One-Time Customs Amnesty Scheme: Proposal, Vivad se Vishwas Model and India’s Tax Dispute Settlement Schemes

Context

• In January 2025 the government indicated plans for a one-time amnesty scheme under the Customs Act, along the lines of the Vivad se Vishwas scheme for income tax.
• The scheme would address disputes over the base value of customs duty, offering settlement without penalty or interest in eligible cases, and immunity from further proceedings once a case is settled.
• It is meant to sit alongside earlier amnesty windows for income tax, central excise and service tax, and GST, giving a complete framework for tax and duty dispute resolution.

Objectives of the Proposed Scheme

• Reduce litigation: cut the pile of customs cases in tribunals (CESTAT) and courts.
• Relief to business: allow firms to close old disputes and focus on operations instead of prolonged legal battles.
• Revenue: recover disputed amounts that are otherwise stuck for years.
• Simplicity: a time-bound, declaration-based process with low compliance cost.

The Vivad se Vishwas Model

• Direct Tax Vivad se Vishwas Scheme, 2020: announced in Budget 2020-21 and in force from March 2020; taxpayers settled pending income-tax appeals by paying the disputed tax with a waiver of interest and penalty.
• Direct Tax Vivad se Vishwas Scheme, 2024: announced in Budget 2024-25, in force from 1 October 2024, for appeals pending as on 22 July 2024; lower settlement amounts for declarations filed by 31 January 2025.
• Vivad se Vishwas II (Contractual Disputes), 2023: announced in Budget 2023-24 and run by the Department of Expenditure, it lets contractors settle disputes with government bodies and PSUs through graded settlement offers.

Other Amnesty and Settlement Schemes

• Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019: for legacy central excise and service tax disputes after GST; relief of 40-70 per cent of the tax dues with full waiver of interest and penalty.
• GST amnesty (Section 128A, CGST Act): inserted by the Finance (No. 2) Act, 2024; waiver of interest and penalty on Section 73 demands for FY 2017-18 to 2019-20 if the tax was paid by 31 March 2025.
• Kar Vivad Samadhan Scheme, 1998 and the Income Declaration Scheme, 2016 are earlier examples of one-time windows.
• Customs Settlement Commission already exists for case-by-case settlement, but not as a blanket amnesty.

Implications

• Businesses get certainty and can release bank guarantees and provisions made for disputes.
• Courts and tribunals get a lighter docket, speeding up other cases.
• Government gains revenue and credibility for its dispute-resolution mechanisms, but must guard against the moral hazard of repeated amnesties.

FAQs

What is an amnesty scheme in taxation?

A time-bound window in which a taxpayer can settle a dispute or declare unpaid tax by paying the principal, with interest, penalty and prosecution waived fully or partly.

How is a customs amnesty different from the income-tax scheme?

Customs disputes involve valuation, classification and exemption of imported goods rather than income; the amnesty would cover the duty element and give immunity from further action.

Why is this topic asked in RBI and NABARD exams?

Tax dispute settlement schemes are regular Budget announcements and appear in the economy and current-affairs sections.