The Indian government has introduced a few programs on legacy dispute resolution and settlement to handle the great number of unsolved tax and legal problems arising from past legislation. These help to lower legal costs, simplify business transactions, and aid in the recovery of revenue locked under drawn-out lawsuits. Among the main projects in this regard is the Sabka Vishwas: Legacy Dispute Resolution Scheme, 2019, which takes care of all outstanding Central Excise and Service Tax issues from the years before the introduction of GST. These strategies lighten the legal and financial burden on taxpayers while also enabling the government to soften the switch to fresh tax systems in addition to raising general openness and compliance.
What is the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019?
With the aim to settle long-pending cases involving Service Tax, Central Excise, and other indirect taxes connected to the pre-GST period, the Government of India launched the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, shortened as SVLDRS, vide Finance Act, 2019. The plan was to provide the taxpayers a chance to settle their past cases by paying a portion of their obligations instead of receiving court relief from all fines, interest, and other court procedures.
It addressed issues involving pending appeals, show cause notifications, payments, audits, inquiries, and voluntary disclosures. Depending on the nature of the case and the phase the process was at the given time, taxpayers received great relief ranging from 40% to 70% of the tax owing. A discharge certificate issued upon payment of the required sum provided entire immunity from all future legal action concerning the matter.
The main intention of this scheme was to reduce litigation, recover stuck revenue, and provide a new beginning for the business migrating to the GST system, so as to ensure more transparency and compliance and ease of doing business.
Eligibility and Applicability of the SVLDRS, 2019
SVLDRS, 2019 was applicable to nearly all unresolved indirect tax matters and offered eligible taxpayers the chance to settle their dues while obtaining significant relief and protection from penalties, interest, and legal action.
Applicability of the Scheme
The scheme addressed disputes, arrears, and unresolved issues connected with:
- The Central Excise Act, 1944
- The Finance Act of 1994, as amended, pertaining to Service Tax provisions
- Other indirect taxes and cesses are administered by CBIC
- All taxpayers, whether an individual, firm, company, or service provider, were required to comply with GST before it took effect on June 30, 2017.
Eligible Categories under the Scheme
The taxpayers fell into the following four broad categories:
- Litigation Category: Appeals, references or writ petitions pending with the appellate authority, tribunal or court as on June 30, 2019.
- Arrears Category: Cases where tax liabilities were confirmed but due and not fully or partially settled.
- Investigation, Enquiry, or Audit Category: Cases in which liability of duty is determined before June 30, 2019.
- Category of Voluntary Disclosure: Individuals who want to come forward with previously undisclosed tax liabilities.
Ineligible Cases
- Cases involving prosecution prior to the submission of a declaration.
- Issues regarding wrongful refunds or those cases where the liabilities had been paid.
- Matters that have been finally adjudicated and for which appeals are no longer pending.
Resolution Process Under The SVLDRS, 2019 Scheme
In 2019, the Government of India formulated a scheme known as Sabka Vishwas (Legacy Dispute Resolution) Scheme to resolve all unresolved complaints under Central Excise, Service Tax, and pre-GST indirect tax laws. It aimed to help taxpayers settle their pending tax issues and to migrate to the GST system without litigation expenses.
The resolution process under this scheme consists essentially of the following stages:
- Eligibility Check: Taxpayers must check whether their case falls under the scheme, which includes pending appeals, show cause notices, arrears, voluntary disclosures, and recoverable amounts.
- Filing the Declaration (Form SVLDRS-1): The declarant shall make an online declaration on the CBIC portal regarding the tax dues, disputes, and pending cases under the relevant category.
- Verification by Designated Committee: The declaration is reviewed by the Designated Committee, which confirms tax dues and computes the amount payable according to the relief available under the scheme.
- Issue of Statement (Form SVLDRS-2): The committee issues a statement indicating the estimated payable amount, inviting the declarant to comment or correct where necessary.
- Payment of Tax Dues (Form SVLDRS-3): The declarant shall pay the amount so determined electronically, in the manner and within the time specified, without any adjustment of input tax credit.
- Discharge Certificate is issued upon full payment, granting exemption from interest, penalties, and prosecution concerning the resolved matter.
- Final Settlement: The case is considered fully concluded, and no further actions may be filed for the same cause of action. It provided a one-time relief mechanism for reducing litigation, realising pending revenue, and giving an opportunity for a fresh start to the taxpayers migrating to the GST regime.
