The Indian cement industry is the second largest cement producer in the world right after China. The Indian Government is highly focused on developing infrastructure, affordable housing and roads as announced by the FM Mr. Arun Jaitley in the Budget 2017. So, the cement industry is expected to get a boost in the near future. The question though is, will the implementation of
GST affect this projected growth?

The Government has announced the Goods and Services Tax (GST) rates L/P Cement @ 28% and Clinker also @ 28%. Tax rates of some sectors were as per the expectations of various stakeholders, while others surprised them. Low tax rates on coal and capital goods came in as a big surprise for the market.

1. Impact of GST on cement

The tax rates for cement was extremely complex. For example, there are various rates and specific duties of excise applicable on different types of cement depending on whether they are supplied in bulk form or in packaged form or whether for industrial or trade purposes. The effective rates including excise & VAT totals up to around
24-25%.

2. Rate of GST on cement and on raw material

The GST tax rate for cement is fixed at 28%. Therefore, this has resulted in a slight increase in taxes. However, the revision in tax rates brings an additional benefit, as the
GST on coal and minerals ore has been reduced to 5%.

i. Limestone is taxed at 5%

ii. Coal is capped at 5%,which is a reduction from the earlier rate of 11.69%.

iii. Electricity is outside the purview of GST.

iv. Nothing has been mentioned regarding Royalty which is paid by the cement companies to the State Government for quarrying limestone.

v. Clean Energy Cess has been levied on coal which is not available as an input credit as it has not been subsumed by
GST.

vi. GST on transportation reduced to 5% if separately charged.

Therefore, these factors will continue to be outside the purview of GST and will be included in the cost of cement production even after
GST is implemented as was done previously. Further petroleum products i.e. (i) petroleum crude;
(ii) high speed diesel; (iii) motor spirit (commonly known as petrol); (iv) natural gas; (v) aviation turbine fuel; and (vi) alcoholic liquor for human consumption are out of
GST regime.

3. Positive impact of GST on cement industry

With the introduction of GST, the cement manufacturers can have a sigh of relief as the supply chain management of cement will get a boost under
GST. Most companies maintain multiple warehouses across States reduced burden of CST and state entry taxes. These warehouses generally operate below their capacity which leads to operational inefficiencies. Now, like other sectors, the cement companies will also consolidate their warehouses and maintain warehouses in areas where it is beneficial, thus leading to operational economies.

4. Savings on transport

Most of the cement manufacturers are located near limestone quarries. But demand for cement is pan-India which means that the cost of transporting cement from the manufacturer to the buyer is pretty high. Now, with
GST the logistics industry is also going to be overhauled. The transit time will decline as vehicles will spend lesser time at checkpoints. This will lead to lower transportation costs and, in turn, the cement industry will save transport costs.

5. Less complex taxes

Under old law, there were multiple excise duties applicable to cement manufacturers. There are separate rates and specific duties applicable on different types of cements depending on whether they are supplied in bulk form or in packaged form, or whether they are for industrial or trade purposes etc. All these multiple rates will be done away with under
GST. Only a fixed rate of 28% will apply on cement. This will result in lesser compliances and less complexity.

6. Suggestions

i. Wherever customer is not going to get the tax credit, it is advisable to take Ex-Factory order as the incidence of tax in case of freight is only 5%.

ii. As there will be no border issue, there is no need to do stock transfer.
Cement industries maximise out direct despatches even in case of inter-State
supplies. Now the branch transfer can be converted in direct despatches from
nearest godown and dealer will get full IGST credit. Cement industries can save on account of handling and secondary transportation.

7. Input Tax Credit to cement industries

ITC being the backbone of GST and a major matter of concern for the registered persons, conditions for eligibility to ITC have been prescribed which is majority in line with pre-GST regime. These rules are also quite particular and stringent in its approach.

A registered cement industry will be eligible to claim Input Tax Credit (ITC) for furtherance of business on fulfilment of the following conditions :

1. Possession of a tax invoice or debit note or document evidencing payment.

2. Receipt of goods and/or services.

3. Goods delivered by supplier to other person on the direction of registered person against a document of transfer of title of goods.

4. Furnishing of a return.

5. Where goods are received in lots or installments ITC will be allowed to be availed when the last lot or installment is received.

6. Failure to the supplier towards supply of goods and/or services within 180 days from the date of invoice, ITC already claimed will be added to output tax liability and interest to be paid on such tax involved. On payment to supplier, ITC will be again allowed to be claimed.

7. No ITC will be allowed if depreciation has been claimed on tax component of a capital goods.

8. If invoice or debit note is received after –

• The due date of filing Return for September of next financial year; or

• Filing Annual Return, whichever is later

No ITC will be allowed.

9. Common credit of ITC used commonly for

• Effecting exempt and taxable supplies

• Business and non-business activity

Credit will be allowed according to the RULES.

8. Items on which credit is not allowed

1. Motor vehicles and conveyance except the below cases :

i. Such motor vehicles and conveyances are further supplied i.e. sold.

ii. Transport of passengers.

iii. Used for imparting training on driving, flying, navigating such vehicles or conveyances.

iv. Transportation of goods.

2. Food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery.

But if the goods and/or services are taken to deliver the same category of services or as a part of a composite supply, credit will be available.

3. Sale of membership in a club, health, fitness centre.

4. Rent-a-cab, health insurance and life insurance except following :

i. Government makes it obligatory for employers to provide it to its employees.

ii. Goods and/or services are taken to deliver the same category of services or as a part of a composite supply, credit will be available.

5. Travel benefits extended to employees on vacation such as leave or home travel concession.

6. Works contract service for construction of an immovable property (except plant & machinery or for providing further supply of works contract service).

7. Goods and/or services for construction of an immovable property whether to be used for personal or business use.

8. Goods and/or services where tax has been paid under composition scheme.

9. Goods and/or services used for personal use.

10. Goods or services or both received by a non-resident taxable person except for any of the goods imported by him.

11. Goods lost, stolen, destroyed, written off or disposed off by way of gift or free samples.

Conclusion

All these put together may reduce the operating costs for the cement industry in the future. However, reduction in costs for the end-consumer will occur only if the cement industries pass on their savings to the consumers. Till then, it is expected that prices of cement will increase, at least temporarily, once
GST is implemented. In turn, costs for infrastructure and housing which are highly dependent on cement, will also increase.

 

Without your involvement you can’t succeed. With your involvement you can’t fail.

— Dr. A. P. J Abdul Kalam

It has already been a fortnight of the historic overhaul of existing indirect taxes with the midnight rollout of GST in India and so far, the overall outlook is positive even though some people are questioning the haste with which it was brought in.

The world economy is viewing this reform as a major break through for ease of doing business as well as cutting red tape prevalent across the country. Through this article, I’ve tried to discuss the provisions of Reverse Charge Mechanism (RCM), the various goods/services attracting reverse charge and how such liability is to be discharged.

Concept of RCM

The concept of Reverse charge had been prevailing in some form in the VAT (purchase tax) and the Service Tax regime. The main concept of getting reverse charge is two-fold – to increase compliance and revenue in the Government treasury from supplies by the unorganised sector and taxing the recipient of such goods/services and also to shift the burden of taxes from certain types of registered persons to business entities.

