New Delhi : The government’s ambitious tax dispute resolution scheme has ended with a whimper with just Rs 1,200 crore being collected and none of the high-profile retrospective tax cases involving firms like Vodafone and Cairn Energy opting to settle.
Finance Minister Arun Jaitley in his budget for 2016-17 announced the Direct Tax Dispute Resolution Scheme that sought not just to settle disputes in retrospective taxes, but end nearly 2.6 lakh pending tax cases where Rs 5.16 lakh crore are locked in.
The scheme, which provided for waiving interest and penalties if the principal amount involved in tax cases is paid, opened on June 1, 2016, and closed on January 31 this year after one extension was given. “We have a similar scheme in indirect tax so any company involved in a tax dispute can anytime settle a case like that by paying principal amount. So indirect tax collection through the scheme wasn’t much. In direct taxes, it was Rs 1,200 crore,” a top finance ministry official told PTI.
None of the firms involved in retrospective tax cases came forward to settle the dispute by paying the principal amount. Through the scheme, the government was hoping to settle major retrospective tax cases facing Vodafone Group and Cairn Energy of UK. It also expected a third of other tax disputes to be settled. The scheme provided for waiver of interest and penalty for retro tax cases only if the company in question withdraws all appeals against the government at all judicial forums.
UK oil explorer Cairn Energy is facing a tax demand of Rs 10,247 crore on alleged capital gains made in a 2006 business reorganisation it carried out in its India unit before getting it listed. The total tax due after including interest comes to over Rs 29,000 crore. British telecom giant Vodafone is facing a total demand of Rs 14,200 crore in tax, interest and penalty with regard to its USD 11-billion acquisition of 67 per cent stake in the mobile phone business owned by Hutchison Whampoa in 2007. Both firms raised their concerns over the tax demands and challenged the matter by initiating international arbitration.
