While treading new roads, the Government has rightly taken steps to unload the baggage of more than INR 3.75 lakh crores blocked in litigations in service tax and excise and allow the business to move on, which may be impeding growth. The maiden budget of the newly elected Government appears to have taken a significant step ahead in its ‘ease of doing business’ policy. It is called Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019.
The Salient Features of the scheme are as follows :
1. Laws covered under the LDRC :
Scheme covers 29 enactments including :
- Central Excise Act, 1944
- Chapter V of Finance Act 1994 (service tax)
- Cess payable under specified enactments like education cess, Swachh Bharat Cess, Krishi Kalyan Cess
- Other acts as may be notified by the Central Government
2. Eligibility conditions to avail benefit under LDRS :
All persons are eligible to opt for the scheme except:
- 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.
- 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.
3. Benefit under the scheme :
4. Restriction :
- Amount payable under LDRS cannot be paid by utilizing input tax credit account under the indirect tax enactment or any other Act.
- Tax dues have to be paid in cash only and cannot be paid using credit.
- The tax discharged under LDRS cannot be claimed as ITC.
5. 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 issue estimate 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.
6. Effect of discharge certificate :
The issuance of discharge certificate shall be conclusive as to the matter and time period stated therein, and:
- The taxpayer shall not be liable to pay any further duty, interest, or penalty.
- The taxpayer shall not be liable to be prosecuted.
- No matter and time period covered by such declaration shall be reopened in any other proceeding.
7. Some points to be noted :
- No outer time limit is prescribed for the operation of the scheme.
- The scheme does not cover cases in which interest alone is in dispute.
- More clarity is required on the manner in which “voluntary disclosure” operates under the scheme.
- It is unclear whether CENVAT credit reversal issues (specifically for service tax assesses) is covered under the scheme.
8. Impact of the Scheme:
The scheme appears to be beneficial to taxpayers considering the number of waivers proposed and the immunity from penal consequences. It also provides a one-time opportunity to settle all past disputes while stepping into a new tax era and thereby may facilitate the ease of doing business.