Taking a big step forward in introducing tax reforms in the country, the Narendra Modi government on Thursday changed the rules for filing tax litigations in tribunals, High Courts and Supreme Courts.
Now the Income-Tax department will approach courts only if the tax liability is either equal to or more than Rs 20 lakh.
After this decision, the government will withdraw lakhs of tax litigations pending in various courts.
The decision will also help the government in bringing down the amount locked up in tax litigation by Rs 5,600 crore.
As of March, 2017, tax disputes worth Rs 7.6 lakh crore were stuck in various stages of litigation in tribunals, High Courts and the Supreme Court, according to Union minister Piyush Goyal.
The government has hiked the threshold limit for filing appeals in tribunals to Rs 20 lakh, while the same for High Courts and the Supreme Court has been raised to Rs 50 lakh and Rs 1 crore, respectively.
Earlier, the threshold for filing appeals by the tax department in ITAT/CESTAT was Rs 10 lakh, while the same in High Courts and the Supreme Court was Rs 20 lakh and Rs 25 lakh, respectively.
With this, tax litigation in the Central Board of Direct Taxes (CBDT) and Central Board of Indirect Taxes and Customs (CBIC) will get reduced by 41% and 18%, respectively.
In all, 29,580 cases would be withdrawn from various litigation fora, reducing tax disputed cases by 37%.
“In case of CBDT, the withdrawal of 41% of the cases, will have a revenue impact of Rs 4,800 crore in absolute terms, while in case of CBIC, withdrawal of 18% of cases will have a revenue impact of Rs 800 crore,” Goyal told media persons in New Delhi.
He said the move to hike threshold limit is a step towards ease of doing business.
“Small and mid-sized taxpayers will benefit with the increase in threshold limit for filing appeals as they can now focus on doing business rather than litigating in various fora. Government trusts the honest tax payers,” Goyal said.
Following Wednesday’s decision, CBDT will withdraw 34% of cases stuck in tribunal, 48% of those stuck in High Courts and 54% in the Supreme Court.
CBIC will withdraw 18% cases from tribunal, 22% from High courts and 21% from the Supreme Court.
However, this will not apply in such cases where the substantial point of law is involved, the ministry had said on Wednesday.
The Economic Survey 2017-18 had said that the tax litigation cases stems from government persisting with litigation despite high rates of failure at every stage of the appellate process.
The tax departments in India have gone in for contesting against in several tax disputes but with a low success rate which is below 30%, Survey had noted.
Watch: Modi govt hikes threshold limit for filing tax appeals in tribunals, courts
(With agency inputs)