Taxation Laws
Tax Dispute Resolution: DRP, DRC and Vivad se Vishwas
Tax litigation in India is vast, and Parliament has tried to reduce it in two ways. Some mechanisms give certainty before a dispute arises or settle it early, such as advance rulings and dispute resolution panels and committees. Others offer a one time settlement of pending disputes on reduced terms, such as the Vivad se Vishwas schemes and the GST waiver. This note covers both.
1. Standing Mechanisms
Figure 1: Routes outside the appeal ladder
- Board for Advance Rulings. From 2021, Boards for Advance Rulings replaced the Authority for Advance Rulings under the Income-tax Act; their rulings are not final and may be challenged before the High Court.
- Dispute Resolution Panel, s.275 (old s.144C). For eligible assessees, such as foreign companies and those with transfer pricing adjustments, the Assessing Officer first issues a draft order, to which objections may be filed before the Panel, whose directions bind the officer.
- Dispute Resolution Committee, s.379 (old s.245MA). For small taxpayers, within prescribed limits of returned income and disputed variation and excluding search and similar cases, a committee may resolve disputes and reduce or waive penalty and grant relief from prosecution.
- Settlement Commission. Abolished with effect from 1 February 2021; applications pending on that date are dealt with by the Interim Board for Settlement.
- Treaty routes. The mutual agreement procedure under tax treaties allows the competent authorities of the two countries to resolve taxation not in accordance with the treaty; advance pricing agreements settle transfer pricing in advance (Topic 38)
2. Direct Tax Vivad se Vishwas Scheme, 2024
Figure 2: Terms of the 2024 scheme
Following the Vivad se Vishwas scheme of 2020, the Direct Tax Vivad se Vishwas Scheme, 2024 allowed disputes pending on 22 July 2024 to be settled by paying the disputed tax, or a percentage of disputed interest, penalty or fee. For appeals filed after 31 January 2020, the amount was 100 per cent of disputed tax if paid by 31 December 2024, and 110 per cent later; older appeals paid 10 per cent more; department appeals and cases already decided in the assessee's favour paid half. Search cases, prosecutions, undisclosed foreign income and cases under laws such as the Benami Act were excluded.
3. GST Waiver: Section 128A
Figure 3: Waiver of interest and penalty
On the recommendation of the 53rd GST Council meeting, s.128A was inserted in the CGST Act to waive interest and penalty on demands for 2017-18, 2018-19 and 2019-20 raised under s.73, the non-fraud provision, where the taxpayer paid the full tax demanded by 31 March 2025. Demands under s.74 for fraud or suppression, and demands for erroneous refunds, were outside the waiver.
⚠ Exam trap Boards for Advance Rulings replaced the Authority for Advance Rulings in 2021, and their rulings can be challenged in the High Court. The Dispute Resolution Panel (s.275, old s.144C) hears objections to draft orders in foreign company and transfer pricing cases; the Dispute Resolution Committee (s.379, old s.245MA) serves small taxpayers. The Settlement Commission ended on 1 February 2021. Vivad se Vishwas 2024 covered disputes pending on 22 July 2024. The GST waiver under s.128A covered only s.73 demands for 2017-18 to 2019-20, if tax was paid by 31 March 2025. |
4. Frequently Asked Questions
Does the Settlement Commission still exist under income tax law?
No. It was abolished with effect from 1 February 2021. Applications pending on that date are handled by the Interim Board for Settlement.
Did the GST waiver scheme cover fraud cases?
No. Section 128A covered only demands under s.73, which applies where there is no fraud, wilful misstatement or suppression; demands under s.74 were excluded.
5. Related Topics
- Topic 24: Income Tax Appeals and Revision. The regular appeal ladder.
- Topic 32: GST Advance Ruling, Appeals and GSTAT. GST advance rulings.
- Topic 38: Double Taxation Relief and Treaties. Mutual agreement procedure.