The CBIC has notified 1 September 2019 to be the date of applicability of the Sabka Vishwas (Legacy Dispute Resolution) scheme, 2019 vide the Notification no. 04/2019 Central Excise-NT dated 21 August 2019. The Hon’ble Union Finance Minister introduced the scheme in the Union Budget 2019.
Tagged as the ‘SVS, 2019’, the scheme is said to bring clarity and swift closure to the several long-standing cases primarily under the Central Excise (CE) and Service Tax (ST). In turn, it will provide a solution to the woes of the pre-GST regime of indirect taxpayers.
Thereby, it enables them to comprehensively migrate into Goods and Services Tax (GST) and be relieved through a full waiver of interest, fine, penalty and the prosecution that follows. Such taxpayers can make use of the scheme and take relevant action by 31 December 2019.
Legacy cases refer to pending cases before the CESTAT and such forums under the erstwhile central taxes – service tax and central excise laws, which were subsumed into GST.
The scheme has two components to address these legacy cases. One of them is the dispute resolution component that liquidates the legacy cases on ST or CE subsumed under GST and any pending litigation at various forums. The other one is the amnesty component.
It offers an opportunity for taxpayers to come forward and pay outstanding tax dues, sparing them from the interest or penal charges dictated under the preceding laws.
This one-time initiative of the Central Government will also cover twenty-six other indirect tax enactments. It covers the tax dues such as those arising out of single appeal, arrears, on enquiry or investigation or excise audit, via show cause notice issued quantified as on 30 June 2019 under the following types:
- No appeal filed before the expiry of the time limit
- Any type of dispute in any appellate forum* which is attaining finality
- Admitted liability in a return
*Appellate forum does not include Revisionary Authority and the Settlement Commission
Talking of the reliefs available under the scheme, it depends upon the tax due figure falling either up to Rs 50 lakhs bracket or beyond that. Where the tax dues are equal to or less than Rs 50 lakhs, then the relief of 70% from duty demand is provided on all cases pending in adjudication, appeal, audit or investigation.
While it is 50% if tax dues demanded is more than Rs 50 lakhs. The percentage of tax due given as relief will drop down to 60% and 40% respectively in cases where no appeal is pending, or tax dues are confirmed as arrears.
Persons making a voluntary disclosure by 31 August 2019 get relief from the interest and penalty but must pay the entire tax dues disclosed. Certain pre-conditions and exceptions are defined under the scheme to ensure a fair recourse.
Hon’ble FM Nirmala Sitharaman quoted in her Budget speech that more than Rs 3.75 lakh crore has been blocked in service tax and central excise litigations.
It calls for a need to unload this baggage, allowing the business to move on. The scheme will mostly help the small businesses who suffer either at the behest of the tax authorities or from the lengthy court hearings that lead to huge legal charges.
Let us take an example to understand the working of the scheme. An SCN has been issued to M/s Torrent Pvt. Ltd. demanding duty of Rs 1,000 and penalty of Rs. 100 while the order in original (OIO) confirms duty of Rs 900 and penalty of Rs 90. Suppose, the assessee has filed an appeal against this order before the Appellate
Authority, then the duty under dispute is Rs 900, and hence tax dues are Rs 900. Suppose the department also had filed an appeal for Rs 200, then the amount under dispute sums up to Rs 1,100 (Rs 900 plus Rs 200), and hence the tax dues is Rs 1,100.
Interested taxpayers can avail the scheme on the CBIC website in Form SVLDRS-1 along with separate declaration for every type of dispute listed above, while the scheme is in force.
The system is designed to generate an auto acknowledgement with a unique reference number. The applications will be verified by a designated committee of the Commissioners for all cases except voluntary disclosures and will issue a statement of the estimate of tax due payable within 60 days.
The taxpayers have the option to either agree or disagree with tax dues as per the statement and accordingly clear the dues by 30 days. Following the payment, a discharge certificate will be issued, and the adjudicating authority shall modify the order.