In fact, field officers have told the Board that most taxpayers are willing to settle pending cases if banks provide them loans for the purpose. The CBIC, in turn, has asked for a list of such taxpayers.
“The realisation of tax dues under the scheme is not as per the expectation. It has been learnt from some of the field formations that major taxpayers, especially in the real estate
sector… are not able to avail of the scheme due to financial crunch. Further, these taxpayers are willing to settle cases if banks provide them loans,” the letter sent to all principal chief commissioners and chief commissioners said. “There may be taxpayers in your jurisdiction facing similar situation,” it added. “In this regard, information should be furnished to the Board by December 2,” it added.
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has asked for details on the parties and the amount of tax dues.
Under the Sabka Vishwas scheme, taxpayers with excise duty and service tax dues have been given deep discounts to the tune of 40 to 70 per cent, relief from payment of interest and penalty (if any), and complete relief from prosecution. Service tax and a large part of excise duty were subsumed under the goods and services tax (GST) regime in 2017.
As many as 150,000 cases are currently under litigation, arrears, or investigation, with a pending tax demand of Rs 3.75 trillion. So far, about 33,000 applications amounting to Rs 18,000 crore tax dues have been received under the scheme, according to finance ministry data. But the amount actually deposited has been quite low, officials said on the condition of anonymity.
Sabka Vishwas offers 70 per cent discount for cases pending appeal where tax demand is more than Rs 50 lakh, and 50 per cent waiver beyond that amount. Even in the case of arrears, the discount is a lucrative 60 per cent for tax demands below Rs 50 lakh and 40 per cent above it. Also, the scheme, launched on September 1, waives any interest, fine and penalty pending, and absolves taxpayers of any prosecution.
Rajat Mohan, partner, AMRG Associates, said the tax department seemed to be under intense pressure to make Sabka Vishwas successful. However, collecting taxes based on newly sanctioned loans from public sector banks to financial stressed corporate entities won’t make economic sense for the government. “RBI must ensure that loans are sanctioned by banks on the basis of facts in each case, ensuring that the quantum of bad assets doesn’t go up due to the tax department’s whims and fancies,” said Mohan.
It may be challenging for the CBIC
to convince banks to give out loans for payment of taxes as an end use, said a banking industry expert.
Typically, only about 20 per cent of litigations go in favour of the tax department. Under Sabka Vishwas, if all prospective applicants come on board, the government can earn about Rs 1.5 trillion, while waiving the fines and discounts.
‘’Banks giving loan for payment of past tax dues is something unheard of. Therefore, I’m not sure if the idea to ask taxpayers to approach banks for financial assistance for paying past taxes would yield the intended results,” said Harpreet Singh, Partner, KPMG.
According to Pratik Jain, partner PwC India, the government is trying to explore ways to encourage the industry to go for the scheme. It might come up with some installment facility, for instance, he pointed out. ‘’It might be worthwhile to extend the time period till say March 2020 given the tepid response that the scheme has received till now,” Jain said.
The government has failed to meet the GST collection targets due to muted demand in the economy. The country’s economic growth slumped to a six-year low in the second quarter of the fiscal at 4.5 per cent, national accounts data released on Friday showed.
GST collection plummeted to a 19-month low in September at Rs 91,916 crore, and remained well under the Rs 1-trillion mark for the third straight month in October at Rs 95,380 crore, 5.3 per cent lower than the corresponding month last year.
“ Businesses would evaluate each matter at various stages of litigation considering the merits, impact on accounting, subsequent period tax treatment etc based on which they would decide on their approach to LDRS . However there could be an outreach by the GST authorities with a desire to prop up revenues, which have been lower than targets in recent months.” said M S Mani, partner, Deloitte India.