Under normal cases the supplier of goods or services or both is supposed to collect the tax and pay the tax to the Government i.e. forward charge. In reverse charge mechanism, the recipient of service is supposed to pay tax instead of the supplier.

The Government has the power to collect tax on such reverse charge transactions vide sections 9(3) of CGST Act and 5(3) of IGST Act for notified goods and services and Sections 9(4) of CGST Act and 5(4) of IGST Act for inward supplies undertaken from unregistered persons.

RCM on notified Goods and Services

The Government as per Section 9(3) of the CGST Act and Section 5(3) of the IGST Act, on recommendation from the Council specify categories of goods or services or both on which tax shall be payable on reverse charge basis. The Act shall apply to such recipient as if he is the person liable to pay tax with regards to said goods or service or both.

Notification No. 04/2017 – Central Tax (Rate) and Notification No.4/2017 – Integrated Tax (Rate) both dated 28th June, 2017 specifies categories of goods notified by the Government to attract reverse charge and Notification No. 13/2017 – Central Tax (Rate) and Notification No. 10/2017 – Integrated Tax (Rate) specifies categories of services notified by the Government to attract reverse charge.

Very few goods like cashew nuts in shell, tobacco leaves etc. are notified at the moment and notified services are quite similar to the ones which were present in the service tax regime.

A brief summary of the categories of such goods and services are tabulated and reproduced hereunder for your ready reference.

Notified Goods under RCM
Supplier of Goods Recipient of Goods GST payable by Service Recipient
By agriculturist of

• Cashew nuts, not shelled or peeled

• Bidi wrapper leaves (tendu)

• Tobacco leaves

Any registered person 100%
Any person who manufactures silk yarn from raw silk or silk worm cocoons for supply of silk yarn Any registered person 100%
Supply of Lottery by state government, union territory or any local authority Lottery distributor or selling agent. Explanation.– For the purposes of this entry, lottery distributor or selling agent has the same meaning as assigned to it in clause (c) of Rule 2 of the Lotteries (Regulation) Rules, 2010, made under the provisions of sub- section 1 of section 11 of the Lotteries (Regulations) Act, 1998 (17 of 1998). 100%

Notified Services under RCM

Service Provider Service Receiver GST payable by Service Recipient
Goods Transport Agency Any society, factory, any person registered under CGST, SGST, UTGST Act, body corporate, partnership firm or any casual taxable person located in taxable territory. 100%
An individual advocate or firm of advocates Any business entity located in a taxable territory. 100%
An arbitral tribunal Any business entity located in a taxable territory. 100%
Any person providing sponsorship services Any body corporate or partnership firm located in a taxable territory. 100%
Services supplied by the Central Government, State Government, Union Territory or local authority to a business entity excluding, –

(1) Renting of immovable property, and

(2) Services specified below-

(i) Services by the Department of Posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than Central Government, State Government or Union territory or local authority;

(ii) Services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport;

(iii) Transport of goods or passengers.

Any business entity located in a taxable territory. 100%
A director of a company or a body corporate A company or a body corporate located in a taxable territory. 100%
An insurance agent Any person carrying on insurance business located in a taxable territory. 100%
A recovery Agent Banking Company, any financial institution or NBFC located in a taxable territory. 100%
Author or music composer, photographer, artist, etc. (Transfer or permitting the use or enjoyment of a copyright) Publisher, Music company, Producer located in a taxable territory. 100%

It is pertinent to note that there is no partial reverse charge mechanism where a portion is to be paid by the recipient and the rest by the supplier.

Also, please note that irrespective of the status of the supplier is registered or unregistered, the above supplies will attract RCM.

RCM on inward supplies from unregistered person

Any goods or services or both procured from an unregistered person by a registered person will attract reverse charge. The Act shall apply to such recipient as if he is the person liable to pay tax with regards to said goods or service or both.

However, some respite is given vide Notification No.8/2017 – Central Tax (Rate) as well as the respective state rate notifications which exempts intra-State supplies of goods or services or both received by a registered person from any unregistered supplier from the whole of the CGST/SGST where the aggregate value of such supplies of goods or service or both received by a registered person from any or all the unregistered suppliers does not exceed ₹ 5,000/- in a day.

It is pertinent to note that this ₹ 5,000/- limit is to be applied per day and the moment this limit for the day is breached, the entire amount will attract tax under RCM. This limit as discussed herein is applicable per GSTIN Registration that is even if a company has multiple registrations it is to be applied individually for each registration per day. Simply put this limit is available per state per day.

Illustration

Inward Supplies from Unregistered dealer – ₹2000 for plumbing and ₹ 3,100 for stationary purchase for a single day.

Since, the aggregate value of supplies from all unregistered dealers exceeds ₹ 5,000/- the entire amount will attract tax under RCM. Stationary will attract the rate applicable to such goods and plumbing will attract the rate applicable to plumbing. The rate is to be applied as if he is the person liable to pay tax.

An unregistered person below the threshold limit(20Lakhs) cannot make inter-state supplies and thus, the Government also has notified the ₹ 5,000/- per day limit only in the CGST Act. That means there will not be a case where there will be inter-state purchases from an unregistered dealer.

Registration

Normally registration is attracted only in cases where a person doing business exceeds a prescribed threshold limit (₹ 20 lakhs other than for special category States). As per Sec 24 any person who is required to pay tax under reverse charge is liable to take compulsorily registration irrespective of the threshold limit prescribed under the Act.

However, this is only in respect of notified services/goods under Sec 9(3) of CGST Act and 5(3) of IGST Act and not with regards to RCM on account of purchases from an unregistered dealer. This is because Sec 9(4) of the CGST Act and Sec 5(4) of the IGST Act requires a REGISTERED person undertaking inward supplies from an unregistered dealer to pay tax under RCM. Since, the person is not registered this section will not be attracted.

Therefore, as stated earlier for notified supplies irrespective that the supplier is registered or unregistered, the recipient will be required to take registration and pay tax under RCM.

Illustration: A clinical establishment providing health care services is exempted in GST. Under Sec 23 he is not required to be registered. However, say the establishment avails legal services of an advocate. Then As per Sec 24 he will be liable for registration and pay tax under RCM.

Time of Supply

Time of Supply is required for determining the point of taxation for levy of tax. There are specific provisions to determine time of supply under RCM.

i) For Goods

Earliest of

a) the date of the receipt of goods; or

b) the date of payment as entered in the books of account or date on which the payment is debited in bank account of recipient, whichever is earlier; or

c) the date immediately following 30 days from the date of issue of invoice

ii) For Services

Earliest of

a) the date of payment as entered in the books of account or date on which the payment is debited in bank account of recipient, whichever is earlier; or

b) the date immediately following 60 days from the date of issue of invoice

where it is not possible to determine the time of supply under (a) or (b) above, the time of supply shall be the date of entry in the books of account of the recipient of supply.

In view of the above one will have to ascertain the time of supply in respect of the goods and services or both separately and then offer it for tax.

Documentation and Invoicing

A registered person who is liable to pay tax under RCM i.e. the recipient shall issue an invoice of the goods or services or both received by him from the unregistered supplier on the date of receipt of the same.

He is also required to issue a payment voucher at the time of making payment to the supplier.

