An amnesty scheme has been introduced by the Maharashtra Government which is to be called as the “Maharashtra Settlement of Arrears of Tax, Interest, Penalty or Late Fee 2022”. The Covid-19 pandemic has disrupted small industries, traders and dealers, which have sustained a lot of financial stress. A substantial number of cases which involved outstanding dues and litigation were pending under different Tax laws, which have been revoked and included into the Goods and Services Tax. The main objective of this scheme is to unlock the amount involved in the outstanding dues and reduce the pending litigations. The laws proposed to be covered under this Scheme are:
• Maharashtra Value Added Tax Act, 2002
• Central Sales Tax Act, 1956
• Bombay Sales of Motor Spirit Taxation Act, 1958
• Bombay Sales Tax Act, 1959
• Maharashtra Purchase Tax on Sugarcane Act, 1962
• Maharashtra State Tax on Professions, Trades, Callings and Employments Act, 1975
• Maharashtra Sales Tax on the Transfer of Right to use any Goods for any Purpose Act, 1985
• Maharashtra Tax on Entry of Motor Vehicles into Local Areas Act, 1987
• Maharashtra Tax on Luxuries Act, 1987
• Maharashtra Sales Tax on the Transfer of Property in Goods involved in the Execution of Works Contract (Re-enacted) Act, 1989
The benefit of the Maharashtra Settlement of Arrears of Tax, Interest, Penalty or Late Fee Scheme-2022 is applicable to penalties, arrears of tax, interest and late fees. There is no monetary limit for being eligible to opt for the scheme and avail it’s benefits. The following individuals are eligible to opt for the scheme:
1. Any individual, whether he is registered or not, is eligible to make an application under this scheme, in respect of any period upto 30th June 2017.
2. Any individual who has previously availed the benefit under Maharashtra Settlement of Arrears in Disputes Act, 2016 or Maharashtra Settlement of Arrears of Tax, Interest, Penalty or Late Fee Act, 2019 is also eligible to avail the benefits under this scheme, as specifically provided in Clause 4 of the Scheme.
3. An individual can opt for the Scheme and apply for the waiver of interest and late fees, even for the arrears which are not disputed. However, no relief will be available for the tax component.
4. Any individual who has disclosed tax liabilities in his income tax return, but has not discharged the same, can also opt for the scheme and avail the waiver of interest, penalties and late fees. However, there will be no tax waiver available in respect of liability disclosed in the returns.
5. As per Clause 2(1)(c) of the Scheme, financial institutions are also eligible to be called as an “applicant”. Hence, a bank can also opt for the scheme on behalf of its borrower who has a huge tax liability, to protect its own interest. However, the scheme does not provide a clarification regarding this situation yet. A clarification is awaited from the Government.
6. Any individual who was liable to pay Professional Tax, but has failed to do so, can also avail the benefit of the Scheme in respect of interest and penalties only and not in respect of the tax component.
The relief available under this scheme encompasses a complete waiver of the arrears upto Rs.10,000 per financial year as per any statutory order as on 1st April 2022. However, if the amount of arrears is upto Rs.10,00,000 as per any statutory order, the applicant may opt to pay for a lump sum payment of 20% and avail a waiver of the balance 80% of the amount. As per Clause 13(1), the applicant will be discharged of his liabilities to the extent of amount of waiver mentioned in the settlement order.
The procedure to claim the benefit under the Scheme is straightforward. The individual is required to file an application and make full payment under ‘One Time Payment Option’ before making the application. In cases where the tax arrears are in excess of Rs. 50,00,000 then the applicant has an option to select the payment in instalments. In such a case, he has to pay minimum 25% before making the application. The payment shall be made in the challan, as prescribed under the Act or in challan number MTR-6. In accordance with the application, if the Designated Committee is satisfied with the application and payment, it will pass an order. Thereafter, the applicant will be discharged of his liability to the extent specified in the settlement order. If the application is not as per the provisions of the Scheme, the Committee can reject the application by passing an order in writing, and giving an opportunity to the applicant to be heard. However, as per clause 8(7), no application will be rejected merely on the grounds that the amount paid is lesser than the requisite amount to be paid.
An applicant is required to file separate application for each of the following type of arrears for each financial year:
I. Arrears payable as per statutory order, or
II. Arrears admitted in the returns / revised return but not paid, or
III. Arrears determined / recommended as payable by the Auditor
The time limit for filing an application under the scheme is from 1st April 2022 to 14th October 2022. If an application is not filed within the specified time limit, then a delay of 30 days may be accepted by the Designated Committee if the requisite amount of payment is made within the time limit. However, the payment of arrears is a must prior to filing an application. If an individual has opted for payment in instalments, minimum 25% of arrears should have been paid prior to making the application.
The time limit to make the payment under the Scheme as per the options available are:
Option 1: One-time Payment Option
-1st April 2022 to 30th September 2022
Option 2: Instalment Option
-1st instalment shall be atleast 25% and payable from 1st April 2022 to 30th September 2022.
– Remaining amount is payable in three equal quarterly instalments from the date of application. All instalments shall be paid within 9 months from the date of application
The application cannot be made without payment of taxes, therefore, failure to make payment within the time limit can arise only in case of the instalment option. In such a situation, interest will be applicable at the rate of 12% per annum on the amount of instalments which are not paid within the time specified. If all the 3 instalments are not paid within 9 months from the date of application, then the Designated Committee shall compute the amount of waiver in proportion to the amount paid by the applicant.
If the application is not in accordance with the provisions of the Scheme, then the Designated Committee can reject the application by passing an order in writing after providing an opportunity of being heard to the applicant. In accordance with the proviso to Clause 18 of the Scheme, an applicant is not entitled to get the refund of any amount paid under the Scheme if his application is rejected. However, such amount will be appropriated against the arrears of the relevant Act and the balance liability will continue to be payable.
Overall, it’s a great initiative by the Government of Maharashtra to reduce the on-going litigation after the advent of GST and the Covid-19 pandemic. However, certain clarificatory circulars are still awaited from the Government.