THE CORONA PANDEMIC, ITS IMPACT ON INDIAN ECONOMY AND RELIEFS GIVEN BY GOVERNMENT, RESERVE BANK OF INDIA AND RELAXATIONS IN INCOME TAX, GOODS AND SERVICE TAX AND CORPORATE AFFAIRS
THE CORONA PANDEMIC:
- The corona virus disease (COVID-19) is an infectious disease caused by a virus previously not identified in humans. The symptoms of the disease include runny nose, sore throat, cough, fever and in severe cases, pneumonia.
- The virus spreads primarily through contact with an infected person when they cough or sneeze or through droplets of saliva or through discharge from the nose.
- A pneumonia of unknown cause detected in Wuhan, China 31st December, 2019 was the first reported case of the disease.
- The disease has rapidly spread to other parts of globe and was declared a public health Emergency of International Concern on 30th January, 2020 by WHO.
- With near about 42.19 lakhs reported cases of the infection and more than 2.84 Lakhs deaths across the globe till date, the disease has brought the entire globe to an halt thereby adversely affecting the economies.
IMPACT OF COVID-19 OUTBREAK ON INDIAN ECONOMY:
- The Indian economy just like other economies in the world is badly effected by the outbreak of COVID-19. Though the Indian economy is not expected to slip into recession like most other countries, the Indian GDP growth rate is expected to show severe decline.
- Amidst the ‘Great Lockdown’ as it is named by the IMF’s Economic Chancellor estimating the cumulative loss to global GDP over 2020 and 2021 at around 9 trillion US dollars, the Indian Economy is projected to be among the handful of countries to cling on tenuously to positive growth.
- Many International rating agencies have decreased the GDP growth forecast by more than 50% which shows the serious impact that the pandemic can have on the Indian Economy.
- The Stock Markets have shown decline by more than 30% after the Corona Outbreak started hitting the country.
- The Corona pandemic may cost as high as Rs. 10,00,000 Crores to the Indian Economy as per HDFC Bank Report.
- If the United Nations reports are to be believed, the global economy will slip into recession with likely exceptions of India and China which somehow gives a ray of hope for speedy revival of the economy.
- Considering the huge burden that the economy will have to bear due to lockdown the Government, Reserve Bank of India, Income tax Department, GST department and Ministry of Corporate Affairs have stepped forward and taken few measures to ease the pressure.
RELIEF MEASURES BY GOVERNMENT OF INDIA:
- In order to help the poor out in this difficult times Union Finance Minister Nirmala Sitharaman announced a relief package of Rs. 1,70,000 Crores which focuses mainly on Migrant Workers and daily wage labourers.
- Rs. 50 lakhs Insurance cover was announced for all front line medical officers.
- Near about 80 Crores families in the country to be covered under the Pradhan Mantri Gareeb Kalyan Ann Yojana and to be given free 5Kgs Rice/ Wheat and 1 Kg pulses for three months.
- 8.69 Crores Farmers to be directly benefitted through Cash Transfers under Krishi Samman Nidhi.
- Wages under MNREGA also to be increased by Rs. 2000 per worker on an average to help meet their daily needs.
- Senior Citizens, persons with disability and widows to get one time additional amount of Rs. 1000 in two installments over a period of 3 months.
- A compensation of Rs. 500 per month to be given to Jan Dhan Account Holder Women over period of next three months.
- BPL Families to get free cylinders under the Ujjwala Scheme.
- Collateral Free Loans doubled to Rs. 20 Lakhs to Women Self Help Groups under the Deen Dayal National Livelihood Mission.
- The government will also bear the cost of EPF contribution of both the employer and employee for 3 months for establishments having less than 100 employees and where more than 90% employees earn less than Rs. 15000 p.m.
- Rs. 31000 Crores to be utilized by states for welfare of building and construction workers for testing, screening and other healthcare facilities.
RELIEF MEASURES BY RESERVE BANK OF INDIA:
- Targeted Long Term Operations (TLTRO) 2.0 – It has been decided to conduct targeted long-term repo operations (TLTRO 2.0) for an aggregate amount of Rs. 50,000 crore. The funds availed by banks under TLTRO 2.0 should be invested in investment grade bonds, commercial paper, and non-convertible debentures of NBFCs, with at least 50 per cent of the total amount availed going to small and mid-sized NBFCs and MFIs. Notifications and guidelines will be issued shortly in this regard.