Returns

A registered supplier of goods/service or both which attracts RCM (tax is payable by the recipient) will have to show said supplies in his GSTR-1 – statement of outward supplies and these supplies will auto-populate in the recipient’s GSTR-2 – statement of inward supplies. The recipient will also have to add other supplies from unregistered dealers in his GSTR-2 to claim ITC but said input tax will only be eligible after said tax under RCM has been paid by him.

Payment of Tax

Sec 49(1) of the CGST Act requires payment of tax, interest, penalty, fee or any other amount into the electronic cash ledger. The phrase any other amount, in the present context, may include payment in respect of RCM.

Sec 49(4) provides that the amount available in the electronic credit ledger may be used for making any payment towards output tax. Sec 2(82) defines output tax which excludes tax payable on reverse charge basis.

In this background, the issue arises as to whether the claim of ITC in respect of the tax paid under RCM is admissible in the month in which the liability to pay RCM arises or only after the RCM tax is paid physically in the Government Treasury i.e. in the following the month.

Sec 41(1) provides that the registered person can take the credit of eligible input tax [which includes tax paid under RCM – Sec 2(62)] on a provisional basis to his electronic credit ledger. Sec 41(2) states that the credit of the available credit electronic credit ledger shall be utilized only for the payment of self-assessed output tax as per the return on provisional basis.

In view of these categorical provisions, the ITC in respect of RCM can be claimed only after the payment thereof is made in the Government treasury. Therefore, the credit would be available only upon admission of liability in one month and the payment thereof in the returns.

In the outset, RCM though might not bring a lot of revenue for the Government but it sure will regularize credit utilization in the flow of transactions as well as help the Government to track erring unregistered dealers. Every person will need to have a robust accounting system to track purchases attracting reverse charge and appropriately account for it.

 

 

“If you want to shine like a sun. First burn like a sun.”

— Dr. A. P. J Abdul Kalam

The Income Tax Appellate Tribunal (ITAT) started functioning in the year 1941 with six Members, constituting three Benches, one each at Delhi, Kolkata and Mumbai. Gradually, the strength increased to nearabout Hi Benches at 27 different stations covering almost all the cities having a seat of the High Court.

As is known, the Income Tax Appellate Tribunal acts as a second Appellate Authority in the field of direct taxes. The Appellate Tribunal was under the administrative control of Finance Department of Government of India, from 30th May, 1942, the Tribunal was put under the charge of Ministry of Law and Justice, Government of India. Since then it has been functioning as an independent authority without any executive interference in discharge of its judicial functions.

The Tribunals were established with the object of providing a speedy, affordable and decentralised determination of disputes. The Income Tax law is a complex piece of legislation where there have been frequent amendments practically every year. Considering this complexity, it must be a challenging task for the adjudicatory bodies, including the Appellate Authority like ITAT to function in an effective manner. Like many other branches, the Government is one of the biggest litigant before the “Tax Authorities and Tribunals.

One of the essential ingredients of justice delivery system is providing adequate opportunity of hearing and maintaining a fair and transparent approach in justice dispensation system. Passing of a reasoned order is one of the essential facets demonstrating
fairness and transparency in the adjudication of disputes.

Judging an issue or a case brought before the adjudicatory body is again one of the complex exercises which the Judges have to constantly undertake. A Judge must be impartial and without bias. A Judge must decide cases without being influenced by the special conscious factors which would normally affect the decision making process. The decisions of Judges are accepted by the public because Judges are seen to be impartial and carrying out their functions in a fair manner.

The principle of fairness, transparency and impartiality in the process of dispensation of justice applies with equal force to all the adjudicatory forums.

Judging is an art and we must try to learn, imbibe and practice that art. It is possible with total dedication, devotion and commitment to the cause of dispensation of justice. At times, it is noticed that if an order is unreasoned one or lacks proper reasoning, it becomes difficult at the higher level to understand and appreciate as to what weighed with the Tribunal or the Authorities in deciding the issue. It would be, therefore, necessary that while deciding issues brought before the adjudicatory bodies, appropriate reasoning is provided for. At the High Court level, it becomes easier and convenient to appreciate such orders and express an opinion on the same. I hope and trust that ITAT, with utmost experience of so many years, must be dealing with cases keeping in view these principles of decision making process.

It is necessary that the departments’ side is also reflected properly before the adjudicatory forums while issues are determined. Adequately trained and knowledgeable officers, lawyers must be engaged to put up view of the departments before the adjudicatory forums. It is equally necessary to provide prompt and proper instructions to the arguing lawyers engaged by the Government and the Departments. At the Government level effective and prompt instructions are required to be provided
to the counsel representing them in the higher Courts.

India is a fast growing economy of the world. The Law Commission of India in its 158th Report had recommended the constitution of Commercial Division in each High Court. In its 253rd Report, the Law Commission recommended for the establishment of the Commercial Courts, the Commercial Division and the Commercial Appellate Divisions in the High Courts for disposal of commercial disputes of specified value. The Parliament enacted a law, namely, the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015. The high value commercial disputes involve complex facts and question of law and the need was felt to provide for an independent mechanism for their early resolution.

Howsoever knowledgeable and trained one may be in the field of law, considering the development globally in the field of trade and commerce, passing of complex law, updated training is a must. Discussion on diverse issues, problems and searching out for a possible solution must be the idea behind arranging a refresher course.

I am confident after undergoing the Refresher Course’ arranged in the Judicial Academy, the participants would certainly get more enriched in appreciating various facets of the issues which would be discussed and deliberated upon during the sessions.

I extend my good wishes to each of the participant.

Thank you.

[Source – Speech Delivered at All India Income Tax Appellate Tribunal Member’s Residential Refresher Course – 2017 held on 16th July, 2017]

 

“All Birds find shelter during a rain. But Eagle avoids rain by flying above the Clouds.”

— Dr. A. P. J Abdul Kalam

Dear Professional Colleagues,

The year 2017 is an eventful year, politically and economically. Economy of the country is in a transition phase. A noted educationist Paulin Kezer had said “continuity gives us roots, change gives us branches, letting us stretch and grow and reach new heights”. “Parivartan” is the life blood of any economy. Our growing economy has given birth to various law reforms. The effect of demonetisation was not diluted that the GST rolled down on the scheduled date. The professionals were not ready, industrialists were not ready, businessmen were not ready but the Government was ready to unfold the GST. Big challenges and opportunities are thrown before the professionals. In fact, professionals have to educate their fellow professionals as well as the ultimate stakeholders i.e., the industrialists and the businessmen which is a real service to the nation as a whole.

As apprehended, GST would enhance the tax base. It is a self-monitoring tax law based on processes and compliances. It is a greatest reform which will change the entire dimension under which businesses operate in India. Black money will be at a back foot. It is an attempt to make a uniform legislation, considering the multiple compliances affecting the free flow of goods and services. Compliances under the GST law are IT driven. Being most important device, GST portal will act as a bridge of communication between the taxable person and the tax administrator.

Equally important to the GST are the judicial reforms introduced in the Finance Act 2017 by way of inserting sections 156 to 189 which relates to “amendments to certain Acts to provide for merger of Tribunals and other Authorities and conditions of service of Chairpersons, Members etc.” These provisions will deal a blow on the independence of Judiciary and separation of powers between executives and judiciary. Our Federation has a deep concern and has always played a great role for the cause of legal fraternity at large and for protection of independence of judiciary.

