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Rs 7.8 lakh crore tax revenues stuck in disputes

Dipak Mondal     February 7, 2019

Even as the government struggles to mop up enough revenues to meet its social and capital expenses, it is unable to realise tax revenues of around Rs 7.8 lakh crore (as of March 2018) as the amount is stuck in different tax disputes.

This was revealed in the budget document presented this year. Of the Rs 7.8 lakh crore, Rs 6.2 lakh crore was raised from direct taxes and the rest Rs 1.6 lakh crore from indirect taxes.

Other than those stuck in disputes, Rs 1.22 lakh crore taxes have not been realised due to reasons other than disputes. The budget documents show that taxes worth Rs 9 lakh crore has been raised but not realised as of March 2018.

Some of these disputes date back to over 10 years, but a bulk of the amount stuck is from recent years. Of the Rs 7.8 lakh crore, disputes involving Rs 7 lakh crore are less than five years old.

In disputes related to direct taxes, corporate taxes account for Rs 4 lakh crore and income taxes account for Rs 2.2 lakh crore.

In indirect taxes, service taxes accounted for the bulk of the disputed amount with Rs 88,000 crore services taxes stuck in disputes followed by Rs 55,000 crore central excise and Rs 10,000 crore stuck in disputes related to customs duty.

Over the last five years, the amount of taxes unrealised due to disputes have grown from Rs 4.1 lakh crore in 2012-13 to Rs 7.8 lakh crore in 2017-18, registering a 14 per cent growth year-on-year.

To minimise tax litigations, the government in July last year decided to increase the threshold monetary limits for filing appeals in appellate tribunals, high courts and the Supreme Court to Rs 20 lakh, Rs 50 lakh and Rs 1 crore, respectively. This move would lead to withdrawal of tax disputes amounting to Rs 5,600 crore.

The data for disputes does not include any GST-related disputes. However, tax experts believe that once the assessment of GST returns and audits start, a flurry of GST-related disputes would come up in the next one-year or so.

L Badri Narayanan, Partner, Lakshmikumaran & Sridharan says (GST) disputes related to assessment have not started and they would not start anytime soon.

"These disputes would not emerge because they (the government) have given three years time for these assessments to be brought. So, for the three years, whether it is my fault, department's fault or by fraud, no questions asked, and they can issue a show-cause notice to me and recover these amounts," he says.

The government has estimated that in the current financial year, its expenses (at Rs 24.57 lakh crore) would exceed its revenues (Rs 18.22 lakh crore) by Rs 6.34 lakh crore. For the next financial year, it estimates the government expenses to exceed its revenues by 7 lakh crore.

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