State governments have begun rolling out one-time amnesty schemes to wipe out all legacy tax issues from before the rollout of the goods and services tax regime.
Maharashtra has unveiled an amnesty scheme for settlement of pre-GST state tax disputes to ensure that the government recovers outstanding taxes and also clears the backlog of long pending assessments.
Karnataka and West Bengal had announced such schemes earlier. The Maharashtra government has issued an ordinance to bring into effect a scheme that provides for settlement of dues under various state levies, including VAT, CST, entry tax, professional tax, luxury tax, and purchase tax on sugarcane.
The industry has been pressing for such a scheme across the country for settling past disputes. That is because prior to GST, tax regime was not uniform with each state having its own laws and procedures.So, businesses now have multiple disputes across states. Moreover, VAT assessments in some states are still pending with a backlog of 2-3 VAT assessment in each state for every dealer, industry experts said. Most tax administration officials in states have now been shifted to GST, and only a few are left to cater to old taxes, fuelling further pendency.
The Maharashtra scheme provides for settlement of various state tax disputes for the period ending till the introduction of GST on July 1, 2017. However, there is no waiver in respect of any undisputed tax which includes taxes shown payable in the returns filed.
The relief under the scheme is available only to taxpayers who have filed their relevant tax returns on or before July 15, 2019. Tax experts said this will help the industry and the government to reduce past litigation and move on in the new tax regime.
“This initiative by the Maharashtra Government to provide a one-time settlement window for old disputes, wherein tax, interest and penalty is waived (either in full or part), is a move towards right direction,” said Pratik Jain, national leader, indirect tax, at PwC. “Waiver from tax, in addition to interest and penalties, might make it a very attractive proposition for taxpayers.”
Jain said it might be worthwhile for the central government to consider similar voluntary amnesty scheme for excise and service tax as well. “This will not only help in revenue collection but also ensure that tax administration focus on GST audits/scrutiny, where the collection target for next year appear to be steep,” he said.