- Consideration of Arbitration Mechanism: The government is considering introducing an arbitration mechanism in the upcoming Budget 2025 to reduce the litigation burden on taxpayers and government officials. This initiative aims to make arbitration a preferred method for resolving tax disputes.
- Dedicated Arbitration Team: Active discussions are underway to create a special team dedicated to managing an arbitration desk as an alternative dispute resolution (ADR) mechanism. This measure is part of a broader mission to implement effective litigation management for tax disputes.
- Improving Business Environment: The move is expected to improve the ease of doing business and reduce the backlog of pending tax cases at various adjudication levels, aligning India with global best practices in tax dispute resolution.
- Global Influence and Adoption: Countries like Canada and Australia already use similar arbitration mechanisms, and the OECD advocates for arbitration in tax disputes. Since 2020, there has been a global increase in the adoption of ADR methods, with significant advancements in technology enhancing these processes.
- Potential Impact and Historical Context: Experts believe that introducing arbitration could be a game-changer for managing tax litigation in India. The Vivad Se Vishwas Scheme (VSV) of 2020 was a successful one-time measure to reduce tax litigation, but a structural shift towards ADR processes like arbitration could provide a more permanent solution to streamline tax dispute resolution.
Source A2ztaxcorp
