J V Kodhandapani, FCA & Venkatesh K Pani, BA LLB Hons
Relief measures announced on 24th March, 2020 by Finance Minister relating to various Statutory and Compliance Matters across Sectors – Covid-19 outbreak:
The Hon Finance Minister
Ministry of Finance
Government of India
The Corona Virus (Covid-19) outbreak has impacted lives of citizens, severely impacted the trade, commerce, industry and the entire business community. The Hon Prime Minister took bold initiative and declared health emergency.
The Hon Finance Minister came forward to provide concrete reliefs, relaxation of deadlines and sops for payment of taxes, interest and penalties and waiver of late fees in filing the forms under the Companies Act, 2013. The Hon Apex Court have suo moto considered the situation and passed orders of general relieves and relaxations under Article 141 and 142 of the Constitution.
To address some of the key issues, Hon’ble Union Finance and Corporate Affairs Minister announced several important relief measures, especially on statutory and regulatory compliance matters related to several sectors, in areas of Income Tax, GST, Customs & Central Excise, Corporate Affairs, Insolvency & Bankruptcy Code (IBC) Fisheries, Banking Sector and Commerce in view of COVID-19 outbreak.
On overall observance of the reliefs and measures, the steps are more in terms of statutory compliances, extending the due dates, lowering the penal interest rates and minimising the filing works. The corporates, business community and the country men are all affected, no exception to any one, need bold and concrete steps and substantial and concrete reliefs which are suggested in the following manner.
Following are the decisions of the FM on statutory and regulatory compliance matters related to various sectors:
1.0 Income Tax
Extension of the last date for income tax returns for (FY 18-19) from 31 March, 2020 to 30 June, 2020.
However, there is no waiver of interest us 234A, B & C and late filing for late filing fee u/s 234E and waiver of various penal provisions under the Income tax Act.
2.0 Vivad se Vishwas scheme – no additional 10% amount, if payment made by June 30, 2020.
2.1 There is no clarity whether the declarations can be filed till 30-6-2020 or 31st March 2020 is still the last date. Given the situation of complete lock down the very due date needs to be extended for the purpose of filing the declaration.
2.2 The Government only clarified waiver of 10% extra amount if paid after 31-3-2020 but before the last date.
2.3 Government also did not enable the tax payers to get soft funding from the banks and financial institutions at minimum lending rate to enable the applicants to pay and discharge the tax arrears in dispute.
2.4 Government could have enabled such facility of funding from the banks and financial institutions so that Vivad se Vishwas Scheme could have been successful both in terms of the number of applicants and the revenue collection.
2.5 For a period of three months, the government expected that the taxpayers to pay 10% extra which works out to 40 % per annum whereas if funded by the banks and financial institutions the rate of interest could have been below 12% per annum. For example, if an assessee had to pay tax arrear of Rs. 1,00,000/-, 10% of such amount is Rs. 10,000/-. If borrowed from the banks, the cost of borrowal is at 12% pa for three months i.e. Rs. 3,000/-.
2.6 What is lacking in the hands of businessman is the liquidity to pay tax and survival given the effect of COVID 19 virus rather than willingness given the advantages of Vivad se Vishwas Scheme for waiver of interest and penalties.
3.0 EXTENSION OF DUE DATES
3.1 Relief given – Due dates for issue of notice, intimation, notification, approval order, sanction order, filing of appeal, furnishing of return, 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 Property Transaction Act, Black Money Act, STT law, CTT Law, Equalization Levy law, Vivad Se Vishwas law where the time limit is expiring between 20 March 2020 to 29 June 2020 shall be extended to 30th June 2020.
3.2 The Hon’ble Finance Minister, being aware of the effect of COVID 19 virus on the business community and the taxpayers, having extended the due dates in para 3 under various statutes to 30/06/2020 is suggested to extend the due dates to file the returns of income for the assessment year 2020-21 and should make provisions in the finance bill 2020 just passed by the Lok Sabha. There are various dates for various categories of assessees for various purposes which need to be deferred or by another 3 months well in advance. This is so in view of the Government staff and also the technological staff managing CPC are all supposed to be working from home than at the centres.
3.3 The assessments for assessment year 2018-19 getting time barred by September 2020 need also to be deferred to 31/03/2021 so that well planned streamlined procedure and activities could be organised by the tax officers given adequate breathing time to the assessees for getting prepared to face scrutiny assessments. Alternatively, the Hon’ble Finance Minister should scrap the entire scrutiny assessments for the assessment year 2018-19 trusting the taxpayers and business community leaving their precious time for conducting business and productive purposes as evident from the speech of the Finance Minister in bringing out the Direct Tax Vivad se Vishwas Act. This could have given a big moral and sentimental boost to the economy under the circumstances when the economy is reeling under multiple pressures.
4.0 LOWERING THE INTEREST RATES
4.1 Relief Provided- For delayed payments of advanced tax, self-assessment tax, regular tax, TDS, TCS, equalization levy, STT, CTT made between 20th March 2020 and 30 June 2020, reduced interest rate at 9% instead of 12 %/18 % per annum ( i.e. 0.75% per month instead of 1/1.5 percent per month) will be charged for this period. No late fee/penalty shall be charged for delay relating to this period.
