Tax Relief in Times of Covid-19 – A Review of the GST Measures

Tax Relief in Times of Covid-19 – A Review of the GST Measures

Executive Summary:

• This article portrays various GST measures implemented by the Hon’ble Finance Minister to cater the taxpayers that are affected by countrywide lockdown.
• Extension of due dates to file GST returns, deferment of GST payments, waiver of interest and late fee would aid in boosting the liquidity for Micro, Small & Medium Enterprises.
• The article elaborates on GST Relief Measures, Sabka Vishwas Scheme, and Key decision in 40th GST Council Meeting.
• Some of the recent Tax Developments during COVID-19 have also been put forth including extension of amount payable under Sabka Vishwas Scheme, insertion of new Section 168A under CGST Act, 2017 empowering Central Government to extend the time limit of compliances in case of ‘force majeure’ i.e. COVID-19, and immediate grant of refund under GST laws.

Introduction

The Hon’ble Union Finance Minister had announced several relief measures to cater to the taxpayers affected by the countrywide lockdown in this pandemic situation. The Central Board of Indirect Taxes and Customs (CBIC) has also issued a set of notifications regarding the due date extensions, e-way bills and provisional ITC. Even after all these announcements and notifications, taxpayers faced a few challenges. To provide more understanding, the CBIC has issued detailed circulars about GST compliance relief measures and clarifications. The Government is considering a package that could include a six-month suspension of GST payments for the worst-hit sectors such as restaurants, aviation and hospitality as well as a lower rate for the real estate sector. Other proposals include a switch to a cash-based principle of levying tax from the current invoice-based system and providing GST relief on sales for which payment is not received due to the lockdown by treating those as bad debts.

Though there has been a demand for complete GST exemption, the government is veering around to the view that suspending the tax will work better. Thus, exempting a sector from tax would mean breaking the credit chain, leading to further problems down the line.

Goods & Services Tax (GST) Relief Measures:

• Last date to file GSTR-3B for the months of March, April and May 2020 has been extended till the last week of June, 2020. However, the following should be kept in mind:
• No interest, late fee or penalty will be charged if your aggregate turnover is less than Rs. 5 crores.
• However, interest will be charged at a reduced rate of 9% per annum (earlier 18%) from 15 days after the due date, if your aggregate turnover is more than Rs. 5 crores. Please note that no late fee or penalty will be charged in this case as well.
• Last date to opt for Composition Scheme has been extended till the last week of June, 2020.
• Last date for making payments for the quarter ending on 31st March, 2020 and that for filing returns for the FY 2019-20 for Composition dealers have been extended till the last week of June, 2020.
• Last date to file Annual GST Returns (GSTR-9, GSTR-9A, and GSTR-9C) has been extended from 30th June, 2020 till the 30th September, 2020.
• Time limit for any compliance under the GST laws, where the time limit is expiring between 20th March, 2020 to 29th June, 2020 has been extended to 30th June, 2020.
• As per the special and comprehensive economic package announced on 13th May, 2020, the last date to make payment without additional amount under the “Vivad se Vishwas Scheme” has been further extended to 31st December, 2020.
• Last date to make payment under Sabka Vishwas Scheme has been extended to 30th June, 2020. Please note that no interest will be charged for this period, if the payment is made by 30th June.
• Due date of furnishing LUT for F.Y. 2020-21 has been extended till 30th June, 2020.
• E-way bill generated up to 24th March 2020 and if its validity period expires anytime between 20th March 2020 and 15th April 2020, shall remain valid until 30th June, 2020.
• Relaxations on reconciliation obligation from February 2020 to August 2020.
• Companies are allowed to verify their GSTR-3B, filed during the period of 21.04.2020 to 30.06.2020, through Electric Verification Code (EVC) instead of Digital Signature. Earlier, companies are mandatorily required to verify their return through digital signature.
• Nil GSTR-3B shall be allowed to be filed through short messaging service (SMS) through registered mobile number. Return shall be verified through OTP received on registered mobile number. This facility shall implement from the date to be notified.

Sabka Vishwas Scheme:

• The two main components of the Scheme are –
-Dispute Resolution and

-Amnesty

• The dispute resolution component is aimed at liquidating the legacy cases of Central Excise and Service Tax that are subsumed in GST and are pending in litigation at various forums.
• The amnesty component of the Scheme offers an opportunity to the taxpayers to pay the outstanding tax and be free of any other consequence under the law.
• The most attractive aspect of the Scheme is that it provides substantial relief in the tax dues for all categories of cases as well as full waiver of interest, fine and penalty.
• As the objective of the Scheme is to free as large a segment of the taxpayers from the legacy taxes as possible, the relief given thereunder is substantial.
• The Scheme is specially tailored to free a large number of small taxpayers of their pending disputes with the tax administration.
• Government urges the taxpayers and all concerned to avail the Sabka Vishwas – Legacy Dispute Resolution Scheme, 2019 and make a new beginning.

Key Decisions – 40th GST Council Meeting:

• Reduction in late fee for past returns: GST late fee reduction for prior periods 1st July 2017 to 31st January 2020 is as follows:
-No late fee for taxpayers with nil tax liability

-Maximum late fee is Rs. 500 per return for the taxpayers who file their returns between 1st July 2020 and 30th September 2020.

• Interest Relief and Late fee waiver for periods February-July 2020:
-For small taxpayers whose aggregate turnover is up to Rs. 5 crore, the rate of interest for late furnishing of GST returns for Feb, Mar and April 2020, beyond 6th July 2020 (as per staggered dates), is being reduced from 18% to 9% p.a., for filing of returns done before 30th September 2020.

-There is no interest charge if tax for these months is paid before 6th July 2020 or date as applicable based on turnover.

-Also, for the months May, June and July 2020, the late fee and interest will be waived off; if the returns are filed before 30th September 2020 (staggered dates are yet to be announced).

• One-time extension for seeking revocation of cancellation of registration:

Taxpayers, who could not get their cancelled GST registrations restored in time, can file an application for revocation of cancellation of registration up to September 30. This applies to all cases where registrations have been cancelled till June 12.

Tax Developments in response to COVID-19:

• Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 –Amount payable under the scheme has been extended till 30 June 2020.
• Amendment to the Central Goods and Services Tax Act, 2017-New section 168A has been inserted in the Central Goods and Services Tax Act, 2017, to give powers to the central government, on the recommendation of the GST Council, to extend the time limit of compliances in case of ‘force majeure’ such as Covid-19.
  • Immediate Grant of Refund – With an objective to provide immediate relief to the businesses, the government has given directions to issue all the pending eligible refunds under both the GST and Customs law by 30 April 2020.

  Conclusion:

  While the broad based and definitive tax reliefs announced by the Government are in line with the trends seen across the globe, there is much to be desired. It is also imperative for the Government to focus on formulation of long-term strategies, specifically focusing on protecting liquidity of corporates for encouraging business continuity. This unprecedented crisis is perhaps the perfect Launchpad for implementation of GST 2.0, premised on lower GST rates, a rationalized median rate slab and widening of the tax base.

  Regards,

  Legal Team

  Proind Business Solutions Private Limited
  306, Tower B, I-thum, Plot No A-40, Sector 62, Noida, UP, India- 201301
  No.: +91 120 4224203
  Email: info@proind.in, website: www.proind.in

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