Apart from these provisions in relation to restructuring and merging of 8 Tribunals, Part-XIV of Chapter-VI of the Finance Act 2017 and more particularly section 184 empowers the Central Government to make rules to provide for appointment, qualification, terms of office and removal of chairpersons and members of Tribunals, though the same are usually prescribed under the relevant legislation creating such Tribunals. Thus legislative powers have been encroached upon by the Executive. In exercise of powers conferred by Section 184, Ministry of Finance has framed the rules called as Tribunal, Appellate Tribunal and other Authorities (Qualifications, Experience & Other Conditions of Service of Members) Rules 2017 vide Notification dated 1-6-2017. By way of these rules, the term of office of ITAT members is reduced to 3 years and will be eligible for reappointment. The retiring age in case of President is decided to be 65 years and for others 62 years, this amounts to discrimination. Further, for their appointment, primacy has been given to the Executive by including more members from the Central Government as compared to judiciary in the search-cum-selection committee. Looking to the unfairness and arbitrariness of these rules, Federation is filing the writ petition challenging the constitutional validity of the provisions of Finance Act and the Rules framed there under before the Delhi High Court.

Friends, Institute of Chartered Accountants of India has recently celebrated its CA Day on 1st July 2017. Hon’ble Prime Minister Shri Narendra Modi addressed the gathering and also released the revised course of education and training for CAs coming into effect from 1st July 2017. Our PM had shown a great concern for the professionals equalising them with Rishi Munis of economy but simultaneously PM had shown his anguish on the community as a whole. He was perturbed from the facts that only 32 lakh assessees are declaring their income more than ₹ 10 lakh when 2.18 crore people had visited foreign country in the last year, crores of vehicles are being purchased every year in the country. He reminded that during the freedom struggle, many lawyers in that era had dedicated their lives for the country’s independence, many of them had played a decisive role in framing our Constitution, now the country is at another crucial juncture of history. After country’s political integration in 1947, today the country is getting economically integrated. The country is beginning a new journey in 2017 when the dream of “One Nation – One Tax – One Market” has become a reality. Hon’ble PM has appealed that this economic development will be led by Army of Chartered Accountants. Friends, this is a time for introspection and retrospection. We all have to give our “Aahuti” to make the country better place to live and better India to devolve on our children.

Last but not the least, I may also apprise you that in the month of June your Federation had organised an international tour cum conference at Sri Lanka, an island in the Indian Ocean with diverse landscapes, ranging from rain forest, highlands and sandy beaches. In the beginning of this month, the Federation had organised a successful Residential Educational Programme in the lustrous city of Goa. Our special thanks to the organisers Mr. Chirag Parekh, Mr. Tushar Joshi and Mr. Praveen Shah who had, in the very short time organised this programme. I hope that all the delegates have enjoyed the programme and returned back with sweet memories of Green Goa.

With Best Regards,

Prem Lata Bansal
National President

The Goods and Services Tax will bring more assessees under tax net-It is the tax professionals who can play a proactive role in educating the taxpayers in explaining the various advantages of GST and to join the nation building process.

The Federation has played a proactive role by organising conferences on the subject of GST across the country. Members of the Federation had discussions with local consultants to understand the difficulties faced even by the smallest traders in our country who are conducting business in remote villages of our country where neither electricity nor internet connections are available. The members of the Indirect Taxation Committee of the Federation has had meetings with the Finance Ministers of respective States and also members of the GST Committee. The Federation has appreciated the positive response shown by the Government and GST Committee members who accepted various suggestions of the Federation. The Federation is of the well considered opinion that, GST will bring about a great revolution in tax compliance which will help in the development of the country and also in bringing more assessees under tax net. The Federation has many star professionals who are practising exclusively in the field of indirect taxes. To understand the various issues on GST, an attempt has been made to discuss the industry specific issues of GST in this issue of the journal. Learned authors have discussed provisions of the relevant laws, difficulties faced by particular industries and also suggested remedial measures. We are of the opinion that this issue will be a very useful reference for the tax professionals to understand industry specific issues. To understand the law and procedure of GST, the Federation is proposing to publish a publication titled “Law and Procedure of GST – Frequently Asked Questions and answers”. The said publication will be authored by experts from across the country. Federation is also considering the feasibility of publishing the said publication in various regional languages. We are sure that the said publication will serve as a useful reference for the tax professionals, traders as well as the Government. I believe that GST is an opportunity for young professionals to specialise in the field of indirect taxes, because all are learning, professionals with hard work and in-depth study of the new law will excel in the profession.

Readers may send their suggestions.

Dr. K. Shivaram

Editor-in-Chief


I.

1951

Press Note dated 18-5-1951

(1)

(a) Voluntary Disclosure Scheme, 1951 popularly known as “Tyagi Scheme”

(b) Concession Scheme for payment of arrears of tax.

Year

ITR/Statute

II.

1965

(1)

Finance Bill (No. 1) 1965 (VDS)

(1965)

55 ITR 53

(2)

Notes on clauses

(1965)

55 ITR 102 (115)

(3)

Memorandum explaining provisions, 1965 (VDS)

(1965)

55 ITR 131

(4)

Budget Speech

(1965)

55 ITR 120 (128)

(5)

Finance Act, (No. 1) 1965 – Section 68 of Finance Bill No. 1

(1965)

56 ITR 25 (56)

III.

1965

(1)

Memorandum Explaining the Finance Bill (No. 2)

(1965)

55 ITR 131

(2)

Budget Speech Finance Bill (No. 2) 1965

(1965)

57 ITR 62

(3)

Finance Act, 1965 (1965) (Clause 24)(Voluntary Disclosure Scheme)

(1965)

58 ITR 1 (7)

IV.

National Defence Gold Bonds, 1980 (issued in 1965)

(1965)

58 ITR 61

V.

1975

(1)

Voluntary Disclosure of Income and Wealth Ordinance 1975 (8-10-1975)

(1975)

101 ITR 36

(2)

Voluntary Disclosure of Income and Wealth Ordinance, 1975 (Press Note) 8-10-1975

(1975)

101 ITR 84

(3)

Circular No. 180 dated 15-10-1975 Voluntary Disclosure of Income and WealthOrdinance, 1975 – Explanatory notes on the Provisions of.

(1975)

101 ITR 88

(4)

Voluntary Disclosure of Income & Wealth tax Rules, Notification No. S.O. 597(E) dated. 8-10-1975

(1975)

101 ITR 99

(5)

Voluntary Disclosure of Income & Wealth Act, 1976

(1976)

102 ITR 49

(6)

Voluntary Disclosure of Income & Wealth (Amendment) Ordinance, 1975(No. 23 of 1975) dtd. 29-9-1975

(1976)

102 ITR 1

(7)

Circular No. 181 dated 25-10-1975The Voluntary Disclosure of Income and WealthOrdinance, 1975 – Clarification regarding(Questions & Answers)

(1977)

109 ITR 109

(8)

Circular No. 183 dated 11-11-1975, The Voluntary Disclosure of Income and WealthOrdinance, 1975 – Clarification regarding(Question & Answers)

(1977)

109 ITR 112

(9)

Circular No. 184 dated 14-11-75 Voluntary Disclosure of Income and WealthOrdinance, 1978 – Clarification Regarding

(1977)

109 ITR 115

VI.

