Indirect tax update
It has been over two years since the introduction of Goods & Service Tax (GST) in India. Through a consultative process, Union and State governments have reviewed how the tax has functioned in reforming India’s indirect tax laws. To address some of the concerns of stakeholders, the Government has recently made some announcements. To wrap-up pending legacy tax cases and to expedite revenue realisation, Union and State Governments have announced tax dispute resolution schemes (amnesty schemes). Also, in line with the overall objective of fostering exports and to align with international guidelines, the Union Government proposes to revamp existing export promotion schemes.
Legacy dispute resolution scheme, 2019
The so-called Legacy Dispute Resolution Scheme (the Scheme) aims to resolve pending pre-GST indirect tax litigations. The total amount in dispute in these litigations is about INR 3,750 billion. The Scheme encourages voluntary disclosure of past disputes or taxes not reported in returns related to the Central Excise, Service Tax, and 26 other indirect taxes levied by the Union Government. However, voluntary disclosure under the Scheme cannot be made in certain specific cases. The Scheme allows adjustment of amounts paid during any appellate proceedings, enquiry, investigation, and so on. The Scheme provides immunity from penalty, interest, and any other proceedings including prosecution. The relief ranges from 40% of the tax due to 70% of the tax due, depending on various factors, such as the disputed amount, timely filing of appeal, admission of liability in filings, and so on.
Remission of Duties or Taxes on Export Product (RoDTEP)
To boost exports and to better align with international trade laws, the Union Government has proposed a new incentive scheme that will replace the existing Merchandise Exports from India Scheme (MEIS). The MEIS will be discontinued after 31 December 2019. The new incentive scheme is expected to be more beneficial than the MEIS both in terms of the number of beneficiaries and rates. The new scheme is expected to be in line with the Rebate of State and Central Taxes and Levies (RoSCTL) scheme announced by the Union Government for the garment sector. The details about the scheme are expected at a later date.
We expect continuation of this reform process would eventually provide India with a robust, world class indirect taxation system.