Resolutions Provided Under The SVLDRS, 2019 Scheme
The Government of India introduced the Sabka Vishwas-Legacy Dispute Resolution Scheme, 2019 (SVLDRS) through the Finance (No. 2) Act, 2019. It aimed at resolving pending issues related to Central Excise, Service Tax, and other indirect taxes before the rollout of GST. This scheme provided a number of settlement and relief options to help the taxpayers clear long-pending issues amicably in a time-bound manner.
1. Settlement of Pending Litigation:
- The scheme allows the taxpayers to settle outstanding complaints before appellate bodies, tribunals, or courts.
- The rest of the processes were disposed of by paying the due amount and issuing a discharge certificate, which lessened the burden of legacy cases considerably.
2. Resolution of Show Cause Notices and Adjudication Orders:
- Taxpayers who received SCNs or had pending adjudication orders were allowed to declare their dues under this initiative.
- No other actions or demands could be taken for the same cause, once resolved.
- This relief encouraged the taxpayers to clear up problems before the final judgment phase.
3. Arrears Settlement:
- Eligible cases include those where a duty, interest, or penalty was confirmed but not fully paid.
- The initiative gave aid starting at 40% to a maximum of 70% on arrears.
- This allowed defaulters to clear their previous liabilities.
4. Voluntary Disclosure:
- Taxpayers who had not previously declared tax dues could make voluntary disclosures of their liabilities under this provision.
- It did not offer any relief in tax payment, but it waived interest, penalties, and prosecution to encourage honest compliance.
5. Immunity from Interest, Penalty, and Prosecution:
- The major clearance given was full exemption from the incidence of interest and penalties and from the launching of prosecution upon clearance of dues.
- This became a strong motivation to encourage the coming forward of taxpayers and to amicably iron out disputes.
6. Finality of Settlement:
- Once the competent authority issued the Discharge Certificate, it granted final closure of the case.
- No further amount was payable, and no appeals or proceedings could be reopened on the same matter.
Final word
The Sabka Vishwas Scheme was an all-inclusive, time-bound, and taxpayer-friendly dispute resolution framework that granted both financial relief and legal immunity. It helped reduce litigation, enhanced revenue collection, and enabled a smooth transition into the GST regime.
Benefits of SVLDRS, 2019 Scheme
The basic effect of SVLDRS, 2019, created a win-win situation where the taxpayer enjoys financial relief, immunity, and final settlement, and the government is able to recover long-pending dues and facilitate a cleaner, dispute-free tax atmosphere.
- Substantial Tax Due Relief: Depending on the nature of the case, the scheme granted partial exemption from the total tax due. This relief varied between a minimum of 40% and a maximum of 70% of the tax amount, which was to be given based on the stage and nature of the dispute. This allowed for the resolution of back liabilities at significantly lesser cost.
- Waiver of Interest and Penalties: Above all, this scheme totally waived all interests, penalties, and late fees upon settlement of the tax liabilities, which reduced the overall financial burden on the taxpayers while promoting quicker resolutions.
- Immunity from Prosecution: With the payment and issue of a discharge certificate, full immunity from any prosecution under the relevant tax laws was granted to the declarant. This gave legal protection and peace of mind to the taxpayers.
- Final Resolution of Disputes: Once the case under SVLDRS was settled, it became final and conclusive; no further processes or appeals shall be allowed on the same matter. This offers certainty and closure to the taxpayer.
- Reduced Litigation and Administrative Burden: The scheme drastically reduced the number of pending litigations, saving the government resources that could be utilised more constructively to focus on the implementation of GST.
Conclusion
The Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, marks an important step forward in streamlining India’s indirect tax regime and resolving disputes that emerged prior to the rollout of GST. By making compliance voluntary and reducing litigation expenses for businesses and the government, the initiative was a big respite for taxpayers through the reduction of tax liabilities, coupled with a total waiver of interest, penalties, and prosecution. This scheme also helped the Government recover significant funds while unshackling the administrative and judicial mechanisms that had been bogged down by prolonged disputes. In brief, SVLDRS 2019 has restored better trust between large numbers of taxpayers and authorities and ensured a seamless transition into the GST system. This will turn out to be another factor expected to usher in transparency and predictability, ensuring a tax-dispute-free future.
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