On 1 February 2020, the Finance Minister announced the dispute settlement scheme ("Vivad se Vishwas" Scheme) in Parliament. Following the announcement, the Direct Tax Vivad se Vishwas Bill, 2020 (the Bill) was introduced. The Bill was subsequently revised to widen the scope and reduce the compliance burden for taxpayers, and was passed by the Lok Sabha (Lower House of Parliament) on 4 March 2020 and by the Rajya Sabha (Upper House of Parliament) on 13 March 2020. The revised Bill received the President's assent on 17 March 2020. Some of the key provisions of the Act are given below.
- The scope of the Act has been expanded to cover the following:
- orders for which the time limit for filing an appeal had not expired as at 31 January 2020;
- cases pending before the Dispute Resolution Panel (DRP) as at 31 January 2020, including cases where the DRP had issued directions on or before 31 January 2020, but no order had been passed;
- a revision petition pending before the Commissioner of Income-tax (CIT) under section 264 of the Income-tax Act, 1961 on 31 January 2020; and
- search cases where the disputed demand is less than INR 50 million, computed year-wise.
- Payment terms under the Scheme:
- Appeals filed by the assessee
- Appeals filed by the Department or where the Department has lost an issue earlier
| Cases | Where payment is made up to 31 March 2020 | Where payment is made after 31 March 2020 |
|---|---|---|
| search cases involving dispute relating to tax, interest, penalty, etc. | payment of 125% of disputed tax waiver of interest and penalty |
payment of 135% of disputed tax waiver of interest and penalty |
| other than search cases where dispute involves tax, interest, penalty, etc. |
payment of 100% of disputed tax waiver of interest and penalty |
payment of 110% of disputed tax waiver of interest and penalty |
| where dispute relates to only interest, penalty or levy |
payment of 25% of disputed interest, penalty or fee waiver of balance 75% | payment of 30% of disputed interest, penalty or fee waiver of balance 70% |
| Cases | Where payment is made up to 31 March 2020 | Where payment is made after 31 March 2020 |
|---|---|---|
| search cases involving dispute relating to tax, interest, penalty, etc. | payment of 62.5% of disputed tax waiver of interest and penalty |
payment of 67.5% of disputed tax waiver of interest and penalty |
| other than search cases where dispute involves tax, interest, penalty, etc. |
payment of 50% of disputed tax waiver of interest and penalty |
payment of 55% of disputed tax waiver of interest and penalty |
| where dispute relates to only interest, penalty or levy |
payment of 12.5% of disputed interest, penalty or fee waiver of balance 87.5% | payment of 15% of disputed interest, penalty or fee waiver of balance 85% |
- Provision of refund of excess tax paid by the taxpayer before filing declaration over the amount payable under the Scheme.
- The revised Scheme will not set any precedence for any other proceedings and does not allow filing of declaration issue-wise.
- Proof of withdrawal of appeal and/or writ would be intimation of payment before the issuance of final certificate for settling dispute and not the declaration. Appeals by the Department also to be withdrawn before the issuance of final certificate for settling dispute.
- Mechanism for carry forward and/or set off of losses: In case where the returned loss is reduced as a result of additions (this would apply for reduction in Minimum Alternate Tax (MAT) credit also.), the taxpayer would have the following options:
- pay the notional tax on the amount by which the loss has been reduced and carry forward the claimed loss without reduction; or
- accept the reduced carry forward of loss without making any payment.
- Settling of disputes regarding transfer pricing adjustment would not have any effect on the secondary adjustment.
- Cases outside the ambit of the Scheme:
- Search cases where disputed tax is more than INR 50 million;
- prosecution cases;
- cases involving undisclosed foreign income and/or assets;
- proceedings based on information received from other countries;
- cases covered under certain laws such as Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974, Unlawful Activities (Prevention) Act, 1967, the Prevention of Corruption Act, 1988, the Prevention of Money Laundering Act, 2002, the Prohibition of Benami Property Transactions Act, 1988;
- proceedings under the provisions of the Indian Penal Code; and
- cases relating to persons notified under section 3 of the Special Courts (Trial of Offences Relating to Transactions in Securities) Act, 1992.