HYDERABAD : Indian tax sleuths seem to be playing the good cop, bad cop.
While corporate taxpayers continue to take regulatory stick, personal income taxpayers are seeing an act of kindness, and in good measure. For, the amount of corporate taxes under dispute shot up by nearly `1 lakh crore in FY18 over the previous year, while the amount under personal income taxes and others plunged by almost an equal amount.
As per FY20 receipts budget documents, corporate taxes under dispute rose from `3,06,609 crore in FY17 to `3,99,188 crore in FY18 (up 30 per cent), while personal and other income taxes fell from `3,03,781 crore to `2,24,351 crore (down 26 per cent) during the same period. Typically, tax amounts under dispute are catergorised in four brackets — 1-2, 2-5, 5-10 and above 10 years — and the reduction in personal taxes under dispute saw a sharp reduction in the 1-2 years period, indicating that either there have been extra efforts to settle litigation or there were fewer fresh disputes added, or both.
Corporates too were lucky as the amount under 1-2 year bracket rose by a mere `19,000 crore, but those who were undergoing litigation remained unfortunate as the amount under dispute nearly doubled in 2-5 year bucket to `1.6 lakh crore. Because of the conscious reduction in personal income tax litigations, total direct taxes under dispute grew at a mere 2 per cent to `6.2 lakh crore in FY18. Meanwhile, total taxes under dispute (direct and indirect, which includes service, excise and custom duties) rose by 5.2 per cent to `7.7 lakh crore in FY18.
Tax appeals take about 15-20 years, thanks to the country’s archaic laws. As per a 2016 World Bank estimate, judicial delays cost India about 1.5 per cent of its GDP annually. Also, the economic costs and effects of tax litigations aren’t understood clearly, as a lack of reliable, granular structured data sets is a critical challenge for courts and tribunals in understanding the problem of tax litigation.
It was in this context, the 2017-18 Economic Survey pitched for separate benches at high courts to reduce pendency, create a non-adversarial and conducive tax environment by overhauling the dispute resolution mechanisms, rationalisation and simplification of the tax regime. “India needs to address pendency, delays and injunctions that are overburdening courts and severely impacting the progress of cases, especially economic cases, through the different tiers of the appellate and judicial arenas if it wants to further ease prospects of doing business here,” it noted.
On its part, the government last July withdrew 41 per cent of the cases belonging to the CBDT and 18 per cent to the CBITC at an expense of `6,000 crore. But they accounted a mere 1.8 per cent of the total disputed value. Though the NDA government in 2014 promised to stop tax terrorism, and reiterated it in 2019, that vow of putting a premium on honesty is yet to do the trick among corporates.