Brief Overview of Vivad Se Vishwas Scheme (VSVS)

Direct Tax Vivad Se Vishwas Scheme was announced by the Union Finance Minister, Mrs. Nirmala Sitharaman during her Budget speech on 1^st February, 2020 and the Bill was introduced in the Parliament on 5^th February, 2020 for settling tax disputes between individual and the Income Tax Department for various appeals, writs, SLPs or arbitration pending with Commissioner of Income Tax (Appeals), Income-tax Appellate Tribunal, High Court or Supreme Court as on 31^st January, 2020.

Objectives of the Scheme

• Create revenues for the government within reasonable time
• Lessen income tax litigation at the end of both, the assessee as well as the government

• Help assessees end their tax disputes with the Income Tax department by paying disputed tax and get waiver from payment of interest and penalty.
• Get immunity from prosecution.

Benefits of the Scheme

1. VSVS provided the taxpayers a choice in terms of whether to follow the conventional mode of litigation procedure or to opt for VSVS.
2. The scheme discharged both the government and the taxpayer from unwanted litigation proceedings.
3. Disputed cases settled under this scheme cannot be reopened by any appellate forum.

Payment Terms

Payment made on or before (Initial dates)	Appeal, writ, SLP, arbitration relates to disputed tax	Appeal, writ, SLP, arbitration relates only to disputed penalty or interest or fee
31st March 2020	100% of the disputed tax (125% in search cases) [waiver of interest & penalty]	25% of the disputed penalty or interest or fee
30th June 2020	110% of the disputed tax (135% in search cases) [waiver of interest & penalty]. If additional 10% exceeds interest and penalty, excess shall be ignored.	30% of the disputed penalty or interest or fee

Some key points to be noted –

1. This scheme is not applicable to Search cases where demand is more than Rs. 5 crores.
2. Also, it is not available for proceedings that are pending before Income Tax Settlement Commission (ITSC) or where writ has been filed against the order of ITSC.
3. Disputed tax can also include the tax determined on default in respect of tax deducted at source (TDS) or tax collected at source (TCS).
4. If an issue in taxpayer’s pending appeal is already decided in favor of taxpayer by higher appellate forum or if Department has filed appeal, amount payable is 50% of aforesaid amounts.

Consequences of this scheme

• Consequent to such declaration and on fulfillment of conditions, all appeals, writs, SLPs, arbitration to be withdrawn (both by taxpayer and by department).
• Immunity to be granted from levy of interest, penalty and institution of any proceeding for prosecution for any offence under the Income -tax Act in respect of matters covered in the declaration.
• If excess payment has been made before filing declaration, refund shall be issued without interest.

Important Dates

1. The due date for availing the benefit of this scheme was 31^st March, 2021.

 

1. The initial due date, 31st March, 2020 for payment of 100% of the disputed tax or 25% of the disputed penalty or interest or fee as the case may be, mentioned in the above table was extended from time to time. Now, as per the latest amendment, it has again been extended from 30th April, 2021 to 30th June, 2021.

 

1. Any payment made on or after 1st July, 2021 (earlier it was 1^st May, 2021) would require taxpayers to pay tax, interest or penalty as per the provisions mentioned in column 2 and 3 of last row of the above-mentioned table.

Conclusion

As the name suggests, the essence of this scheme is ‘moving from dispute to trust’. Instead of legally penalizing a taxpayer through legal actions and proceedings, the government, through this scheme aimed to offer an open-ended scheme for a limited period of time without any discrimination.