Effect Of Tax litigation In India On Country’s Economy
India has emerged to be one of the biggest economies in the world. The country has become an attractive destination for investors having interests in all kinds of industries.
A large, skilled workforce, resources, and the government’s favorable policies have helped in this regard. There are some problems, though and one of the major ones is tax-related litigation involving companies.
Effect Of Tax litigation In India
The foremost reason for which lawyers are approached by business persons is representing for tax litigation in India. The problem is so grave that the economic survey published at the beginning of this year also took note of it. It is not only the taxpayer and the tax department along with other government agencies which feel the strain.
The economy of the country suffers because of this serious issue. In this article, we will try to give an idea to the reader how the Indian economy is impacted by large numbers of tax litigations.
The Problem Explained By Statistics
In order to explain the enormity of the problem, we would like to present some numbers which were a part of the economic survey.
This will give a fair idea about how these legal issues are affecting the nation. In March 2017 there were about 1.45 lakh cases related to indirect taxes being under consideration of the Income Tax Appellate Tribunal (ITAT) besides the various high courts and the Supreme Court of India. By the same date, approximately 1.37 lakh direct tax cases were being listed in the same judicial forums.
In the budget speech of 2016, it was mentioned that about 3 lakh income tax cases were pending before the first-level appellate authority. The total disputed amount was somewhere around a staggering 5,05,000 crore.
The survey also noted that the highest court of the land showed a tendency to accept appeals made through special leave petitions directly from the tribunal or a lower court. A jump from 25% in 2008 to 40% in 2016 in the acceptance of SLPs made this clearly evident.
Impact On The Indian Economy
These issues are not only affecting business owners and other taxpayers who are approaching agencies like top indirect tax firms in Delhi for representing for tax litigation in India but also the nation’s economy.
As the survey noted, by March 2017, the amount stuck in tax disputes amounted to nearly Rs 58 lakh crore. This is more than 4.7% of India’s GDP and according to the report is taking a huge toll on the nation’s economy.
With government spending its resources in fighting these cases, important projects are stalled. About Rs 52,000 crore worth of infrastructure projects could not be completed as they were stopped because of court orders.
Roads, railways, and power are the three vital sectors hardest hit by these litigations. With poor infrastructure, no economy can hope to develop at a rapid pace and it is affecting the country’s aspirations to achieve a high growth rate.
Effect On Government Agencies
The problem is also severely affecting the productivity of various government agencies, especially the Income Tax Department.
It was mentioned in the survey that the department is the biggest litigant but has a poor success rate. It loses about 85% of the cases.
A success rate that is below 30% only goes to show that it is wasting valuable time and resources which could have been spent to improve its productivity.
There is delay in collection of tax revenue as the personnel is busy appearing in tribunals and courts. The judiciary which is already under severe strain is put under even more stress by a large number of these litigations.
Effect Of Tax litigation In India – the money spent by litigants, whether government agencies or taxpayers in hiring lawyers for representing for tax litigation in India would be put to better use if the government took some proactive measures to remove confusing laws and increase transparency in the functioning of authorities.
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