be said that the matter has been finally heard? Can the scheme be applied partially on some of the issues covered in one notice etc. are some of the open issues, which need to be resolved to ensure maximum participation,” says Harpreet Singh, Partner, KPMG India.
Some negatives in the scheme
· The tax dues required to be settled in cash and Cenvat credit balance (or the ITC under GST) cannot be used to make payment of dues under the scheme
· Dues paid under the Scheme will not be available as Cenvat credit / ITC under GST to the declarant
· Where pre- deposit has been paid it shall be deducted while determining the amount payable. However, if pre-deposit amount exceeds the amount payable, then no refund shall be admissible
"The scheme is likely to be used more for cases where demand is less vis-a-vis the relative cost of litigation and interest, and also where assesse believes that the case is weak on merits. Thus, the need of the hour is to quickly analyze the pending litigation and decide upon cases that can be applied for under the scheme,” adds Singh.