- Refinancing Facilities for All India Financial Institutions (AIFIs) – It has been decided to provide special refinance facilities for a total amount of Rs.50,000 crore to All India Finacial Institutions like NABARD, SIDBI and NHB to enable them to meet sectoral credit needs. This will comprise Rs.25,000 crore to NABARD for refinancing regional rural banks (RRBs), cooperative banks and micro finance institutions (MFIs); Rs.15,000 crore to SIDBI for on-lending/refinancing; and Rs. 10,000 crore to NHB for supporting housing finance companies (HFCs). Advances under this facility will be charged at the RBI’s policy repo rate at the time of availment.
- Reduction in Fixed Rate Reverse Repo Rate – In order to encourage banks to deploy the surplus funds in investments and loans in productive sectors of the economy, it has been decided to reduce the fixed rate reverse repo rate under the liquidity adjustment facility (LAF) by 25 basis points from 4.0 per cent to 3.75 per cent with immediate effect. The policy repo rate remains unchanged at 4.40 per cent, and the marginal standing facility rate and the Bank Rate remain unchanged at 4.65 per cent.
- Increase in Ways and Means Advances (WMA) for States – It has been decided to increase the WMA limit of states by 60 per cent over and above the level as on March 31, 2020 to provide greater comfort to the states for undertaking COVID-19 containment and mitigation efforts, and to plan their market borrowing programmes better. The increased limit will be available till September 30, 2020.
- Asset Classification – It has been decided that in respect of all accounts for which lending institutions decide to grant moratorium or deferment, and which were standard as on March 1, 2020, the 90-day NPA norm shall exclude the moratorium period, i.e., there would an asset classification standstill for all such accounts from March 1, 2020 to May 31, 2020. NBFCs, which are required to comply with Indian Accounting Standards (IndAS), may be guided by the guidelines duly approved by their boards and as per advisories of the Institute of Chartered Accountants of India (ICAI) in recognition of impairments.
- Higher Provisions to be made by Banks – With the objective of ensuring that banks maintain sufficient buffers and remain adequately provisioned to meet future challenges, they will have to maintain higher provision of 10 per cent on all such accounts under the standstill, spread over two quarters, i.e., March, 2020 and June, 2020. These provisions can be adjusted later on against the provisioning requirements for actual slippages in such accounts.
- Extension of Resolution Timeline – Recognizing the challenges to resolution of stressed assets in the current volatile environment, it has been decided that the period for resolution plan shall be extended by 90 days. Details will be spelt out in the circular.
- No Distribution of Dividend by Banks – In view of the COVID-19-related economic shock, scheduled commercial banks and cooperative banks shall not make any further dividend payouts from profits pertaining to the financial year ended March 31, 2020 until further instructions. This restriction shall be reviewed on the basis of the financial position of banks for the quarter ending September 30, 2020.
- Reduction in Liquidity Coverage Ratio (LCR) – In order to ease the liquidity position at the level of individual institutions, the LCR requirement for Scheduled Commercial Banks is being brought down from 100 per cent to 80 per cent with immediate effect. The requirement shall be gradually restored back in two phases – 90 per cent by October 1, 2020 and 100 per cent by April 1, 2021.
- Extension in DCCO allowed for NBFC to Commercial Real Estate Projects – It has been decided to extend the date for commencement for commercial operations (DCCO) in respect of loans by NBFCs to commercial real estate projects delayed for reasons beyond the control of promoters to extend an additional one year, over and above the one-year extension permitted in normal course, without treating the same as restructuring. This will provide relief to NBFCs as well as the real estate sector.
- Extension of period for realization and repatriation of Export proceeds – The time period for realization and repatriation of export proceeds for exports made upto or on July 31, 2020 has been extended from 9 months to 15 months from the date of export.
- Deferrment of Installments – Installments of all the term loans for business and individuals have been deferred by 3 months at discretion of respective banks.
- Reduction in Cash Reserve Ratio – The Cash Reserve ratio has been reduced by 1% to help banks to deal with the pressure of cash withdrawal.
- Infusion of Funds -The Reserve Bank has decided to infuse Rs. 3.74 Lakh Crores into the economy to help businesses during the lockdown period.
- Delayed repayments on term loans and Working Capital will not be classified as NPAs.