1981

(1)

Special Bearer Bonds (Immunity and Exceptions) Ordinance, (1981)(No. 1 of 1981)

(1981)

127 ITR 55

(2)

The Special Bearer Bonds (Immunity and Exemptions) Ordinance, 1981 – Press note Act 1981 (assent on 27-3-1981)

(1981)

127 ITR 69

(3)

The Special Bearer Bonds (immunity and Exemptions) Act, 1981 – (No.7 of 1981)

(1981)

129 ITR 30

(4)

Special Bearer Bonds (Immunities and Exemptions)Bill 1981 (Bill No. 26 of 1981)

(1981)

128 ITR 185

(5)

Special Bearer Bonds, 1991Sale of Bonds (1981)

(1981)

128 ITR 114

(6)

Special Bearer Bonds (Immunities and Exemptions) Ordinance, 1981

(1981)

128 ITR 113

(7)

Special Bearer Bonds (Immunities and exemptions) Act, (1981) – Clarification Regarding

(1982)

134 ITR 162

VII.

1985

(1)

Amnesty Scheme, 1985

i) Cir. 423 Dt. 26-6-1985

(1985)

155 ITR 45

ii) Cir. 432 Dt. 20-9-1985

(1985)

156 ITR 162

iii) Cir. 439 Dt. 15-11-1985

(1985)

156 ITR 163

iv) Cir. 440 Dt. 15-11/1985

(1985)

156 ITR 164

v) Cir. 441 Dt. 15-11-1985

(1985)

156 ITR 165

vi) Cir. 451 Dt. 17-2-1986

(1986)

158 ITR 135

vii) Cir. 453 Dt. 4-4-1986

(1986)

159 ITR 9

viii) Cir. 472 Dt. 15-10-1986

(1986)

162 ITR 17

ix) Cir. 474 Dt. 11-11-1986(Extension of Period – Amnesty Scheme under the Income-tax Act and Wealth Tax Act.)

(1986)

162 ITR 57

VIII.

1986

(1)

FERA Amnesty Scheme, 1986

(1986)

162 ITR 5

(1986)

164 ITR 145

IX.

1991

(1)

Finance Bill 1991-1992(Speech of Hon’ble Finance Minister)

(1991)

190 ITR 89

(2)

Remittances of Foreign Exchange and investmentIn Foreign Exchange Bonds (Immunities and Exemption) Act, 1991 (assent on 18-9-1991)

Remittance in Foreign Exchange (Immunities) Scheme, 1991 framed under the above Act.

Remittance of Foreign Exchange and Investment

In Foreign Exchange Bonds (Immunities and Exemptions) Bill 1991

(1991)

(1991)

(1991)

191 ITR 308

191 ITR 312

191 ITR 79

X.

1991

(1)

The Voluntary Deposits (Immunities and Exemptions) Act, 1991 (National Housing Bank) (assent on 20-9-91)

(1991)

191 ITR 157

(2)

National Housing Bank (Voluntary Deposit) Scheme, 1991

(1991)

191 ITR 160

(3)

India Development Bonds Scheme, 1991

(1991)

191 ITR 314

(4)

Circular No. 611 dt. 30-9-1991 on the Remittances In Foreign Exchange (Immunities) Scheme, 1991 and India Development Bond Schemes, 1991

(1991)

191 ITR 319

(5)

Voluntary Deposits (Immunities & Exemptions) Bill, 1991

(1991)

191 ITR 157

(6)

Press Note – The Remittance in Foreign Exchange (Immunities) Scheme 1991 and India Development Bond Scheme, 1991

(1991)

191 ITR 322

(7)

India Development Bonds (Amendment) Scheme 1991

(1992)

191 ITR 14

(8)

Remittance of Foreign Exchange and Investmentin Foreign Exchange Bonds (Immunity and Exemptions) Act, 1991 : Notification under section 2(b), explanation No. 800 E dt. 27-11/1991

(1992)

193 ITR 85

(9)

Remittance of Foreign Exchange and Investment in Foreign Exchange Bonds (Immunity and Exemptions) Act, 1991 : Notification under section 5(b), explanation No. 801E dt. 27-11-1991

(1992)

193 ITR 85

(10)

Remittance in Foreign Exchange (Immunities) Scheme, 1991, Notification 69 E dt. 30-1-1992

(1992)

196 ITR 21

(11)

India Development Bonds (Amendment) Scheme 1992, Notification No. 70 (E) dt. 30-1-1992

(1992)

196 ITR 21

XI.

1993

(1)

Gold Bonds (Immunities and Exemptions) Ordinance, 1993

(1993)

200 ITR 169

(2)

Gold Bonds, Scheme, 1993

(1993)

200 ITR 186

(3)

Gold Bonds, (Immunities and Exemptions) Bill, 1993

(1993)

200 ITR 205

(4)

Gold Bonds (Immunities & Exemptions) Act, 1993 on 2-4-1993

(1993)

203 ITR 47

(5)

Gold Bonds Scheme, 1993: Restriction on gold Bond Renewal (Ministry of Finance dt. 27-11-1997)

(1997)

228 ITR 188

XII.

1997 VDIS

(1)

Finance Bill & Speech, 1997

(1997)

224 ITR 9(21)

(2)

Notes on Clauses

(1997)

224 ITR 84(106)

(3)

Memorandum Explaining provisions

(1997)

224 ITR 114(140)

(4)

Finance Act, 1997

(1997)

225 ITR 113

(5)

Notification No. SO 435 (E) dt. 9-6-1997 for Commencement of VDIS

(1997)

226 ITR 1

(6)

Notification No. SO 436 (E) dt. 9-6-1997 for VDIS, 1997 Rules

(1997)

226 ITR 1

(7)

Form of Declaration of VDIS 1997

(1997)

226 ITR 2

(8)

Explanatory Notes on provisions relating to VDIS, 1997 (Circular No. 753 dt. 10-6-1997)

(1997)

226 ITR 4

(9)

Clarification on VDIS, 1997 (question & answers) (Cir. No. 754 dt. 16–6-1997)

(1997)

226 ITR 8

(10)

Certificate u/s. 68(2) of VDIS 1997 (to be Granted by ITO)

(1997)

226 ITR 16

(11)

Clarification on VDIS, 1997 (Circular No. 755 dt. 18-6-1997)

(1997)

226 ITR 33

(12)

Minutes of Assocham Meeting with CBDT dt. 23-7-1997

(1997)

93 Taxman 162 (Mag)

(13)

Clarification for circular No.755 dated 25-7-1997 (CBDT Press Note dt. 8-8-1997) – Jewellery Valuation Affidavit

(1997)

227 ITR 5

(14)

Pune Chief Commissioner’s letter dt. 15-7-1997

(1997)

I.T. Review Oct. 1997

26 Taxman – Yearly Tax Digest. 1998, 5.27

(15)

Press Release issued by Chief CIT, Mum. dt. 13-8-1997

(1997)

I.T.Review Oct. 1997

27 Taxman – Yearly Tax Digest, 98 5.75

(16)

Press Release issued by Chief CIT, Mum. dt. 27-8-1997

(1997)

I.T.Review Oct, 1997

28 Taxman – Yearly Tax Digest, 1998 5.75

(17)

Press Release issued by Chief CIT, Mum. dt. 29-8-1997

(1997)

I.T.Review Oct., 97 28 Taxman – Yearly Tax Digest, 1998 5.75

(18)

Letter No. F. No. 266/Form (-) VDIS/97-98 dt. 12-12-1997 issued by Chief CIT, Mumbai Deduction of undisclosed salary by the Employees Act. (1997) against the employer.

