The Punjab government has rolled out a new One-Time Settlement (OTS) Scheme for Recovery of Outstanding Dues, 2025, aimed at clearing thousands of pending pre-GST tax cases. If you’re a business or an individual with legacy tax dues in Punjab, this is a rare chance to settle them on highly concessional terms.
What Is the OTS Scheme?
Announced by the Punjab Cabinet under Chief Minister Bhagwant Singh Mann, the OTS scheme will run from 1 October 2025 to 31 December 2025. It covers legacy tax cases under pre-GST Acts such as the Punjab VAT Act and the Central Sales Tax Act. According to official data, around 20,000 cases with dues totaling nearly ₹11,969 crore are pending.
The government expects to recover about ₹3,344 crore through the scheme, while waiving over ₹8,400 crore in interest, penalties and portions of tax.
How the Waivers Work
Relief is offered in a tiered manner:
Up to ₹1 crore in dues
– 100% waiver of interest and penalties
– 50% waiver on tax principal
₹1 crore to ₹25 crore in dues
– 100% waiver of interest and penalties
– 25% waiver on tax principal
Above ₹25 crore in dues
– 100% waiver of interest and penalties
– 10% waiver on tax principal
Government food agencies are excluded, and only assessment orders framed by 30 September 2025 will be covered.
Why This Matters to Taxpayers
Massive cost savings: Interest and penalties are fully wiped out. Even part of the tax principal is waived.
Finality of disputes: This is positioned as the last chance. After 1 January 2026, strict recovery action will resume on unpaid dues.
Reduced legal burden: Settling now means fewer ongoing litigations, lower compliance costs and clearer financial statements.
Better business prospects: Once legacy dues are cleared, credit profiles and business contracts often improve.
Points to Consider Before Opting In
Cash flow: Even after waivers, you still need to pay the remaining tax amount within the scheme window.
Documentation: Ensure you have all assessment orders, notices and proofs ready to submit.
Eligibility: Check if your dues qualify under the covered Acts and dates.
Professional advice: A tax consultant or CA can help you calculate your potential savings and guide you through the process.
A Quick Example
Suppose a small business owes ₹80 lakh in pre-GST tax dues, of which ₹20 lakh is interest and penalty. Under the OTS scheme, the entire interest/penalty is waived and 50% of the tax is waived. The business might pay only about ₹30 lakh instead of ₹80 lakh — a huge saving.
The Bottom Line
Punjab’s OTS Scheme is a rare opportunity to wipe the slate clean on old tax disputes. For eligible taxpayers, acting within the October–December 2025 window can mean significant savings and freedom from legal uncertainty. With recovery proceedings resuming in January 2026 for non-participants, now is the time to crunch the numbers and decide.
FAQs
Q1: Who can apply under Punjab’s OTS Scheme?
Individuals, businesses, and traders with pending legacy tax dues under state taxes.
Q2: What relief does the scheme offer?
Waiver of penalties and interest, with only the principal amount payable.
Q3: How long is the scheme open?
The scheme is time-bound. Dates are announced by the Punjab government; taxpayers should apply promptly.
Q4: Does it apply to GST dues?
Typically, OTS covers pre-GST taxes like VAT and CST. GST liabilities may not be included unless specified.
Q5: How do taxpayers benefit long term?
Clearing old dues improves compliance history, reduces litigation, and boosts creditworthiness.
Published on : 25th September
Published by : SMITA
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