Bengal tax truce option

TT, Calcutta, Dec. 17: The Bengal government today amended a law to allow out-of-court settlement of disputes over business entities' tax arrears, now totalling over Rs 6,200 crore, after accepting a part of the amount.

The initiative comes at a time the state government is scrambling to shore up revenues in the upcoming last quarter against the backdrop of the feared adverse impacts of demonetisation.

The West Bengal Taxation Laws (Amendment) Bill, tabled and passed today, empowers the finance department to settle disputes after accepting 30 to 60 per cent of the tax arrears.

"Nearly 7,000 cases related to input tax credit claims and the application of higher tax on turnover upon assessment (are pending) in various courts.... This amendment will help industry as well as the government," finance minister Amit Mitra said.

The disputes relate to the input tax levied on raw materials bought by manufacturers as well as assessment of turnover. When the final tax is calculated on the finished product, the government deducts the input tax. Legal disputes over the calculation of the final payable amount are common and the cases drag on for years.

The amendment has laid down two categories of settlements. One allows settlement after a one-time payment of 30 per cent of arrears whose clearance is mired in litigation. In disputes over the tax imposed following the assessment of turnover, they can be settled if 60 per cent of the purported arrears are paid.

"A decision like this could have faced a legal challenge. So, the assent of the Assembly was needed," a source said.

This is the first time in 13 years the Bengal government is trying to settle tax arrear cases out of court. It had earlier done so in 2003 and 1999.

Mitra later told a conference organised by the Bengal Chamber of Commerce and Industry: "Ease of doing business is what we want. Today, the Assembly was in session. There, I announced this big reform on tax arrears.... We want these companies to go back to work and not run around in courts."

Finance department sources said the new amendment was mooted after several litigants informally communicated they were keen to clear their slate. The arrears in dispute add up to Rs 6,278 crore.

The state government seized the opportunity because of the need to meet the revenue target of Rs 50,219 crore for 2016-17, which is 14 per cent higher than a year ago.

"We had missed the target by around Rs 3,500 crore in 2015-16. This year, achieving the budget forecast is looking more difficult," another source said, referring to the toll the demonetisation is said to be taking on collections.

Liquor tweak

The state government has replaced sales tax on liquor with an excise duty at the same rate to simplify the collection process.

There will be no impact on the total revenue but the move will add to the state's excise collection. "We just wanted to do away with the two levies - excise duty and sales tax. This system of taxation will decrease the compliance cost of businessmen," Mitra said.