Scheme for settlement of dues under Maharashtra Settlement of Arrears of Tax, Interest and Penalty Act 2023

Unlock benefits of Maharashtra’s Arrears Settlement Scheme 2023 for tax dues under MVAT, CST, and other acts pre-dating 30-06-2017. Explore the provisions, waiver options, and application process. Act now.

Government of Maharashtra has declared scheme of settlement of arrears of tax and other dues under MVAT act, CST act and other nine relevant acts, applicable to all periods prior to 30-06-2017, by  introducing  Maharashtra Settlement of Arrears of tax , interest, penalty Bill 2023 in the  Maharashtra Legislative Assembly on 20-03-2023. This act proposed  to  be effective from 01-05-2023. In this article provisions of the act and salient features of scheme is discussed.

Also Read: Maharashtra Settlement of Arrears of Tax, Interest, Penalty or Late Fee Bill, 2023 & Maharashtra Amnesty Scheme, 2023 for Goods and Services Tax Department

Scope of scheme for settlement of arrears

Goods and Service Tax act has came in to force wef 01-07-2017. Prior to implementation of said act in state various tax laws were in existence. Some of the tax laws have been repealed and subsumed in GST. A large number of cases involving outstanding dues and litigations are pending. In this background and with intention to unlock the amount involved in the outstanding dues and to reduce old pending litigations, Government of Maharashtra has introduced scheme for settlement of dues under MVAT act, CSTact and other nine relevant acts, in respect of period prior to 30-06-2017. Under the scheme it is proposed to write off arrears  of  rupees Two lakh  or less as per statutory order  per financial year under relevant acts in respect of specified period ( up to 30-06-2017 ). Scheme provides for partial waiver of disputed tax, interest, penalty and late fee on payment of requisite amount and filing of an application within prescribed period and subject to compliance of prescribed conditions. Duration of scheme is 1-05-2023 to 31-10-2023. One time payment option and instalment option( only for arrears fifty lakh and above  per order) is available for payment of requisite amount.  Applicants are required to make payment of  prescribed requisite amount within specified time and thereafter eligible for partial waiver of arrears as per Annexure A or Annexure B appended to the act. Special optional scheme is also provided for settlement of arrears by making lump sum payment of twenty percent of arrears  under one time payment option, where arrears per statutory order is fifty lakh or less. After examining an application if the designated authority is satisfied that the applicant has paid the requisite amount determined in accordance with sections 8 and 9, and satisfied other prescribed conditions  the designated authority shall pass an order  such applicant shall be discharged of his liability to the extent of the amount of waiver specified in the order of settlement.

Administration of settlement act 2023

As per section 3 of the act Goods and service Tax Department of Maharashtra will administer the act and implement the scheme of settlement of dues. Accordingly, officers specified u/s 10(2) of Mvat act and section 3 of MGST act shall be designated authority for the carrying out the purpose of this act.

Persons eligible for scheme

As per section 4 of the act an applicant whether registered or not under relevant act is eligible to apply for settlement of arrears, whether such arrears are disputed in appeal or not. As per section 2 (1) (c)  “ applicant” means a person who is liable to pay arrears of tax, interest, penalty or late fee levied or leviable under the Relevant Act or any other person including financial institution who desires to avail the benefit of settlement by complying with the conditions under this Act. It is pertinent to note that financial institution or any other person who desire to avail benefit of scheme deemed as an applicant and  may apply on behalf of dealer. The applicants who have availed benefits of settlement of dues under earlier settlement act 2016, 2019 and 2022 are also eligible to the said scheme.

Cases litigated by the department are also eligible

Such cases are also eligible for settlement of dues. It is provided in section 5 that where the Department has filed reference or an appeal before the Maharashtra Sales Tax Tribunal or the Courts, the demands disputed by the said Department including tax, interest, penalty or late fee may be considered for the settlement of arrears by the applicant and the application for settlement may be filed accordingly.  In such cases, once the amount disputed by the said Department is settled under this Act, there shall be no refund or adjustment of the amount so paid or there shall be no recovery of the waiver already granted under this Act.

Conditions for settlement

Conditions have been prescribed in section 11 of the act and in other sections. As per section 11, in order to avail benefit of settlement of dues, an applicant is required to withdraw appeal fully and unconditionally which is pending before Appellate authority, Tribunal or court in respect of respective statutory order. Accordingly, applicants has to satisfy the following conditions.

A) payment of requisite amount within prescribed time.

B) submission of an application for settlement in prescribed form within specified period.

C) submission of copy of application for withdrawl of full and unconditional appeal sent to appellate authority/ Tribunal.

