Rs 15.4 lakh crore stuck in tax disputes, up 50% since FY20: MC Analysis

Amount under tax disputes has risen 50% since FY20

The money stuck in tax disputes reached a new high of Rs 15.4 lakh crore in financial year 2023-24, up nearly 50 percent higher from the pre-pandemic period, a Moneycontrol analysis of Budget documents shows.

A total of Rs 10.4 lakh crore was under dispute in FY20, of which Rs 8.8 lakh crore was over income tax and the remaining under taxes levied by the Centre on commodities and services.

The share of taxes on income in tax disputes has risen further.

While taxes on income accounted for 81 percent of the tax disputes in FY15, it rose to 84.8 percent in FY20 and has since increased further to 86.8 percent.

Amount under corporation tax disputes has nearly doubled, rising 85.7 percent. Income tax disputed amount has grown at a slower 17.8 percent.

The government’s Vivad Se Vishwas schemes have been targeted to settle income tax disputes. The last scheme was notified by the Central Board of Direct Taxes in 2024.

"It appears that pace at which tax disputes are growing is surpassing the pace of growth in tax collection. This also raises a question on effectivness of Direct Tax Amnesty Scheme," said Amit Singhania, founder, Areete Law Offices.

While the share of amount disputed under commodities taxes has declined, within that bracket, there has been a 95 percent rise in the amount under dispute in customs.

Goods and services tax (GST) collections seem to be no exception either. In FY24, there was a 2.5-fold rise in the amount under Central Goods and Services Tax disputes.

More cases stuck for longer

Analysis shows that disputes have been going on for longer periods as well.

In FY24, for instance, 22.7 percent of the amount, or Rs 3.5 lakh crore, was stuck for over five years, of which Rs 44,842 crore was stuck for more than 10 years.

In contrast, in 2020, just 9.7 percent of the amount was stuck for over a five-year period.

The amount of money stuck for two-five year period has risen to 49.5 percent in FY24 from 31.7 percent five years ago.

There has been a sharper rise in the ratio of amounts stuck at the direct tax level. The ratio of amount stuck for over five years increased from 6.3 percent in FY20 to 20.1 percent in FY24, with corporation tax being the major contributor. For commodity and service taxes, it rose from 28.3 percent to 39.9 percent.