AN amnesty scheme for the chhota aadmi (small man) who has evaded or short-paid excise duties is on the cards.
The UPA government is looking at a settlement scheme to allow taxpayers who have committed technical offences pay a portion of their excise dues and end litigation. The proposed scheme would cover individuals running their own business and companies. In India, companies with a turnover of Rs 1.5 crore pay excise.
It would be akin to the Kar Vivad Samadhan Scheme, 1998, where taxpayers could voluntarily settle their dues at reduced rates, avoid fines and penalties and get immunity from prosecution.
With over 60,000 cases on technical offences pending in various appellate forums, the proposed scheme could help declog the system and enable the government garner some revenues, a senior official said.
It is reckoned many individuals and small companies commit technical offences as they are not well-versed with excise rules. They are normally charged a penalty for such violations. While the nuts and bolts of the scheme are being worked out, the idea is to give relief in cases where the disputed excise duty is around Rs 10,000. It could cover service tax disputes as well, though a final view is yet to be taken.
The proposed scheme will ease the workload of tax administrators and enable them to focus on large excise evasion cases. A formal announcement is expected in Budget 2008.
The Kar Vivad Samadhan Scheme, launched by former finance minister Yashwant Sinha in 1998, was more broad-based as it was open to all taxpayers who had direct and indirect tax arrears. Those who faced prosecution charges for concealing income were debarred from the scheme.
However, the response was lukewarm and the government realised a modest Rs 400 crore from tax payers. The Comptroller & Auditor General of India (CAG) criticised the scheme, saying it had failed to declog the system and only provided an escape route to debtors.
An amnesty scheme, like the Voluntary Disclosure Incentive Scheme (VDIS), was perceived in some quarters as one that penalised honest tax payers and rewarded dishonest ones.
The proposed scheme would be designed carefully to avoid such criticism. Safeguards are set to be in place to check misuse. “It’s a good idea to settle the minor cases through a compounding mechanism. Litigation is a time-consuming process in our country. By design, court procedures are slow. The institution of Settlement Commission is a good mechanism to get the blocked money faster. I think the finance minister should give a second look to restore the coverage of Settlement Commission to excise and Customs duty evasion cases. It is no good to wait for 10 years to collect the money when the commission can help you get it right now,” finance ministry former joint secretary T R Rustagi said.
Excise revenues, which used to be the largest contributor to the tax kitty, now account for less than a quarter of the total budgeted revenues of Rs 5,48,122 crore. The dip has been due to a host of factors including area-based and SSI exemptions. It is looking at various ways to step up revenue collection from excise and a settlement scheme could be a small part of the solution.