Barking up the Wrong Tree?

Context:  Instead of pursuing “Vivad Se Vishwas scheme”, greater focus on collecting tax dues without dispute is essential.

Tax dispute settlement scheme — “Vivad Se Vishwas”

• Aim: To help direct taxpayers to end their disputes with the government.
• Objective: to both reduce the number of pending income-tax disputes and generate additional revenues for the government.
• Eligibility: Only those tax disputes against which appeals were filed on or before January 31, 2020, are eligible to claim the benefits under the scheme.
• Need: the amount of direct tax revenues raised but not realised because of disputes had risen sharply.
• Performance of the scheme: Tardy progress
  • The declarations made till now are less than 10% of the scheme’s potential.
  • As of November 17, government had collected just about Rs 72,500 crore of tax under this scheme.
• Problems associated with the scheme
  • May fail to generate additional revenues: due to low tax collection.
  • May fail to reduce the number of pending income-tax disputes.
  • Rise of tax revenues blocked in disputes: Share of unrealised direct tax revenue in total direct taxes collected went up sharply from 64 % in 2013-14 to 71 % in 2018-19.

Way forward

• Give more freedom to taxpayers: Government should avoid putting pressure on taxpayers to settle disputes on terms set out in the scheme.
  • Rather, allow taxpayers to explore normal options for settling disputes through existing legal routes.
• Give more freedom to public sector enterprises: Avoid pressurising public sector enterprises to settle their tax disputes under the terms of the scheme.
• Explore other areas to boost tax collection.
  • An estimated amount of direct tax dues worth Rs 1.38 trillion, not under any dispute remains uncollected by the government.
  • Tax administration apparatus of revenue department shall be beefed up to collect such tax dues.

Conclusion: Collecting direct tax arrears without any dispute can make a significant contribution to the exchequer this year and will relieve the pressure on “Vivad Se Vishwas” Scheme.