India’s tax dispute burden is rising sharply, despite multiple policy interventions aimed at streamlining compliance and reducing litigation. The Standing Committee on Finance, in its latest report tabled in Parliament on Wednesday, flagged a 198% jump in the amount of disputed direct taxes over two years.
As per the report, appeals in direct tax cases rose from 51,567 in 2021–22 to 64,311 in 2023–24, while the disputed amount ballooned from ₹6.64 trillion to ₹14.21 trillion, marking a 198 per cent increase. At the Income Tax Appellate Authority, the contested sum almost tripled in one year — from ₹2.89 trillion in 2022–23 to ₹8.56 trillion in 2023–24.
In indirect taxes, the number of cases went up from 1.13 lakh to 1.26 lakh, and the value involved more than doubled to ₹7.4 trillion during the same period.
“Considering this data, it seems that the various measures taken by the Government to reduce tax litigation have not yielded the desired results so far….. The Committee feel that it is imperative to further enhance the focus on tax dispute redressal mechanisms and take additional measures in this regard,” the report said. It highlighted that no assessment of the best practices by different countries for mitigating tax dispute burdens has been undertaken by CBDT.
The Committee also took note of the “slow pace of disposal of cases related to the Prevention of Money Laundering Act (PMLA),” pointing out that “only 45 cases have been disposed of so far” since the law came into force.
Alongside rising litigation, the Committee raised concerns over the significant staff shortages in both the Central Board of Direct Taxes (CBDT) and the Central Board of Indirect Taxes and Customs (CBIC).
“For instance, in CBIC, against a total of 36,859 vacancies, only 4,653 officers were recruited in 2024 and 8,912 vacancies have been reported to SSC for future recruitment. This still leaves a substantial gap in sanctioned versus working strength, particularly at the crucial Inspector level which perpetuates a substantial impediment to the efficacy of field enforcement and seamless delivery of taxpayer services,” the report stated.
The committee noted that there are considerable numbers of vacancies in both CBDT and CBIC. In some posts, there are 100% vacancies. Even for the crucial post of Inspector of Central Excise, there are 7,744 vacancies. Such vacancies may be hampering the smooth functioning of the organizations and providing optimum services to the taxpayers.
The Committee flagged persistent challenges in tackling GST evasion and fake invoicing, despite the deployment of advanced analytics and AI-based tools.
There were 12,574 GST evasion cases in 2021-22, which increased to 20,582 in 2023-24. Similarly, fraudulent ITC cases rose from 5,966 in 2021-22 to 9,190 in 2023-24. During the study visit of the Committee to Chennai and Mumbai, in Nov 2024, it emerged that fraudulent ITC cases are a significant challenge in GST, requiring urgent attention to curb it,” the report stated.