What is meaning of “arrears”

Basically this  scheme is intended  for  settlement of arrears under relevant act for specified period (upto 30-06-2017) and therefore it is necessary to determine eligible outstanding amount of arrears as on 1-05-2023. In this background it has great significance and hence  definition of term “ arrears “ has been defined under section 2(1) (d) of the act.

“arrears” means the outstanding amount of tax, interest, penalty or late fee, as the case may be,-

(i) payable by an assessee as per any statutory order under the Relevant Act; or

(ii) admitted in the return or, as the case may be, the revised return filed under the Relevant Act and which has not been paid either wholly or partly; or

(iii) determined and recommended to be payable by the auditor, in the audit report submitted as per section 61 of the Value Added Tax Act, whether the notice under section 32 or 32A of the Value Added Tax Act, has been issued or not, and such arrears of tax, interest, penalty or late fee, pertains to specified period and it also includes the interest payable on the admitted tax under the Relevant Act for the specified period ;

Definition of disputed tax and undisputed tax

Under the said  scheme partial waiver is provided in respect of amount of disputed tax. However, there is no provision to waive amount of undisputed tax and applicant is require to pay 100 % amount. Therefore, while determining amount of requisite amount  applicant should carefully ascertain correct amount of undisputed tax and disputed tax strictly on the basis of definitions provided in the act. Sometimes it may happen that amount of tax disputed in appeal may not be disputed tax as per definition. As per section 2(1) (g) disputed tax means tax other than undisputed tax as defined in section 2(1) (q) of the act. Definition of undisputed tax is as under. “un-disputed tax” means,

(i) the taxes collected separately under the Relevant Act or

(ii) the taxes shown payable in the return or the revised return under the Relevant Act; or

(iii) an amount claimed by the dealer as deductions as per rule 57 of the Value Added Tax Rules or similar rules under other Relevant Act ; or

(iv) an amount forfeited under the statutory order or excess tax collection shown in the return, revised return or Audit report, as the case may be, submitted under the Relevant Act ; or

(v) any amount of tax determined and recommended to be payable by the auditor, in the audit report submitted as per section 61 of the Value Added Tax Act, and accepted by the assessee, either wholly or partly ; or

(vi) the tax deducted at source (TDS) by the employer under the Value Added Tax Act ; or

(vii) the tax collection made under section 31A of the Value Added Tax Act ;

(viii) the tax payable by the enrollment certificate holder under the Maharashtra State Tax on Professions, Trades, Callings and Employments Act, 1975 ;

(ix) the tax deducted by the employer under the Maharashtra State Tax on Professions, Trades, Calling and Employments Act, 1975 ;

(x) the amount of disallowed set-off under rules 52A or 52B of the Value Added Tax Rules, which is eligible to be claimed in the subsequent period ;

Determination of outstanding amount of arrears eligible for settlement

An applicant is required to determine outstanding amount of arrears, which is basis for calculation of requisite amount, correctly before filing an application. An applicant is eligible to take credit of amount paid after passing of statutory order till 30-04-2023. Considering such credits outstanding amount needs to be quantified and be reconciled with record of department where found necessary. Section 6 (1 ) (a)  of the act provides that any payment made in respect of a statutory order either in the appeal or otherwise, on or before the 30-04-2023 , shall first be adjusted towards the amount of un-disputed tax and then disputed tax, thereafter, towards the interest and the balance amount remaining unadjusted, shall then be adjusted towards the penalty and the late fee, sequentially. Section 6 (1) (b) of the act states that  after adjustment of  such amount  the amount remaining outstanding for the specified period, as on the 01-05-2023  shall be considered for the settlement under this Act. Similarly any demand raised for the specified period by any statutory order during the period from 01-05-2023 to 31-10-2023 shall be considered for the settlement under this Act.

Provision to write off dues up to ten thousand

Section 7 of the act provides for write off pending dues. Accordingly, any arrears determined as per any statutory order for the specified period ( upto 30-06-2017 ) as on the 30-04-2023, which are rupees Two lakh or less per financial year under the Relevant Act are eligible for  write off.  The post assessment interest on such written off dues is entitle to waiver.

Determination of requisite amount and extent of waiver

Payment of requisite amount is precondition to file an application for settlement. Therefore, it is very important to determine said amount correctly by proper interpretation and application of provisions of this act. Short payment of requisite amount has direct effect on extent of waiver. Term requisite amount is defined in section 2 (1) (l)   of the act as under .