Taxman – Yearly Tax Digest, 1998 5.101

(19)

Clarification from Chief CIT Pune dt. 15-7-1997, No. PN/CC/VDIS/97-98

Taxman – Yearly Tax Digest, 98 5.101

(20)

Press Release issued by Chief CIT, Mum. dt. 12-9-1997 (1997)

I.T. Review Oct., 1997, 30

Taxman – Yearly Tax Digest, 98 5.75

(21)

Press Release issued by Chief CIT, Mum. dt. 3-10-1997 (Utensils)

(1997)

I.T. Review Oct, 1997

37 Taxman – Yearly Tax Digest, 98 5.75

(22)

Press Release issued by Chief CIT, Mum. dt. 10-10-1997 – (Loose Diamonds)

(1997)

I.T. Review Oct, 97 38

(23)

All India Federation of Tax Practitioners vs. Union of India (Constitutional Validity Appeal)

(1997)

228 ITR 68 (Bom.)

(24)

Clarification issued by Chief CIT, Mumbai 22-10-1997 (Interest)

I.T. Review Oct., 1997, 41

(25)

Clarification issued by Chief CIT, Mumbai 29-10-1997 (Valuation of Loose Diamonds) Depreciate Press Release

I.T. Review Oct, 1997 42

(26)

Clarification issued by Chief CIT, Mumbai, 31-10-1997 (Lease)

I.T. Review Oct, 1997 43

(27)

Clarification issued by RBI dt. 5-11-1997 FERA

I.T. Review Oct, 1997, 44

(28)

Clarification issued by CCIT dt. 13-11-1997 (Provides)

(1997)

I.T. Review Oct., 1997, 48 Yearly Tax Digest 1997, 599 & 100

(29)

All India Federation of Tax Practitioners vs. Union of India

(1998)

231 ITR 24

(30)

Clarification regarding definition – Jewellery dt. 3-12-1997

(1997)

228 ITR 187

(31)

Sales tax immunity Clarification by State of Gujarat, Circular No. CST No. 1097 – 1379 dt. 6-11-1997

(Yearly Tax Digest) (1997) 5.102 & 103

XIII.

(1)

Kar Vivad Samadhan Scheme, 1998

(1998)

233 ITR 36

(2)

Kar Vivad Samadhan Scheme clarification Circular No. F/149/145/98-TPL dt. 3-9-1998 (Questions and Answers)

(1998)

233 ITR 50

(3)

Kar Vivad Samadhan Scheme Clarifications (Questions and Answers)

(1998)

233 ITR 121

(4)

Kar Vivad Samadhan Scheme on Enlarging the Scope of Scheme to Departmental Appeals

(1998)

234 ITR 62

(5)

Kar Vivad Samadhan Scheme, 1998 Commissioner of Income Tax, Notified as designated authority

(1998)

234 ITR 111

(6)

Kar Vivad Scheme, 1998 Determination of Disputed Income

(1998)

234 ITR 111

(7)

Kar Vivad Samadhan Scheme, 1998 Function and Jurisdiction of Commissioner

(1999)

236 ITR 189

(8)

Kar Vivad Samadhan Scheme, 1998 No Proceedings against co. notices

(1999)

235 ITR 22

(9)

Kar Vivad Samadhan Scheme, 1998(Removal of Difficulties Order)

(1999)

235 ITR 90

(10)

Kar Vivad Samadhan Scheme 1998 Partner & Registered Firms exempt from Payment of further tax on shared income in pre 1993-94

(1999)

235 ITR 23

(11)

All India Federation of Tax Practitioners vs. Union of India. (Constitutional validity of Kar Vivad Scheme)

(1999)

236 ITR 1 (Del.)

(12)

Dept. Appeals – allowed to be covered under Kar Vivad Scheme (Enlargement of the scope of the Scheme to deposit appeals)

(1999)

234 ITR 62

XIV

(1)

Black Money (Undisclosed Foreign Income and Assets) and imposition Tax Act, 2015

(2)

The undisclosed Foreign Income and Assets (Imposition of tax) Bill, 2015

Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (No. 22 of 2015)

(2015) 375 ITR 1 (St)

(3)

Notification No .G.S.R. 529 (E) dt.02/07/2015 – Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Rules, 2015

(2015) 375 ITR 107 (St.)

(4)

12 of 2015 dt.2-07-2015 – Explanatory notes on provisions relating to tax compliance for Undisclosed foreign income and assets as provided in Chapter VI of the Black Money (Undisclosed Foreign Income and Assets) and imposition Tax Act, 2015

(2015) 375 ITR 97 (St.)

(5)

13 of 2015 dt-6-07-2015 – Clarifications on tax Compliance for undisclosed foreign income and assets

(2015) 375 ITR 128 (St.)

(6)

15 of 2015 dt.03-9-2015- Clarifications on tax compliance for undisclosed foreign income and assets

(2015) 377 ITR 83(ST)

(7)

Orders: Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act (Removal of difficulties) Order, 2015 [Notification No 56/2015/F. No.133/33/2015–TPL]-9

(2015) 376 ITR 14 (St.)

(8)

Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015: Powers and functions of Additional Commissioners and Joint Commissioner under Act -Notification No. S.O. 2299( E ), dated 24 th August, 2015

(2015) 378 ITR 13 (St)

(9)

Press Notes/Releases Black money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015- dt 21-09-2015-Persons holding Undisclosed foreign assets are advised to file their declarations well in time as provided under the compliance window of the new Black Money Act; One time Compliance opportunity will end on 30th September, 2015; information contained in the declaration will be kept confidential; process of filing declaration is simple and can be filed on line also; fears of harassment of the declarants expressed in certain for a are totally un founded.

(2015) 378 ITR 8 (St.)

XV.

2016 – IDS – 2016 (Finance Act)

(1)

Finance Minister budget speech

(2016)

381 ITR 9 (St.)(35)

(2)

Notes on Clauses

(2016)

381 ITR 169 (St.)(236)

(3)

The Income Declaration Scheme, 2016 (Finance Act, 2016)

(4)

Income Declaration Scheme Rules, 2016, Notification

(2016)

384 ITR 188 (St.)

(5)

Notification No. 32/2016, F.No.142/8/2016-TPL dtd.19th May, 2016

(6)

Notification No. 33/2016 (F.No.142/8/2016-Tpl), dtd. 19th May, 2016

(7)

Circular No. 16 of 2016 dtd.20th May, 2016 – Explanatory Notes On Provisions Of The Income Declaration Scheme, 2016

(2016)

384 ITR 14 (St.)

(8)

Circular No.17 of 2016 dtd.20th May, 2016 – Clarifications on the Income Declaration Scheme, 2016

(2016)

384 ITR 148 (St.)

(9)

Circular No.19/2016 dtd. 25th May, 2016 – Principal Commissioner or the Commissioner who exercises jurisdiction over the declarant.

