Govt to launch retro tax settlement scheme on 1 June
21 Mar 2016
The government is in the process of framing rules for a one-time settlement of retrospective tax disputes, involving firms like Vodafone and Cairn Energy, and expects to launch the offer from 1 June, allowing companies to pay the principal tax and get waiver from payment of interest and penalty.
Once finalised, the rules for implementation of the scheme as well as the format for application as well as the particulars and declarations that have to be made for penalty waiver will be notified in the official gazette, official sources said.
The scheme will open on 1 June and a closure date will be decided by the Revenue Department later.
The details of the scheme will be issued once the Finance Bill, 2016 is approved by Parliament in the second leg of Budget session beginning 25 April.
To be eligible for the amnesty scheme, however, the companies would have to call off any arbitration or court procedures, reports quoting finance ministry sources said.
Companies would have to provide proof of withdrawal of "any proceeding for arbitration, conciliation or mediation or any notice thereof under any law for the time being in force or under any agreement entered into by India with any other country or territory outside India whether for protection of investment or otherwise."
The companies would also have to furnish an undertaking waiving their right to seek or pursue any remedy or any claim in relation to the specified tax which may otherwise be available to it under any law or under an agreement with any country.
The company availing of the offer would have to pay the principal tax amount within 30 days of the designated authority determining the amount payable by the declarant.
Also any amount paid in pursuance of a declaration will not be refundable under any circumstances.
The rules once framed would be placed before both Houses of Parliament for any possible modifications the law makers may suggest.
Announcing the one-time scheme of Dispute Resolution for companies which are facing tax demand due to retrospective amendment to I-T Act, finance minister Arun Jaitley had in his Budget speech said: "They can settle the case by paying only the tax arrears, in which case liability of the interest and penalty shall be waived."
British telecom major Vodafone faces the highest arrears in retro tax of a total Rs 14,200 crore (including principal, interest and penalty) over its $11 billion acquisition of Hutchison Whampoa's India telecom business in 2007. Another British firm Cairn Energy has been asked to pay a total of Rs29,000 crore as tax on alleged capital gains made on a 2006 internal business reorganisation.
Both the firms have challenged the tax demands and have initiated international arbitration.
The arbitrations are costing the government a lot besides wasting time and bringing India a bad name.
The settlement scheme was proposed to put an end to all these.
