The government’s decision to hike the monetary threshold for appeals in tax matters would bring down the amount under litigation by Rs 5,600 crore, Finance Minister Piyush Goyal said on Thursday.
About 66 per cent of the tax disputes at various levels of judiciary is proposed to be withdrawn out of the total amount of Rs 7.6 lakh crore under litigation in tribunals, high courts and Supreme Court (as of March 2017).
The government on Wednesday increased the threshold for the tax department to file appeal before Income Tax Appellate Tribunal/Customs, Excise and Service Tax Appellate Tribunal (ITAT/CESTAT) to Rs 20 lakh from Rs 10 lakh earlier, for high courts to Rs 50 lakh from Rs 20 lakh and as for the Supreme Court to Rs 1 crore from Rs 25 lakh.
The direct tax department will be able to reduce matters under litigation by total 41 per cent while the indirect tax department would see a 18 per cent reduction in such disputes.
Goyal said the decision will benefit small taxpayers even though the process of withdrawal of these cases could take up to a year as the tax department would consult with law officers to ensure cases involving substantial points of law are concluded as they set a precedent for similar cases.
The move to hike threshold limit is a step towards ease of doing business, he said.
In case of Central Board of Direct Taxes (CBDT), the withdrawal of 41 per cent of the cases, will have a revenue impact of Rs 4,800 crore in absolute terms, while in case of Central Board of Indirect Taxes and Customs (CBIC), withdrawal of 18 per cent of cases will have a revenue impact of Rs 800 crore, Goyal said.
“This is a major step in the direction of litigation management of both direct and indirect taxes as it will effectively reduce minor litigation and help the departments focus on high value litigation,” the government said in a statement.
For CBDT, out of the total cases filed by the department in the ITAT, 34 per cent of matters would be withdrawn. Around half the cases in filed in high courts (48 per cent) and the Supreme Court (52 per cent) would stand withdrawn once the new norms come into effect.
The CBIC is estimated to see a reduction of 18 per cent in litigation. At the tribunal level, the department would withdraw 16 per cent of the cases while 22 per cent matters in high courts and 21 per cent of the appeals in the Supreme Court would not be litigated any further.
Pranav Sayta, tax partner, EY India, said: “This should significantly help reduce tax litigation across various levels. It will not only help taxpayers by helping resolve some of the pending disputed matters but will also enable the tax administration to focus on more important matters rather than spread their energy on a plethora of small matters. It will further the government’s avowed objectives of promoting a taxpayer friendly environment and help promote ease of doing business.”