Maharashtra’s latest tax amnesty: an ‘all-carrot’ policy for traders

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Finance Minister Sudhir Mungantiwar, who spelt out the state’s 2016-17 budget on Friday, stated that a dealer who has filed an appeal against sales tax raised before March 31, 2012 and the recovery of the disputed dues is stayed by an appellate authority, will be entitled to avail the amnesty if he withdraws the appeal and owns up to the undeclared earnings.

Under the scheme, for tax raised between April 1, 2005 and March 31, 2012, dealers will have to pay the unpaid tax and 25 per cent of the interest amount for waiver of the remaining dues. For cases where the tax dispute dates to a period before April 1, 2005, payment of just the tax amount raised would make dealers eligible for a full waiver of the interest and the penalty amount.

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Disclosures made in the budget documents on tax revenues raised but not realised reveals that close to Rs 40,909 crore in sales tax revenue has not been realised. Of this, Rs 16,193.57 crore is the amount that was raised before March 31, 2012 and remains under dispute.

Just as the government’s fiscal managers argued that “this was all about encouraging as many people as possible to come into the system and regularise their affairs”, the Opposition termed it as yet another “all-carrot” policy of the BJP government.

Congress’s Sachin Sawant said, “This is not any different than the ‘fair and lovely scheme’ announced by the Centre over black money. He added that, “The BJP wants a project a ‘pro-farmer’ face but won’t provide for their genuine demands for a loan waiver. Instead it has doled out an amnesty for tax fiddlers.”
In May last year, the Metal and Stainless Steel Merchants’ Association (MASSMA), an apex body representing steel merchants in Maharashtra, had approached the BJP government demanding that waiver of penalty and interest for sales tax dues. They had even issued a veiled threat that their 20,000 members would shift base to Gujarat if the demand was not met.

The government appeared to have bowed into the pressure. “This amnesty scheme will save several hundred crore for metal traders and other merchants. The MASSMA had been fighting for this waiver for years. The previous Congress-NCP government did not entertain our demand, but the BJP government has. This will also do away with the mental harassment we were facing from sales tax officials over tax evasion queries,” said Pravin Bohra, Chairman, MASSMA’s media committee.

Bohra informed that metal merchant alone may benefit by Rs 800 crore if they avail the amnesty. “The tax amount that has been raised on our members totals around Rs 1200 crore. Out of this, Rs 400 crore is the principle tax amount, while the rest is penalties and interest. We are willing to pay the principle amount, which would also enrich the state coffers,” Bohra added.

Former Maharashtra Chief Minister, Prithviraj Chavan confirmed that the MASSMA representatives had even met him during his tenure.

Sales tax officials, requesting anonymity, said that a majority of the cases involved merchants who were found to have collected bogus bills (without purchase or sale of goods) from bogus dealers, also referred to as hawala dealers, who were then reassessed for tax evasions. “The penalties and interest claims were raised as per norms against those found evading tax,” an official said.

During the Congress-NCP’s reign, the government had taken a line that extending such a waiver to metal merchants would lead to similar demands from other traders and tax fiddlers. The BJP government has now extended a general amnesty to all those falling within the category.

Viren Shah, president, Federation of Retail Traders Welfare Association, who had backed MASSMA’s demand, said it would encourage people to come clean about their tax affairs. “It is a one-time benefit that the traders can avail. They can pay tax and avoid fines,” he said.

Mungantiwar, meanwhile, indicated that the move was also to clean up most tax dues before the GST regime kicks in. “On the backdrop of GST, some states like Bihar, HP, Gujarat, and Madhya Pradesh have announced amnesty scheme for pending dues,” the finance minister said.