New Delhi: The Delhi Government is reportedly preparing to introduce a one-time tax amnesty scheme aimed at settling legacy disputes related to Value-Added Tax (VAT), excise, and service tax, which predate the implementation of the Goods and Services Tax (GST) in July 2017.
According to sources in the Department of Trade and Taxes, a proposal is being drafted to waive penalties and interest on disputed tax dues. The goal is to facilitate the swift recovery of the principal tax amount while reducing the burden of long-pending litigations. The plan is expected to be presented before the Delhi Cabinet for final approval after reviews by the finance, planning, and law departments.
Relief for Over 3.5 Lakh Traders
Currently, more than 3.5 lakh traders in Delhi are involved in tax-related legal disputes. The total disputed tax amount is estimated to be over ₹15,000 crore, with nearly ₹5,500-6,000 crore being the actual unrecovered tax component. The remaining amount consists of interest and penalty charges.
Officials say that many of these cases are entangled in court proceedings, leading to administrative delays and legal backlogs. The proposed tax settlement scheme aims to offer traders a clean slate, reduce litigation costs, and expedite the recovery process.
Previous Attempt Failed to Launch
A similar tax amnesty initiative was proposed earlier by the AAP-led Delhi Government. The scheme was announced by then Finance Minister Manish Sisodia during the 2022-23 budget speech, but it was never implemented. However, pressure from the trading community and the need to strengthen state finances have brought the idea back to the forefront.
According to a senior official, Delhi traders have consistently raised the issue in meetings with the Chief Minister, especially during discussions on tax policies and the redevelopment of markets.
Financial Benefits for Delhi Government
Recovering the long-pending tax dues will not only improve Delhi’s financial health but also reduce the legal expenditure on thousands of tax recovery cases. The government anticipates that a successful rollout of the scheme will boost state tax revenue and streamline administrative processes.
For the financial year 2025-26, the Delhi Government has presented a budget of ₹1 lakh crore, of which ₹68,700 crore is expected to come from tax revenues, including a major contribution of ₹49,000 crore from GST and VAT collections.
Key Highlights
- One-time amnesty scheme may soon be launched by Delhi Government.
- Scheme targets legacy VAT, excise, and service tax disputes predating GST.
- Over 3.5 lakh traders involved in litigation; ₹15,000 crore in dispute.
- Waiver of interest and penalty proposed to encourage quick settlements.
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Intended to boost tax recovery and reduce court case backlog.