Vivad Se Vishwas scheme-A failed Plan

Why in news?

The amount expected to be raised under Vivad Se Vishwas scheme is well below the revenue department’s expectation.

What is Vivad Se Vishwas scheme?

In the 2020-21 Budget, this scheme was introduced to put an end to pending direct tax disputes at various appellate forums paving way for efficient revenue collection.
It waives of the interest, penalty & prosecution for those persons who settle their dues by March 31, 2021.
It is modelled on the lines of Sabka Vishwas scheme which met with reasonable success in closing numerous litigations in indirect tax demands.

What was the targeted revenue from the scheme?

As per the Standing Committee on Finance, there are 4,83,000 disputes cases pending before the Commissioner (Appeals), the Income Tax Appellate Tribunal, High Courts & Supreme Court.

The estimated amount in the above cases was around 9.32-lakh crore towards the end of November 2019.
But Centre has collected only Rs 72,480 crore through the scheme till mid-November — well short of expectation.

Why did the expected revenue not realised?

There was increased pressure on the revenue officials to increase tax base & to collect more taxes resulting in surging tax demands.
These demands were not realised because – assessee is not traceable or not possessing adequate assets, demand stayed by appellate bodies, company is under liquidation etc.
Recent Income Tax Department reports identify that over 6,000assessee income tax return did not match with their assets.
But revenue department is continuing its drive to raise tax demands in this fiscal year too.
Efforts taken by the centre to check tax evasion, reduce black money has also resulted in too many frivolous demands.
The Standing Committee also reported that 95 % of the total outstanding demands will be difficult to recover.

What can be done now?

Though data from GST returns, banks & other investments will help in reducing tax evasion, but liability cannot be clearly established.
This is because the data is subjected to varied interpretations.

The Income Tax Department now needs to face the reality and make necessary amendments.
It should also keep in mind of a fair, courteous and reasonable treatment of assesse from the tax authority which is highlighted in the recently launched Tax Charter.

Source: Business Line