Finance Ministry Current Affairs

Government raises threshold monetary limit for filling appeals relating to tax cases

Union Finance Ministry has hiked threshold monetary limit for tax departments to file appeals all three levels of appeal — Appellate Tribunals, High Courts, and Supreme Court. The move is aimed at significantly decreasing taxpayer greivances and litigation burden of tax departments in courts and tribunals across the country.

Key Facts

Tax departments, Central Board of Direct Taxes (CBDT) files appeals in ITAT (Income Tax Appellate Tribunal) while Central Board of Indirect Taxes and Customs (CBIC) files appeals in CESTAT (Customs, Excise and Service Tax Appellate Tribunal) and also in High Courts and Supreme Courts.

Under new limits tax departments CBDT and CBIC can file appeals in ITAT/CESTAT only if the tax amount involved is Rs 20 lakh or more, up from Rs 10 lakh at present. Moreover, appeals can be filed in High Courts if tax amount involved in litigation is Rs 50 lakh (up from Rs 20 lakh at present). For appeals in Supreme Court, the threshold limit has been hiked to Rs 1 crore (from Rs 25 lakh at present).

The new threshold limits will result in 41% reduction litigation from CBDT’s side, including 34% cases in ITAT, 48% of cases in case of High Courts and 54% of cases in case of Supreme Court. Similarly, in case of CBIC, it will result in reduction in 18% of cases as 16% of cases will be withdrawn in CESTAT, 22% in High Courts, and 21% in Supreme Court.

This decision will give relief to taxpayers. It is also based on premise that the cost of litigation is sometimes more than the recovery sought. It will also create trust in tax administration and give relief to honest, small and mid-sized taxpayers. It will promote tax friendly environment and help to promote ease of doing business.

Background

More than 66% of cases are stuck in litigation involve 1.8% in value. In many cases, cost of litigation is higher than the recovery. As per Economic Survey 2017-18, even though success rate of tax department at all three levels of appeal — Appellate Tribunals, High Courts, and the Supreme Court is under 30% for both direct and indirect tax litigation, it remains undeterred and persists in pursuing litigation at every level of the judicial hierarchy making it the largest litigant in India. The tax department unambiguously loses 65% of its cases. Over period of time, the success rate of tax departments has only been declining, while that of assessees has been increasing.

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Bharat-22 ETF follow-on offer may be worth Rs. 10,000 crore

The Union Finance Ministry may come out with Rs. 10,000 crore follow-on fund offer of Bharat-22 exchange traded fund (ETF) as it looks to dilute stake in Coal India Limited (CIL) to meet the minimum public holding norm. Besides, it is also keen to takeETF route to sell off government shares held through  Specified Undertaking of the Unit Trust of India in private companies (SUUTI)—ITC, Axis Bank and L&T.

Background

The Union Government is planning to raise Rs. 80,000 crore in current fiscal from disinvestment, lower than over Rs. 1 trillion raised in 2017. The Bharat-22 ETF was launched in November 2017 to meet some part of this disinterment target. It comprises shares of 22 companies, including public sector undertakings (PSUs), public sector banks (PSBs), ITC, Axis Bank and L&T. The fund so far has garnered bids to tune of Rs.32,000 crore, although government retained only Rs. 14,500 crore.

Prior to the launch of Bharat-22 ETF, which has diversified portfolio, Union Government had floated CPSE ETF comprising stocks of 10 bluechip PSUs—ONGC, Coal India, IOC, GAIL (India), Oil India, PFC, Bharat Electronics, REC, Engineers India and Container Corporation of India. Through the CPSE ETF, the government had raised Rs. 11,500 crore in three tranches

Exchange Traded Fund (ETF)

ETF is index funds that offer security of fund and liquidity of stock listed and traded on exchanges. Much like index funds they mirror index, commodity, bonds or basket of assets. They are similar to mutual funds in certain manner but are more liquid as they can be sold quickly on stock exchanges like shares.

The ETFs trading value is based on the net asset value of the underlying stocks that it represents. Their price changes daily as they are traded throughout the day. ETF route is considered as safer mode of disinvestment as it shields investors against stock market volatility.

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