An analytical analysis is necessary to ensure success in such amnesty schemes, beginning with stratification of disputes into intelligible classes of taxpayers. To illustrate, often inter-state VAT issues arise on account of delay on part of transacting parties for supplying the prescribed documents. These lead to hefty tax demands and consequential penal consequences. Five decades of settled judicial opinion
permits the taxpayer to belatedly furnish such documents in appellate proceedings, which has the effect of nullifying the entire dispute. In such and similar cases, where the disputes are purely mechanical or constitute a technical breach of the law which do not entail any interpretation of the law, paying up half the disputed tax is not an incentive to encourage foreclosure.
Similar considerations will weigh on high-pitched assessments, particularly disputes that entail the violation of principles of natural justice. In such cases, the taxpayer makes an assessment of more than reasonable certainty of a positive appellate outcome. In such situations, why would a rationale business person driven by commercial considerations opt for such a scheme? Amnesty is best suited to cases involving tax-evasion and protracted defiance and is rarely an option for diligent and reputed taxpayers having committed a technical breach, who instead prefer judicial vindication.
An underlying sentiment behind such amnesty exercise, to make it truly successful, should first be ‘to not’ treat it as an ad-hoc measure. Experience drawn from the past schemes, such as the Central Tax 2016 plan to liquidate disputes at Commissioner (Appeals) level or the Rajasthan government’s 2015 amnesty scheme, testify that (i) partial/limited scope of amnesty and (ii) rigours/unattractive terms of settlement, are handicaps to success of such noble policy moves. Hence, the terms of the scheme should be all-pervasive and must be seen as offering a realist alternative to taxpayers.
Another noteworthy aspect is the statute of limitation under state laws. VAT assessments in Maharashtra can extend up to eight years. Hence, typically, VAT liability for FY17 (the last year of pre-GST compliance) can arise up to 2025 and considering the appellate process, disputes may exist well beyond 2030. The notified scheme has lacunae in the sense it covers only cases that have been already detected or are pending! An amnesty scheme to deal with pre-GST laws should ideally not have a cut-off date and instead should roll-over year on year to deal with future disputes. Alternatively, it would have been expedient for states, in general, to enact an omnibus statute of limitation introducing a moratorium for all assessments under all erstwhile state indirect tax laws. This will ensure that the tax-administration and taxpayers devote time and resources to conclude past matters. It would also ensure that taxpayers know the precise quantum of dispute and are able to realistically assess the relative merits of opting for the scheme.
The GST Council’s role in framing such a scheme is unknown. Ideally, the GST Council as part of GST rollout should have framed a master template (of such schemes) for states to adopt with appropriate modifications. It would be expedient if the states route their amnesty proposals via the GST Council to seek a holistic view. In fact, the GST Council must take lead to address pre-GST indirect tax litigation in a manner which not just aids states to liquidate revenues but genuinely incentivises taxpayers to opt for a settlement. It goes without saying that emphasis should be on the intent to settle, instead of mere optics or an exercise for statistical attainment.
In conclusion, the Maharashtra scheme is laudable in terms of its intent, though uncoordinated and suffers from infirmities which are addressable.
, BMR Legal, and an independent advocate. Views are personal