RELIEFS AND RELAXATIONS IN INCOME TAX
- The income tax department has decided to grant refunds upto Rs.5,00,000/- immediately to individuals and businesses to help reduce the cash crunch problem.
- The last date for Aadhar-Pan linking is extended from 31.03.2020 to 30.06.2020.
- The last date for belated/ revised filing of the Income Tax return for FY 2018-19 is extended from 31.03.2020 to 30.06.2020.
- The time limit to avail the Vivaad Se Vishwas Scheme has been extended upto 30.06.2020. The waiver of additional 10% tax would continue upto 30.06.2020 instead of earlier 31.03.2020.
- Interest at reduced interest rates of 9% would be levied instead of earlier 18% towards delayed payment/ deposit of advance tax, TDS, TCS, Self assessment tax, STT, CTT, equalisation levy made between 20.03.2020 to 30.06.2020. However, there is no extension of deadlines.
- Due dates for issue of notice, intimation, notification, approval order, sanction order, filling of appeal, furnishing of returns, statements, applications, reports, any other documents and time limit for completion of proceedings, by the authority and any compliance by the taxpayer including investment in saving instruments or investments for roll over benefit of capital gains under Income Tax Act, Wealth tax Act, Prohibition of Benami Transaction Act, Black Money Act, STT law, CTT Law, Equalisation Levy law, Vivaad Se Vishwas Law where the time limit is expiring between 20th March, 2020 to 29th June 2020 shall be extended to 30th June 2020.
RELIEFS AND RELAXATIONS IN GOODS AND SERVICE TAX
- Where an E-Way bill has been generated and its period of validity expires during the period 20.03.2020 to 15.04.2020, the validity period of such e-way bill shall be deemed to have been extended till 30.04.2020.
- In case of tax payers with an annual aggregate turnover of upto Rs. 5 Crores, the due dates for filing GSTR-3B for February, March have been extended upto 29.06.2020 and April 2020 till 30.06.2020. No late fee, interest or penalty shall be levied on the same.
- Where the annual aggregate turnover exceeds Rs. 5 Crores the due dates for filing GSTR-3B for February, March, April 2020 have been extended upto 24.06.2020. No late fee or penalty shall be levied. Tax payments made after 15 days will attract reduced interest rates of 9% instead of 18%.
- The last date for opting into the composition scheme for FY 2020-21 has been extended from 31.03.2020 to 30.06.2020.
- The last date to avail the Sabka Vishwas Liberalised Remittance Scheme has been extended upto 30.06.2020.
- For compliance matters involving issue of notice, notification, approval, sanction order, filing of an appeal, furnishing of a return, statements, applications, reports or any documents, the time limit has been extended from 31.03.2020 to 30.06.2020.
RELIEFS AND RELAXATIONS IN CORPORATE AFFAIRS
- Companies and LLPs are not required to pay any additional fees for any late filing of documents/ returns/statements irrespective of due dates for a moratorium period from 01.04.2020 to 30.09.2020.
- The board meetings to be conducted within an interval of 120 days has been further extended by 60 days.
- The CARO,2020 will be made applicable from FY 2020-21 instead of FY 2019-20.
- Newly incorporated companies to get additional 6 months for filing the declaration form for commencement of Business.
- The requirements of creation of deposit reserve and investment of 15% of debentures have been postponed from 30.04.2020 to 20.06.2020.
- The threshhold limit for liquidating a company has been extended from Rs. 1 Lakh to 1Crore that has defaulted its corporate debtors under section 4 of IBC,2016.
- The fight against corona is a long lasting one and main problem at present with government is facilitating the basic needs of the economically weaker sections during the period of lock down and revival.
- Also due to lock down the manufacturing and producing activities are at a halt thereby heavily affecting the supply side.
- The Measures have provided some relief to industry and the tax payers in payments and compliances.
- The Government and tax authorities are trying their best to provide as much relief to business sector as possible. However, considering the huge impact created by the massive outbreak of COVID-19 and subsequent lockdown further relief measures and support of people is required to help the economy come out of the crises.
- Proper possible compliances during this lockdown needs to be done to ensure smooth functioning of tax system in the country.
- In this period of crises, it is our collective responsibility to stand with Government and follow the instructions as and when issued. Also, its our responsibility to help in this fight in whatever way possible.
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(The author is a chartered accountant and can be reached at firstname.lastname@example.org)