“requisite amount” means an amount required to be paid by the applicant under this Act and shall be the aggregate of the amount paid during the period specified in clause (b) of the Table given in sub-section (2) of section 10 of this Act towards,-

(i) the amount of un-disputed tax, and

(ii) the amount of disputed tax, interest, penalty, late fee,

whether levied or not, as determined under sections 8 and 9 of the Act and as specified in Annexure-A or Annexure-B appended to the Act ;

As per section 8(b) of the act where an amount of arrears determined as per statutory order for period before 30-06-2017 as on 1-05-2023, are  fifty  lakh or less, an applicant may opt for lump sum payment 20 % for waiver of remaining amount, instead of determining requisite amount as per Annexure A or B.

Section 8 provides for determination of requisite amount and extent of waiver. Accordingly, where the said tax is un-disputed or disputed, then the extent of the payment of such un-disputed tax, disputed tax, interest, penalty or late fee and applicable waiver in respect of disputed tax, interest, penalty or late fee for One Time Payment option or Instalment option as provided in section  shall be as specified in Annexure-A or Annexure-B, as the case may be. Hence, an applicant is required to determine and pay requisite amount within prescribed time and  determine extent of waiver as per Annexure A or B considering period of order under relevant act.

 The payment made on any account on or before the30-04-2023 shall not be considered as a payment towards the requisite amount.

Under any circumstances, the applicant shall not be entitled to any waiver in respect of un-disputed tax.

Subject to the other provisions of this Act, the applicant shall be entitled to the waiver of disputed tax, interest, penalty or late fee, to the extent as prescribed in Annexure-A or Annexure-B appended to the act as the case may be.  Annexure  A is applicable to the arrears under relevant acts pertaining to periods after 1-04-2005 whereunder waiver of disputed tax and interest is provided 50 % and 85 % respectively. However, Annexure B is applicable to the arrears under relevant acts pertaining to periods before 1-04-2005 whereunder waiver of disputed tax and interest is provided 70 % and 90% respectively.

It is  further provided that in any case application shall not rejected on the ground of short payment of requisite amount where the applicant has made the payment which is less than the requisite amount as determined under this section then, the designated authority shall compute the proportionate amount of waiver admissible under the option opted by the applicant,  in proportion to the requisite amount paid by the applicant. It is further  Provided that, the amount so paid shall first be adjusted towards the un-disputed tax and the amount remaining, if any, after such adjustment shall then be adjusted towards the disputed tax, interest, penalty and late fee, proportionately.

Duration and payment of requisite amount

Section 10 states that duration of scheme is 1-05-2023 to 31-10-2023. Application for settlement require to file on or before 14-11-2023.  Three options for payment such as  lump sum payment option, one time payment option and instalment option , are provided in the section depending on nature of classification of arrears. Where arrears are less than fifty lakh per order, applicants are mandatorily required to make payment said amount under one time payment option on or before 31-10-2023. However, where arrears are in excess of  fifty lakh per statutory order, both options including payment in instalment are also available. In  such cases an applicant needs to make payment of  twenty five percent of arrears before 31-10-2023 and remaining amount should be paid in three quarterly instalment within nine months from the date of an application. Failure to pay three instalment within said period proportionate benefit of waiver will applicable.

Application for settlement of arrears

After determining an  outstanding amount eligible for settlement and payment of requisite amount, applicant is required to file an application for settlement to the designated authority in prescribed form,  on or before 14-11-2023, along with copies of statutory order, challan of payment of requisite amount,  acknowledgment of copy of letter given to appellate authority for full and unconditional withdrawl of appeal. However, where payment of requisite amount has made within specified period, designated authority may condone the delay in  filing of an application up to thirty day by recording reason. Applicant has to quantify and mention  outstanding amount, requisite amount and amount of waiver in the application. It is necessary to file separate application for each class of arrears separately for each financial year.

Scrutiny of an application

After receipt of an application, designated authority makes scrutiny of application for verification of its correctness and completeness.  During the course of scrutiny authority has to verify following issues from  the records available with the Department.

A) Correctness of outstanding amount of arrears eligible for settlement claimed in application.

B) Correctness of requisite amount shown in application.

C) Correctness of amount of waiver claimed in application.

D) Correctness of quantum of disputed and undisputed tax claimed in the application.

E) Whether required documents are submitted.

F) Whether application is filed within specified period.

G) Whether payment of requisite amount made within specified period.

H) Whether separate application made for each class of arrears separately for each F.Y.

I) Whether appeal has withdrawn unconditionally and fully if pending.

J) Whether payment of three instalment is made within nine months from the date of an application.

K) Whether option of payment opted is as per provisions of act.

Upon scrutiny of application, if it noticed that application is incorrect, incomplete or short payment of requisite amount, designated officer is required to issue defect notice to the applicant by intimating defects along with quantum of  short payment of requisite amount. Thereafter, an applicant is required to correct the defect and make additional payment if necessary  within  15 days. In any case additional payment should be paid within prescribed period only.

