With ₹12 trillion stuck in tax disputes, Govt must fix resolution in budget

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₹12.2 trillion stuck in various tax squabbles, experts said. “Over the past seven years, India's tax framework has undergone significant reforms, yet a persistent challenge remains—the substantial amount of money entangled in litigation," said Saurabh Agarwal, a tax partner at EY, referring to the ₹12.2 trillion, as per data from previous budget documents. “This issue causes financial strain for both taxpayers, who must bear interest on pending liabilities, and the government, which is deprived of these funds for developmental purposes.

He said the government must streamline the legal processes in the July 23 budget to release resources trapped in prolonged disputes. The budget could introduce a comprehensive settlement scheme, providing tax and penalty concessions to encourage early resolution, particularly for smaller claims, Agarwal said. “This approach aims to empower businesses, allow entrepreneurs to thrive, and ensure that valuable court resources are prioritised for more intricate cases," he said.

The amount locked up in customs-related litigation is about ₹22,000 crore, the data show. "An amnesty scheme can be introduced to resolve disputes regarding classification, valuation, exemption and trade agreement concessions since these are the key disputes regarding customs," said Ranjeet Mahtani, a partner at Dhruva Advisors. There could be exceptions to the scheme as in cases of smuggling, he added.

“Such a scheme, in line with the SVLDRS introduced for central indirect tax laws prior to the covid-19 pandemic, will prove beneficial for both the exchequer and taxpayer," Mahtani said. SVLDRS stands for Sabka Vishwas (Legacy Dispute Resolution) Scheme. In the past, the government introduced the SVLDRS as well as the