(2016)

384 ITR 153(St.)

(10)

Circular No. 24 of 2016 dtd. 27th June, 2016 – Clarifications on the Income Declaration Scheme, 2016

(11)

Circular No. 25 of 2016 dtd.30th June, 2016 – Clarifications on the Income Declaration Scheme, 2016

(12)

Circular No. 27 of 2016 dt.14th July, 2016 –

(13)

Press Release dt.14th July, 2016 – Time Schedule for making payment under the scheme

XVI.

DTRS – 2016 (Finance Act, 2016)

(1)

The Finance Minister budget speech

(2016)

381 ITR 9 (St.)(36-37)

(2)

Notes on Clauses

(2016)

381 ITR 169 (St.)(236)

(3)

The Direct Tax Dispute Resolution Scheme, Finance Act, 2016

(4)

The Direct Tax Dispute Resolution Scheme Rules, 2016 – 26th May, 2016

(2016)

384 ITR 183 (ST.)

(5)

Notification No.34/2016, F.No.142/11/2016-TPL – 26th May, 2016

(6)

Notification No.35/2016, F.No.142/11/2016-TPL – 26th May, 2016

The Finance Minister has, in his Budget Speech on 29th February 2016, stated that the tax litigation in our country is a scourge for a tax friendly regime and creates an environment of distrust in addition to increasing the compliance cost of the taxpayer and administrative cost of the Government. He has also stated that there are over 3 lakh tax cases pending with the commissioner of Income- tax (Appeals) with disputed amount of tax of about 5.5 lakh crores. In order to reduce these appeals before the first Appellate Authority he has announced a new scheme called “Direct Tax Dispute Resolution Scheme – 2016” Two separate Schemes are announced in this Budget, one for settlement of disputed taxes under Income-tax and wealth tax Act and the other for disputed taxes under Indirect Tax Laws.

1.1 In paras 163 to 165 of his Budget Speech, the Finance Minister has given the outline of Dispute Resolution Schemes and stated as under:

“163. A taxpayer who has an appeal pending as of today before the Commissioner (Appeals) can settle his case by paying the disputed tax and interest up to the date of assessment. No penalty in respect of Income-tax cases with disputed tax up to ₹ 10 lakh will be levied. Cases with disputed tax exceeding ₹ 10 lakh will be subjected to only 25% of the minimum of the imposable penalty for both direct and indirect taxes. Any pending appeal against a penalty order can also be settled by paying 25% of the minimum of the imposable penalty. Certain categories of persons including those who are charged with criminal offences under specific Acts are proposed to be barred from availing this scheme.

164. I had in my Budget speech of July, 2014 assured that this Government would not retrospectively create a fresh tax liability. I had also hoped then that the cases pending in various Courts and other legal fora relating to certain retrospective amendments undertaken to the Income tax Act, 1961, through the Finance Act, 2012 will soon reach their logical conclusion. I would like to reiterate that we are committed to provide a stable and predictable taxation regime. We will not resort to such amendments in future. I had also announced constitution of a High Level Committee which would oversee any fresh case where the assessing officer proposes to assess or reassess the income in respect of indirect transfers by applying the retrospective amendment. In order to allay any fears of tax adventurism, this Committee will now be chaired by the Revenue Secretary and consist of Chairman, CBDT and an expert from outside. This Committee will effectively oversee the implementation of the assurances.

165. In order to give an opportunity to the past cases which are ongoing under the retrospective amendment, I propose a one-time scheme of Dispute Resolution for them, in which, subject to their agreeing to withdraw any pending case lying in any Court or Tribunal or any proceeding for arbitration, mediation etc., under BIPA, they can settle the case by paying only the tax arrears in which case liability of the interest and penalty shall be waived”.

1.2 In chapter X of the Finance Act, 2016 (Act), Sections 200 to 211 provide for “The Direct Tax Dispute Resolution Scheme – 2016”. Similarly, Chapter XI (Sections 212 to 218) of the Act provides for “The Indirect Tax Dispute Resolution Scheme – 2016”. In this article the provisions of the Direct Tax Dispute Resolution Scheme are discussed.

2. The Scheme

2.1 The Direct Tax Dispute Resolution Scheme 2016 (Scheme) has come into force on 1st June, 2016. This scheme enables all assessees whose assessments under the Income-tax Act or the Wealth-tax Act have been completed for any assessment year and whose appeals are pending before the Commissioners of Income tax (Appeals) as on 29-2-2016 to settle the tax dispute. The scheme also applies to those assessees in whose cases any disputed additions are made as a result of retrospective amendments made in the Income-tax or Wealth- tax Act and whose appeals are pending before the CIT(A), ITA Tribunal, High Court, Supreme Court or before any other authority.

2.2 Section 202 of the Act provides that the assessee who wants to settle the tax dispute pending before the concerned appellate authority as on 29-2-2016, can make a declaration in the prescribed Form No. 1 (in duplicate) on or after 1-6-2016 but before 31-12-2016. In the case of an assessee in whose case the assessment or reassessment is made in the normal course and not due to any retrospective amendment, and the appeal is pending before CIT(A) as on 29-2-2016, the tax dispute can be settled as under:

(i) If the disputed tax does not exceed ₹ 10 lakh for the relevant assessment year, the assessee can settle the same on payment of such tax and interest due up to the date of assessment or reassessment.

(ii) If the disputed tax exceeds ₹ 10 lakh for the relevant assessment year, the dispute can be settled on payment of such tax with penalty leviable of 25% leviable and interest up to the date of assessment or reassessment. It is difficult to understand why minimum penalty is required to be paid when the disputed addition may not be for concealment or inaccurate furnishing of particulars of income.

(iii) In the case of appeal against the levy of penalty, the assessee can settle the dispute by payment of 25% of minimum penalty leviable on the income as finally determined.

2.3 In a case where the disputed tax demand relates to addition made in the assessment or reassessment order made as a result of any retrospective amendment in the Income-tax or Wealth-tax Acts, the dispute can be settled at the level of any appellate proceedings (i.e. CIT(A), ITA Tribunal, High Court, Supreme Court or any other Authority) by payment of disputed tax. No interest or penalty will be payable in such a case.

3. Procedure for declaration

3.1 The declaration for settlement of disputed tax for which appeal is pending before CIT(A) is to be filed in Form No. 1 in duplicate. Once this declaration is filed for settlement of a tax dispute for a particular year, the appeal pending before the CIT(A) for that year will be treated as withdrawn.

3.2 In a case where the tax dispute is in respect of any addition made as a result of retrospective amendment, the assessee can file the declaration in Form No. 1 in duplicate with the designated authority. The assessee will have to withdraw the pending appeal for that year before CIT(A), ITA Tribunal, High Court, Supreme Court or other Authority after obtaining leave of the Court or Authority whereever required. If any proceedings for the disputed tax are initiated for arbitration, conciliation or mediation or under an agreement entered into by India with any other country for protection of Investment or otherwise, the assessee will have to withdraw the same. Proof of withdrawal of such appeal or such other proceedings will have to be furnished by the assessee with the declaration in Form No. 1. Further, the declarant will have to furnish an undertaking in Form No. 2 waiving his right to seek or pursue any remedy or any claim for the disputed tax under any agreement.