Order of settlement

Upon satisfaction of correctness and completeness of an application and considering compliance of defect notice, If the designated authority is satisfied that the applicant has paid the requisite amount determined in accordance with sections 8 and 9, the designated authority shall pass an order and provide the copy of the said order to the applicant within three month and thereupon, notwithstanding anything contained in the Relevant Act, such applicant shall be discharged of his liability to the extent of the amount of waiver specified in the order of settlement.

Where, the application for settlement of arrears of tax, interest, penalty or late fee is not in accordance with the provisions of this Act, and applicant failed to pay additional amount or to correct defect so communicated by way of defect notice then the designated authority may, reject the application, after giving an opportunity of being heard to the applicant.

On rejection of such application and if the applicant had withdrawn the appeal to apply for settlement then the said original appeal under the Relevant Act shall be reinstated on application made in this behalf to the appellate authority under the Relevant Act subject to the provisions of section 14.

In view of provision of section 8 (6) of the act, where the applicant has made the payment which is less than the requisite amount as determined under this section then, the designated authority shall compute the proportionate amount of waiver admissible under the option opted by the applicant,  in proportion to the requisite amount paid by the applicant.  Further provided that, the amount so paid shall first be adjusted towards the un-disputed tax and the amount remaining, if any, after such adjustment shall then be adjusted towards the disputed tax, interest, penalty and late fee, proportionately.

Section 8(7) provides that no application shall be rejected merely on the ground that the payment made by the applicant during the period as per option opted by the applicant under this Act is less than the requisite amount. In  such case proportionate benefit of waiver should be granted.

No refund of payment made under settlement scheme

Section 18 of the act provides that under no circumstances, an applicant is entitled to get refund of any amount paid under this act. It indicates that excess amount paid  toward requisite amount is not refundable. Therefore, applicant should carefully consider all payments made before 30-04-2023 either in appeal or otherwise, while determining requisite amount.

Common probable mistakes while filing application

An applicant is required to carefully understand  the provisions of the act before filing an application for settlement. Common probable mistakes on the part of an applicants are as under.

A) Non filing of an application within prescribed time.

B) Payments of requisite amount not made within prescribed time.

C) Outstanding amount of arrears as on 1-5-2023 not determined correctly.

D) Non consideration of some payment made before 30-04-2023.

E) Incorrect determination of undisputed and disputed tax.

F) Incorrect determination of requisite amount and amount of waiver.

G) Conditional or part withdrawl of appeal.

H) Non payment of short payment as per defect notice within prescribed

I) Non filing of separate application for each class of arrears and for F. Y.

Conclusion

Government has introduced scheme for settlement of dues under relevant acts and inserted following good provisions to give maximum benefit to the dealers. In compare to earlier amnesty schemes and settlement acts 2016, 2019 and 2022 this scheme is more beneficial to the dealers. Therefore, considering fifty percent waivers to disputed tax and 85 % waiver of interest , it is  best opportunity to settle dues .

A) Provision to write off arrears as per statutory order which are  two lakh or less.

B) Special scheme for settlement of arrears fifty lakh or less as per statutory order by making lump sum payment of twenty percent .

C) Waiver of fifty percent disputed tax for all period after 1-04-2005.

D) Waiver of seventy percent disputed tax for periods up to 31-03-2005.

E) Provision to allow benefit of scheme to dues as per statutory orders passed till 31-10-2023.

F) Provision to allow benefit of scheme to all applicants who have also availed benefits of settlement of dues under earlier settlement act.

G) Provision to grant benefit in a cases which are litigated by state before Tribunal or courts.

H) Provision to give option of payment of requisite amount in three instalment ( where arrears per order is fifty lakh or above )within nine months from date of an application.

I) Provision to condone delay up to thirty days in filing of an application for settlement.

J) Provision to prescribe condition to withdraw pending appeals unconditionally and fully.

K) Provision of restoration appeal where application for settlement is rejected.

L) Provision to make eligible any other person or financial institution to avail benefit to settle dues on behalf of defaulter dealer.

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Motiram Kanadje – Retired Joint Commissioner of State Tax  | Author can be reached via email Email [email protected]

Disclaimer: Nothing contained in this document is to be construed as legal opinion or view of author whatsoever and the content is to be used strictly for informational and educational purposes. While due care has been taken in preparing this article, certain mistakes and omissions may creep in. The author does not accept any liability for any loss or damage of any kind arising out of any inaccurate or incomplete information in this article nor for any action taken in reliance thereon.