While the Budget is expected to tweak personal income tax (PIT) slabs to give relief to large sections of taxpayers and prop up sagging consumption, the government may also seek to offset the resultant short-term revenue loss by unveiling a liberal dispute resolution scheme. The new amnesty would enable the government to garner big chunks of revenue in FY21 but there is a possibility that it could commence in the current financial year itself.
According to sources privy to the Budget discussions, the scheme would be modelled on a similar one — Sabka Vishwas — that existed for four and half months till January 15, helping settle 95 per cent of indirect tax disputes it was dealing with.
The initiative comes at a time when direct tax collections have been hit hard. Till January 15 this year, the gross collections (before transfers to states but post-refunds) were down 5 per cent on year, as against a growth of 17 per cent required to meet the Budget Estimate of Rs 13.35 lakh crore.
Although the latest amount stuck in disputes between the taxman and the taxpayer in the direct tax arena isn’t known, the disputed amount was revealed to be a whopping Rs 6.23 lakh crore at the end of FY18, including Rs 4 lakh crore locked up over corporate tax disputes.
While demonetisation helped boost PIT collections — the mop-up grew 22 per cent in FY17 — that proved to be a blip and the growth has since fallen steeply. The government has had only modest success so far in proving the unmet tax liabilities of those who deposited huge amounts of cash in banks during demonetisation.
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Direct tax collections fell by over 5 per cent till January 15 this fiscal largely due to the lower collections in corporation tax, which is partly attributable to the slashing of rates in September. With less than a quarter to go, the Centre is all but sure to miss the Budget Estimate target for direct tax mop-up.
Delivering a lecture on Sunday, Finance Minister Nirmala Sitharaman said the government was keen on quick resolution of pending tax-related disputes so that firms, especially MSMEs, could start a new life in technology-driven regime largely devoid of face-to-face interactions with the tax administration. She said the dispute resolution scheme launched last year for indirect taxes had been a success, and the Finance Ministry would replicate the same for income tax cases.
“Nearly 95 per cent cases are closed. About Rs 35,000 crore has been settled (for cases related to excise and service tax regime). The total value of cases was over Rs 2 lakh crore. There are another 5 per cent cases which didn’t opt for the scheme, and they will be fought in the courts,” she had said. —FE
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