I-T dept wants Goa PSUs to use Vivad se Vishwas scheme to resolve disputes

The Goa office of the Income Tax Department has urged the state chief secretary to suggest the public sector undertakings (PSUs) to sort out their tax-related disputes under the 'Vivad se Vishwas' scheme.

Talking to reporters in Panaji on the sidelines of an event, Chief Commissioner of Income Tax (Goa), B V Gopinath, on Friday said that five state PSUs are locked in corporate tax dispute with the department.

The Parliament on Friday approved a bill that will provide an opportunity to taxpayers to settle disputes by paying due taxes with a complete waiver of interest and penalty till March 31.

The Direct Tax Vivad se Vishwas Bill was passed by voice vote and returned by the Rajya Sabha as it was a money bill. It was approved by the Lok Sabha on March 4.

"We have already approached the Goa chief secretary and urged him to suggest the PSUs to avail the Vivad se Vishwas scheme," he said.

Total Rs 2 crore tax dues are still pending with five PSUs run by the state government, he said.

"The department is trying to reach out to the parties involved in the disputes through chartered accountants and lawyers," Gopinath said, adding that since this is a voluntary scheme, no one can be forced to opt for it.

He said the coronavirus outbreak was likely to affect the tax collection in the coastal state.

India faces first fall in direct taxes in at least two decades: Report

India's corporate and income tax collection for the current year is likely to fall for the first time in at least two decades, over half a dozen senior tax officials told Reuters, amid a sharp fall in economic growth and cut in corporate tax rates.

Prime Minister Narendra Modi's government was targetting direct tax collection of Rs 13.5 trillion ($189 billion) for the year ending March 31 - a 17% increase over the prior fiscal year.

However, a sharp decline in demand has stung businesses, forcing companies to cut investment and jobs, denting tax collections and prompting the government to forecast 5% growth for this fiscal year - the slowest in 11 years.

The tax department had managed to collect only Rs 7.3 trillion as of Jan. 23, more than 5.5% below the amount collected by the same point last year, said a senior tax official.

After collecting taxes from companies in advance for the first three quarters, officials typically garner about 30-35% of annual direct taxes in the final three months, data from the past three years shows.

But eight senior tax officials interviewed by Reuters said despite their best efforts direct tax collections this financial year were likely to fall below the 11.5 trillion collected in 2018-19.

"Forget the target. This will be the first time that we'll see a fall in direct tax collection ever," said a tax official in New Delhi.

He estimates that direct tax collections for this year could end up roughly 10% below fiscal 2019.

Direct taxes typically account for about 80% of the government's projections for annual revenue, and the shortfall may leave the government needing to boost borrowing to meet expenditure commitments.

The tax officials also say that a surprise cut in headline corporate tax rate last year aimed at wooing manufacturers and boosting investment in Asia's third-biggest economy is another key reason behind the sluggish tax collections.

"We'll be very happy if we can even breakeven with what we collected last year," said another senior tax official in the financial capital Mumbai, the biggest tax generator, accounting for about a third of revenues from direct taxes. "But given the state of the economy, I'm not too hopeful."

US corporate sector hails India's move to cut income tax rate for companies

The US' corporate sector has lauded the Indian government for substantially slashing the income tax rate to 25.17 per cent, saying the move will reverse the economic slowdown and will allow global companies a "good option" for growing their manufacturing base in the country.

The government on Friday slashed the income tax rate for companies by almost 10 percentage points to 25.17 per cent and offered a lower rate to 17.01 per cent for new manufacturing firms to boost economic growth rate from a six-year low by incentivising investments to help create jobs.

Finance Minister Nirmala Sitharaman said the reduction in tax rates was done by promulgating an ordinance to an amendment to the Income Tax Act.

"We laud the Government for addressing our longstanding demand for lowering the corporate tax rates. The move will make Indian companies globally competitive and allow global companies a good option for growing their manufacturing base in country," Mukesh Aghi, president of US India Strategic and Partnership Forum (USISPF) told PTI.

"This is a welcome step to reverse the economic slowdown," he said.

Aghi said additional announcements pertaining to lowering of MAT rate to 15 per cent, non-applicability of buy-back tax on select listed companies and limiting the applicability of higher surcharge by making it non-applicable on capital gains on sale of security, including derivatives held by FPIs, will help in re-assuring investors from global economies including the United States.

"USISPF continues to be at the forefront in partnering with the Government of India towards initiatives like these which enhance the ease of doing business in India," he said.

Aghi exuded confidence that the trade disputes between India and the US will be resolved by the time Prime Minister Narendra Modi and President Donald Trump meet in New York for the second time in three days' time on September 24.

"Absolutely", he said when asked if some of the trade issues would be resolved.

"The gap is not that big. I am confident that by the time when Prime Minister Modi and President Trump meeting New York, a lot of the issues would have been sorted out," he said.

Responding to a question, Aghi said the sentiment about India among US companies was now more mature and more calculated.

"What we are saying is that the investment process in India from US companies is not slowing down. In fact, they're looking at how do we have a backup strategy, especially for manufacturing, China plus one strategy. And India becomes one of the options," he said.

Noting that the bilateral trade now is $142 billion, he said it was experiencing a double digit growth, despite all the disputes.

