Tax disputes in India have been on for decades on a stretch, driven by a maze of complex laws, myriad interpretations of rulings and a range of high tax rates that only led to encouraging tax evasion in India. When the Modi government first came to power in 2014, it had inherited a maze that was nearly unnavigable, and the difficulty of the task in front of it would have scared any other person. However, taking one step at a time, the government worked hard to dismantle the complexities and simplify the regime, enabling a clean and honest business environment.
It did not stop there, as Prime Minister Modi realized that the road to reform and building trust is long. Upon regaining power in 2019, the government was keen to resolve several legacy disputes and issues that consumed time and resources of the country for sometimes paltry amounts. An urgent need was felt to ‘move on’ and work towards regaining trust of the industry, that was lost over decades.
A GovernmentThat Lives the Motto of Participatory Governance in Letter and Spirit, All Year Round
A section of people has been trying to paint an erroneous picture that the second term of Narendra Modi is not focused about the economy as much as it should be. Unfortunately for those detractors, even a cursory glance is enough to dispel this myth. The Prime Minister, ably supported by the Finance Minister, have had a more than hands-on approach on the economy. Soon after the government came to power, the 2019 Budget was put out to work towards developing a roadmap of NaMo 2.0’s economic approach, which focused on trust, transparency and taking everyone along. However, this government has, contrary to the wrong notions, not been a budget-to-budget government. Post the 2019 Budget, the government started consulting various sectors of the economy and announced a slew of measures to address various challenges. Be it measures for real estate sector, tax rate cuts, or undertaking feedback via the GST Stakeholder Feedback Diwas, the government has been on its toes continually. In time for the new Budget, the Prime Minister personally took up along side the Finance Minister a series of marathon meetings. January saw PM Modi taking inputs and feedback from multi sectoral experts, and meeting industrialists to understand their expectations towards improving the business environment in India.
The government has also been working to make policy making a participatory exercise. Before the Budget 2020, the Prime Minister personally invited suggestions and ideas for the decade’s first budget.
The Union Budget represents the aspirations of 130 crore Indians and lays out the path towards India’s development.— Narendra Modi (@narendramodi) January 8, 2020
I invite you all to share your ideas and suggestions for this year’s Budget on MyGov. https://t.co/zVCL06TdLn
Even beyond the presentation of the budget, NaMo 2.0 has gone all out to work towards taking the government’s message, conducting a series of marathon meetings with various stakeholders across the length and breadth of this country. This truly unique participatory and interactive mode of governance is unique to NaMo 2.0, and people have been amazed by the level of granularity to which the government has been keen to go into the minutiae to assuage all quarters.
Ensuring Vishwas With Vikas – Addressing Legacy Disputes and Regaining Trust on Taxation
In 2019, the Modi government introduced the Sabka Vishwas-Legacy Dispute Resolution Scheme. Dispute resolution and amnesty were the two key components of the scheme, which aimed to rebuild trust between the stakeholders.
The dispute resolution component deals with legacy cases of Central Excise and Service Tax which were pending in litigation at various forums, while the amnesty component offered an opportunity to taxpayers to pay the outstanding tax and be free of any other legal consequences. This was borne out of the realization during the first term that a large segment of the taxpayers afflicted by legacy taxes were people who did not contribute significantly to the tax kitty of the government; however, the continued litigation was proving to be a resource burden on the government in turn. A notable feature of the Scheme has been the substantial relief in the tax dues for all categories of cases as well as full waiver of interest, fine, and penalty it offers to the party in question, with the assurance of no further litigation and prosecution.
The scheme certainly has been a success, judging by the reaction to it. As of 10 February 2020, the government managed to settle 49,534 cases, and in turn had managed to recover Rs. 24,970 crores through the settlements. The cases were being pursued at various forums, from the lowly Commissioner all the way up to the Supreme Court in the form of appeals.
In the 2020 Union Budget, the government has come up with another scheme, named ‘Vivad Se Vishwas’. With this, the government is aiming to reduce litigations in the direct taxes payments. Under the scheme, a taxpayer can get near total waiver of interest and penalty provided the amount of the disputed tax is paid. The scheme’s genesis again comes from legacy of endless disputes. At the time of the Budget, the government had highlighted how 4,83,000 direct tax cases were pending in various appellate forums.
While legacy is one aspect of regaining trust, enhancing it requires more steps that prevent harassment from scrupulous officials one may find at the Tax department offices. In this regards, a couple of steps within a year are noteworthy - a faceless assessment scheme and a Faceless appeal on the lines of Faceless assessment. Further, to further enhance the efficiency of Income Tax Department, Income-tax Act was amended to mandate the Central Board of Direct Taxes (CBDT) to adopt a Taxpayers’ Charter. The purpose of the charter, to build trust between taxpayers and the administration is possible only when taxpayer’s rights are clearly enumerated.
What was not even imaginable for a large number of critics and sceptics across India was done in a decisive manner by the Modi government. The resolution schemes have been extended to give more companies and people to close the chapter. The industry too finds the scheme impressive, as it sees a sincere effort of the government in redressing grievances and trying to reset the relationship to one of mutual trust. Additionally, the reforms on charter and assessment-appeal anonymity are seen as major steps to reduce unnecessary harassment and forbear a new chapter of transparency. The message is clear – the government is pro-business and wants to regain their trust. By walking the talk, the government has nurtured the shoots of a transparent aspirational business environment in India that is fair to everyone.