Sabka Vishwas (Legacy Dispute Resolution) Scheme-2019: Golden Opportunity to Wipe off Old Tax Dues
There is a flood of Offers/Sale/Discounts going on in the Market. So why only the Private Sector should have all the fun. Government has also come out with the “Indirect Taxes Sale” providing up to 70% Discount.
The Finance Minister in her maiden budget introduced Sabka Vishwas (Legacy Dispute Resolution) 2019 (LDRS) in order to curb the pending litigations under the erstwhile Indirect Tax Enactments. The scheme provides relief from tax, penalty, interest, immunity from prosecution, etc., on account of pending disputes.
*Effective Date of LDRS:
*Update on 01.09.2019
Indirect Taxes Enactments covered under LDRS: Scheme covers 29 enactments including Excise , Service Tax, Sugar Cess, Salt Cess, tobacco cess enactments etc.
Eligibility conditions to avail benefit under LDRS:
All persons are eligible to opt for the scheme. Except the following:
> who have filed an appeal before the appellate forum and such appeal has been heard finally on or before the 30th day of June, 2019
> who have been convicted for any offence punishable for the matter for which he intends to file a declaration
> who have been issued a show cause notice and the final hearing has taken place on or before the 30th day of June, 2019
> who have been issued a show cause notice for an erroneous refund or refund
> who have been subjected to an enquiry or investigation or audit and the amount of duty involved in the said enquiry or investigation or audit has not been quantified on or before the 30th day of June, 2019
> a person making a voluntary disclosure after being subjected to any enquiry or investigation or audit; or
> a person making a voluntary disclosure after having filed a return wherein he has indicated an amount of duty as payable, but has not paid it
> who have filed an application in the Settlement Commission for settlement of a case
> persons seeking to make declarations with respect to excisable goods set forth in the Fourth Schedule to the Central Excise Act, 1944.
Quantum of Relief available under LDRS:
The relief available to a declarant under this Scheme shall be calculated as follows:
|S. N.||Situation||Relief Available|
|1||where the tax dues are relatable to a show cause notice or one or more appeals arising out of such notice which is pending as on the 30th day of June, 2019 :||Tax Dues up to 50 Lakhs : 70 %
Tax Dues more than 50 lakhs : 50 %
|2||where the tax dues are relatable to a show cause notice for late fee or penalty only, and the amount of duty in the said notice has been paid or is nil :||Entire amount of late fee or penalty;|
|where the tax dues are relatable to an amount in arrears :||Duty amount up to 50 laksh : 60%
Duty Amount more than 50 lakhs : 40%
|4||where the tax dues are linked to an enquiry, investigation or audit against the declarant and the amount quantified on or before the 30th day of June, 2019 is:||Tax Dues up to 50 Lakhs : 70 %
Tax Dues more than 50 lakhs : 50 %
|5||where the tax dues are payable on account of a voluntary disclosure by the declarant, then||No Relief|
Please Note that any amount paid as pre-deposit at any stage of appellate proceedings under the indirect tax enactment or as deposit during enquiry, investigation or audit, shall be deducted when issuing the statement indicating the amount payable by the declarant. However if Pre-deposit or deposit amount exceeds the amount payable under declaration, the declarant shall not be entitled to any refund.
Meaning of “Tax Dues” under LDRS
|S. N.||Situation||Tax Dues|
|1.||Where a single appeal arising out of an order is pending as on the 30th day of June, 2019 before the appellate forum||The total amount of duty which is being disputed in the said appeal|
|2.||Where more than one appeal arising out of an order, one by the declarant and the other being a departmental appeal, which are pending as on the 30th day of June, 2019 before the appellate forum||The sum of the amount of duty which is being disputed by the declarant in his appeal and the amount of duty being disputed in the departmental appeal|
|3||Where a show cause notice under any of the indirect tax enactment has been received by the declarant on or before the 30th day of June, 2019||The amount of duty stated to be payable by the declarant in the said notice|
|4||Where an enquiry or investigation or audit is pending against the declarant||The amount of duty payable under any of the indirect tax enactment which has been quantified on or before the 30th day of June, 2019|
|5||Where the amount has been voluntarily disclosed by the declarant||The total amount of duty stated in the declaration|
|6||Where an amount in arrears relating to the declarant is due||The amount in arrears|
Whether any interest or penalty is payable?
If a Declarant opts for this scheme he is not required to pay any amount towards interest and penalty.
How to make payment of liability under LDRS Scheme?
Amount payable under LDRS cannot be paid by utilizing input tax credit account under the indirect tax enactment or any other Act. The payment is to be discharged in cash only.
Whether tax liability paid under LDRS Scheme can be claimed as ITC?
No. The tax discharged under LDRS cannot be claimed as ITC.
Procedure for filing declaration under LDRS Scheme
Step 1: Submission of declaration electronically in prescribed manner (Form and manner yet to be prescribed)
Step 2: Designated Committee (DC) to verify the correctness of the declaration, except in case of voluntary disclosure
Step 3: a) Declared dues accepted by Designated Committee – DC shall issue statement of amount payable electronically within 60 days from date of declaration
b) In case amount assessed by DC is higher than the declaration amount – DC shall issueestimate of amount payable electronically within 30 days from the date of declaration and the declarant shall be afforded an opportunity of being heard before issue of final statement
Step 4: Declarant will have to pay the amount electronically within 30 days from the date of issue of such statement.
Step 5: DC shall issue a discharge certificate in electronic form, within 30 days of said payment and submission of proof of withdrawal of appeal, Discharge Certificate shall be conclusive to the matter and time period.
Any appeal or reference or a reply to the show cause notice against any order or notice giving rise to the tax dues, before the appellate forum, other than the Supreme Court or the High Court shall be deemed to be withdrawn.
In case of any writ petition or appeal or reference before the High Court or Supreme Court, the declarant shall file an application for withdrawal.
Implication of issue of Discharge Certificate
Issuance of discharge certificate with respect to the amount payable, shall be conclusive as to the matter and time period stated therein, and;
This is more liberal scheme compared to previous Voluntary Compliance Encouragement Scheme (VCES) scheme. (VCES) offered waiver of interest and penalty only, whereas LDRS not only provides for waiver of Interest and Penalty but waiver of Tax dues also. So, this is the golden opportunity for those who wants to get rid of litigation and pending tax liability.
Though the scheme has been announced but there are many doubts which we expect will be clarified once the rules and FAQs are also issued.
This amnesty scheme once again enhanced the “Vishwas” of Dishonest / Non-compliant assesses fully justifying its Title.
Disclaimer: The contents of this article are meant for information purpose only. Readers are advised to refer the full text of scheme and consult their legal advisors for better understanding.
CA Satish Sarda
Practicing Chartered Accountant
Past Chairman – Nagpur Branch of ICAI