FM: New thresholds for tax appeals will bring down amount involved in litigation

NEW DELHI: Finance minister Piyush Goyal on Thursday said the higher threshold for filing appeals in tax disputes announced on Wednesday will eliminate tens of thousands of pending tax disputes, which clog the judicial system but account for a very small part of tax dues.

Goyal said that despite withdrawing a large number of appeals, the amount involved in litigation would drop by just about ₹5,600 crore: ₹4,800 crore in the case of direct taxes and about ₹800 crore for indirect tax disputes.

The idea is to give relief to as many taxpayers as possible, especially where the amounts involved are small. Goyal said the step was taken after it came to light that 66% of the pending tax disputes by number, across various tribunals and courts, including the Supreme Court, account for a mere 1.8% of the ₹7.6 trillion involved in litigation.

“It has been noted that, often, the cost of litigation turns about to be more than the recovery amount, because the percentage of recovery is also small,” said Goyal. Going by the revised monetary threshold for filing appeals, the revenue department will drop 41% of all direct tax cases, or 26,812 cases, which represent 0.82% of the total tax amount in litigation. In case of indirect taxes, 18% of all cases, representing 1.45% of the disputed tax amount, will be withdrawn, the minister added.

The Narendra Modi-led government had promised a non-adversarial tax regime when it came to power in 2014 and took steps to reduce tax disputes, including those related to crossborder transactions within large corporate groups, which had seen an increase in previous years.