"US companies are gaining market share in India. Companies such as Google, Facebook, Amazon, WhatsApp, Uber have been shut out of China. So the market is open for US companies. The US is one of the largest FDI investor in India," he said.

That momentum will continue especially in light of the extremely positive reforms announced by India today to cut corporate tax rates, Aghi said.

"It sends a message that India is open for business, welcoming to foreign investment and this is a long-term opportunity to continue engagement with industry," Aghi said.

As the India US trade grows and the relationship deepens, there will be friction points, there will be disagreements, he noted. But, there is enough maturity on both sides to sort this out and keep the bigger picture in mind to move forward, Aghi said.

Applauding Sitharaman for the decision, USA India Chamber of Commerce president Karun Rishi said it was a bold, progressive and historic move.

"It signals the Indian government's commitment to economic growth and its goal of a USD 5 trillion economy by 2025," he said.

Cutting tax on new manufacturing companies from 25 per cent to 15 per cent will make India competitive and incentivise setting up manufacturing units in India. This will firmly revive growth and create much needed new jobs, Rishi said. Allowing corporate social responsibility (CSR) spending on incubators or research grants to institutes engaged in promoting science research can accelerate innovation in India, Rishi said.

He hoped the Indian corporate sector will use CSR to support basic and early BioPharma research for the benefit of 1.3 billion Indians and rest of the world.

Tax panel: Set up advisory cell to help semi-skilled entrepreneurs

An income tax tribunal has come out with rare suggestions to the government to help new semi-skilled entrepreneurs become tax compliant, instead of forcing them to vanish in silent death because of the maze of procedural hassles.

A single-member income-tax appellate tribunal (ITAT), Chandigarh said, “These businesses whether engaged in a tailoring activity or boutique owner; restaurateur, dhaba/caterers food outlet; tiffin packer, florist, innovator, etc to my mind should be given a special velvet gloved treatment and encouraged to succeed.”

Tribunal judicial member Diva Singh said it is only these entrepreneurial fresh ventures appropriately nurtured within the framework of the taxation system which can be the agents of economic change of the nation.

Singh basically suggested the tax department to set up a tax advisory cell consisting of public spirited officers of the revenue with strong ethics, full awareness of tax laws and people skills to help these enterprises.

She said the creation of such a mechanism is imperative in order to nurture the successful ventures of semi-skilled first time untrained entrepreneurs from a below the tax-free threshold to incomes above this level.

“These upward movements in incomes, I am aware, are first noticed by the tax administrator (assessing officer) where deposits in bank accounts or other visible markers of financial success qua a new player in the market are first noticed in the system,” the ITAT member said.

A mechanism to guide these brand new assessees through the tax and the bureaucratic maze must be made available by the state, she said.

“Their first brush with their financial success must not be so stunning that it poses a seemingly impossible hurdle of compliances that they ultimately crumble and unfortunately vanish in the teeming masses who instead of utilising the state’s opportunities of growth believe in ridding piggy-back on the enterprise of a few perpetually clamouring for free financial packages and depending only on state affirmative actions,” the member said.

Second, she advised the department to identify the new successful businesses, however small as the agents of economic change.

The ventures, it is noticed generally do not have any advise, experience or knowledge to fall back on and it has been noticed that unknowingly there may be transgressions of the tax laws etc. Even if these are bonafide, they need to be legally addressed, she said. Thirdly she suggested a tax compliance scheme especially created for the benefits of these new ventures so as to address their past lack of compliances.

In order to assist these new ventures to come within the fold of the law for their past actions or inactions and carry on their businesses ensuring future compliances past transgressions need to be first addressed through clear concessions under tax compliance scheme/voluntary disclosure scheme for such small enterprises.

Commenting on the suggestions, Amit Maheshwari, managing partner of Ashok Maheshwary & Associates, said the suggestions show that ITAT is also in sync with the government's resolve to cut down on litigation and make a non-adversial tax regime for the tax payers.

The ITAT member said small businesses with innovative ideas, who are agents of economic change in India, need special treatment.

“... the fact that business opportunities can be visualised only by the formally educated is also well accepted to be not a necessity. The oft quoted successful ventures of semi-skilled women (Lijjat Papad); semi-skilled family business (Haldiram), (MDH) etc. non-expert need-based venture (Rajah Spice [UK] ) high end tailoring services provided by Tamil Nadu fishermen powering Savile Row tailors can be some of the Indian examples which demonstrate that it is the passion and the vision which is the spark,” she said.

The ITAT said generally the violations of tax laws by new assessees do not occur because they are so desired but because of sheer lack of proper advice.

“Instead of letting these sparks of economic change stifle and die due to fear of compliances, I firmly believe... that they be urgently assisted in the interests of the state,” she said.

Such sparks may be reflected at times in part time enterprising housewives, illiterate, semi-skilled men/women or teenagers.

“I would seriously exhort and urge the State through the tax administration to provide a platform specially created to assist these ventures to remain relevant and tax compliant,” the tribunal member said.

Singh made these proposals in a case related to an assessee carrying on the business of boutique who was asked to shell out Rs five lakh as he was not able to explain certain deposits in her HDFC account, according to tax officials.