3.3 It is also provided that if (i) any material particulars furnished by the declarant are found to be false at any stage, (ii) the declarant violates any of the conditions of the scheme or (iii) the declarant acts in a manner which is not in accordance with the undertaking given by him as stated above, the declaration made under the scheme will be considered as void. In this event all proceedings including appeals, will be deemed to be revived.

4. Payment of Disputed Tax

4.1 On receipt of the declaration from the assessee the Designated Authority will determine the amount payable by the declarant under the scheme within 60 days. He will have to issue a certificate in Form No. 3 giving particulars of tax, interest, penalty etc., payable by the declarant.

4.2 The declarant will have to pay the amount determined by the Designated Authority within 30 days of the receipt of the Certificate. It may be noted that there is no provision whereby the Designated Authority can extend the date for payment of tax, interest or penalty. He will have to send the intimation in Form No. 4 about the payment and produce proof of payment of the above amount. Upon receipt of this intimation and proof of payment, the Designated Authority will have to pass an order in Form No. 5 that the declarant has paid the disputed tax under the scheme. Once this order is passed it will be conclusive about the settlement of disputed tax and such matter cannot be re-opened in any proceedings under the Income-tax or Wealth-tax Acts or under any other law or agreement.

4.3 Once this order is passed, the Designated Authority shall grant immunity to the declarant as under:

(i) Immunity from instituting any proceedings for offence under the Income-tax or Wealth tax Acts.

(ii) Immunity from imposition or waiver of any penalty or interest under the Income -tax or Wealth-tax Acts. In other words, the difference between interest or penalty chargeable under the normal provisions of the Income-tax or Wealth-tax Act and the interest or penalty charged under the scheme cannot be recovered from the declarant.

4.4 It is also provided that any amount of tax, interest or penalty paid under the scheme will not be refundable under any circumstances.

5. Who cannot make declaration

5.1 Section 208 of the Act provides that in the following cases declaration under the Scheme for settlement of disputed taxes cannot be made.

(i) In relation to assessment year for which assessment or reassessment under Section 153A or 153C of the Income-tax Act or Section 37A or 37B of the Wealth-tax Act is made.

(ii) In relation to assessment year for which assessment or reassessment has been made after a survey has been conducted under Section 133A of the Income-tax Act or 38A of the Wealth-tax Act and the disputed tax has a bearing to findings in such survey.

(iii) In relation to assessment year in respect to which prosecution has been instituted on or before the date of making the declaration under the scheme.

(iv) If the disputed tax relates to undisclosed income from any source located outside India or undisclosed asset located outside India.

(v) In relation to assessment year where assessment or reassessment is made on the basis of information received by the Government under the Agreements under Section 90 or 90A of the Income-tax Act.

(vi) Declaration cannot be made by following persons.

(a) If an order of detention has been made under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974.

(b) If prosecution has been initiated under the Indian Penal Code, The Unlawful Activities (Prevention) Act, 1967, the Narcotic Drugs and Psychotropic Substances Act, 1985, The Prevention of Corruption Act, 1988 or for purposes of enforcement of any civil liability.

(vii) Declaration cannot be made by a person who is notified under Section 3 of the Special Court (Trial or Offences Relating to Transactions in Securities) Act, 1992.

6. To Sum Up

6.1 The Act authorises the Central Government to issue directions or orders to the authorities for the proper administration of the scheme. The Act also provides that if any difficulty arises in giving effect to any of the provisions of the scheme, the Central Government can pass an order to remove such difficulty. Such order cannot be passed after expiry of 2 years i.e., after 31-5-2018. Central Government is also authorised to notify the Rules for carrying out the provisions of the scheme and also prescribe the Forms for making declaration, for certificate to be granted by the Designated Authority and for such other matters for which the rules are required to be made under the scheme. Accordingly, the Government has notified “The Direct Tax Dispute Resolution Scheme Rules, 2016” on 26-5-2016.

6.2 This is probably for the first time when such a unique scheme has been introduced for reducing litigation. The only objection that can be raised is with regard to levy of penalty when the disputed tax is more than ₹ 10 lakh. There is no logic in levying such a penalty. Even if the assessee is not successful in the appeal before CIT(A), his liability will be for payment of disputed tax and interest. Penalty is not automatic. The disputed addition or disallowance may be due to interpretation of some provision in the tax law for which no penalty is leviable. Therefore, in case where disputed tax is more than ₹ 10 lakh, the assessee will not like to take benefit of the scheme and to that extent litigation will not be reduced. It may be noted that u/s. 214 of the Act, in the scheme for resolution of Disputes under Indirect Taxes, the provision is that the declarant has to pay tax due along with interest due and “penalty equivalent to 25% of penalty imposed in the impugned order”. Under the Income-tax Act or the Wealth-tax Act Penalty proceedings are separate and separate order is passed for levy of penalty. Therefore, it is suggested that the provision for levy of minimum notional penalty at 25% in a case where disputed tax is more than ₹ 10 lakh should be deleted.

6.3 As stated earlier, section 202 of the Act provides that declaration can be filed for settlement of disputed taxes only in respect of an appeal pending before CIT(A). There is no reason for restricting this benefit to appeal pending before the first appellate authority. It is suggested that the scheme should have been made applicable to appeals filed by the assessee before ITA Tribunal, High Court or the Supreme Court which are pending on 29-2-2016. If this provision had been extended to all such appeals, pending litigation before all such judicial authorities will get reduced.

6.4 Further, Section 208 provides that an assessee in whose case assessment order is passed u/s. 153A/153C of the Income-tax Act or 37A / 37B of the Wealth-tax Act or order is passed after survey u/s. 133A of the Income-tax Act or 38A of the Wealth-tax Act cannot make a declaration under the scheme. This provision will also be an impediment for the success of the scheme.

6.5 The provision in Section 202 of the Act relating to settlement of disputed taxes levied due to retrospective amendment in the Income-tax and Wealth-tax Acts is very fair and reasonable. In such cases only tax is payable and no interest or penalty is payable. This provision is made with a view to settle the disputed taxes levied due to retrospective amendment made in section 9 by the Finance Act, 2012. This related to taxation as a result of acquisition of interest by a non-resident in a company owning assets in India. (Cases like VODAFONE, CAIRN and others). However, there are some other sections such as sections 14A, 37, 40 etc., where retrospective amendments have been made. It will be possible to take advantage of the scheme if appeals on these issues are pending before any Appellate Authority or Court as on 29-2-2016.

6.6 It may be noted that last year the CBDT had made one attempt to reduce the tax litigation by issue of Circular No. 21/2015 dated 10-12-2015 whereby appeals filed by the Income tax Department where disputed tax was below certain level were withdrawn with retrospective effect. This year the Government has issued this scheme whereby assessees can settle the demand for disputed taxes and thus reduce the tax litigation. From these efforts, one can conclude that the efforts on the part of the Government to settle tax disputes and reduce tax litigation to that extent are commendable.