Govt considering Customs amnesty scheme to resolve legacy disputes

The government is considering a one-time amnesty scheme for resolution of legacy disputes pertaining to Customs after the success of its two initiatives taken in the previous two budgets -- Sabka Vishwas for excise and service tax cases, and Vivad se Vishwas for income-tax issues, two people aware of the development said.

It is one of the demands of the industry to give businesses a chance to resolve past disputes related to Customs in line with other two schemes. The government is actively considering it, the people cited about said, requesting anonymity. The government and businesses are embroiled in legacy disputes such as Customs classification, disagreement over valuation and rules of origin issues, they added.

“Previous dispute resolution schemes [Sabka Viswas and Vivad se Vishwas] have been highly successful. They helped people, especially small businesses, immensely in getting rid of their past baggage of disputes and move ahead with a clear slate. A similar scheme is expected, possibly in this budget,” one of the officials said.

Finance minister Nirmala Sitharaman had proposed the first legacy dispute resolution mechanism for central excise and service tax in her first budget on July 5, 2019 for smoother functioning of the newly introduced Goods and Services Tax (GST) regime.

“GST has just completed two years. An area that concerns me is that we have huge pending litigations from pre-GST regime. More than ₹3.75 lakh crore is blocked in litigations in service tax and excise. There is a need to unload this baggage and allow business to move on,” she had said in her budget speech.

In the next budget on February 1 last year, she proposed a ‘No Dispute but Trust Scheme’ under the name of Vivad se Vishwas for reducing litigations even in the direct taxes. “I hope that taxpayers will make use of this opportunity to get relief from vexatious litigation process,” she said in her budget speech.

Sabka Vishwas legacy dispute resolution scheme (SVLDRS) was introduced on September 1, 2019, with the objective of reducing litigations so that taxpayers could focus on GST. The scheme provided taxpayers relief in payment of disputed tax amounts ranging from 70% to 40% of the tax amount and waived off interest and penalty.

SVLDRS, 2019, saw about 190,000 declarations by taxpayers involving total tax dues of about ₹90,000 crore, a second official mentioned above said. The direct tax Vivad se Vishwas scheme is still under operation as the last date to avail it is January 31, the official added.

Ranjeet Mahtani, partner at consultancy firm Dhruva Advisors LLP, said, “An amnesty scheme on the lines of Vivad se Vishwas or other similar schemes (SVLDRS) might be a welcome decision but would largely be dependent on the implementation.”

“As we move towards a [digital] faceless system, it will be very much in order to resolve long-standing disputes to clear up the burdened judicial pipeline, as also to upgrade the law to keep up with times, technology and international best practices. Customs law and border protection is now as much an economic system as a geopolitical tool, and thus must keep up with times,” he added.