4.2 COVID 19 virus effect was there much before 20/03/2020. Only partial lockdown or total lockdown is announced later. Whereas many operations came to standstill even earlier. The relief should have been brought from 01/03/2020 covering the due date for payment of advance tax by 15/03/2020 and GST. From the speech of relief measures, it is evident that for failure to pay advance tax by 15/03/2020, taxpayer is required to pay interest u/s 234C of the Act.
4.3 Having re-scheduled the due date to 30/06/2020 for compliance procedure in Para 3, the government should make delayed payments interest free till 30/09/2020 since the process of recovery and stabilisation of business operations could go on for some more months.
4.4 Para 5, does not cover payments due under other acts such as Provident Fund Act, ESI Act. Given the above logic, if the state governments also honour in the same manner, it is a laudable measure.
4.5 Directives under labour laws for various compliances, relaxation of penal provisions and closure of litigations and amnesty schemes are also suggested.
5.0 ADDITIONAL RELIEFS BASED ON GROUND REALITIES MAY BE PROVIDED:
5.1 CASH DELIVERY SERVICES
Cash delivery service by the banks to the senior citizens, pensioners, physically challenged and persons medically unable to visit the banks may be provided on call basis. This is for the reason that due to imposition of curfew coupled with section 144, 4 persons or more are not expected assemble at assessment year place for this reasons, there are long queues. Police also disperse the crowds assembled in more numbers. The banks also allow limited persons at assessment year time inside the bank and thus it causes difficulties for to the senior citizens, pensioners, physically challenged and persons medically unable to visit the banks and ATMs to cash cheques at times of cash requirements. It is also to be noted that the Banks provide only essential services with skeletal staff and reduced their working hours. The cash delivery services on call basis can meet their requirements for 3 weeks of lockdown.
5.2 CREDIT CARD PAYMENTS
It is expected that due to shutdown of the private, public and government offices, the payment of salaries are going to be delayed, scaled down for reasons. Most of the people have used or using the credit card, debit cards, payTM and other digital methods for purchases and daily sustenance. Under these circumstances, the limit on card purchases would have got exhausted or the payments to cards by way of cheques and cash deposits are not easily to accomplish. Given the scenario, the card issuing banks and the companies may consider enhancing the limits, not insisting for immediate payments on due dates, not to block the cards for non-payment and make the citizens confortable.
5.3 DEFERMENT OF EMIs, ECS DEBITS
Most of the middle-class who availed housing loans, personal loans, educational loans, vehicle loans have their EMIs and ECS audit debits falling due in these months. Without regularity of salary and steady planned incomes, meeting the EMIs and ECS prove major burden. Most of the non-essential sectors have been facing disaster situation and as a result, the salary in the hands of the employees is most uncertain. It is highly important that the Government/RBI direct the, banks and NBFCs who granted such loans, may stop and defer such auto debits and also not to charge penal charges for cheque bouncing or ECS failure cases.
5.4 COERCIVE RECOVERY OF TAX DUES.
The income tax assessments for AY 2017-18 have been concluded and the demands uploaded and the officers have been taking steps for recovery of tax demands made by way of attachment of bank accounts, issuing summons and so on. With the complete lock down of establishments and the scaled down of economic activity, the Central Govt and State Government may ease the situation by deferring the payment of tax dues of Income tax, GST and other dues over the next few months.
5.5 NO SUMMONS
The tax authorities, both IT and GST may be advised not to issue summons and pressurise the business community and the tax payers in paying up the taxes due.
5.6 TAX INCENTIVES
The Government should think of incentivizing and giving sops to tax payers who are able to pay and discharge the taxes either in advance or in arrears for March 2020 and in the next immediate 3 months so as to improving the revenue collections.
5.7 INCOME TAX AND GST REFUNDS
The business community and the taxpayers have been eagerly waiting for tax refunds over the year plus. The CPC did not process the returns and issue the refund orders due to year end issues. The best the Government should do at this point of time is to process the returns and issue the long pending refunds expeditiously to meet their immediate obligations due, which includes payment of taxes.
5.8 ASSURANCE OF WAGE REIMBURSEMENTS
Due to lockdown, there are job losses and loss of earnings, causing socio, economic and financial impact, both to the employees as well as to the employers. Employees of middle income group face extreme hardship in meeting the daily and monthly challenges and commitments. Equally, the employers face challenge in not able to pay salaries without earnings and cash flows. In this situation, the government mandated that the employers shall pay wages to the employees during the temporary lockdown period. While the mandate is laudable, the practicalities at ground level are equally difficult. The rescue operations in this regard could be making employers available with the funds from possible channels such as soft bank loans so that the employers can maintain the community / society. The government should come forward and give an assurance that the employers will be reimbursed of the wages paid during the lockdown period. Such assurance should come from the government to cover at least low level to middle class income groups in the category of workers, staff which may be defined.
5.9 SHUTDOWN OF ONLINE DELIVERY E-COMMERCE PLAYERS
It is widely reported that the popular e-commerce players Flipkart, Amazon, Big Basket, have shut down the operations and the web sites are shut giving the reason that with increased volume of online purchases, the delivery boys have been risking their lives working 12 to 14 hours a day and such movements are reportedly banned by the local authorities. In the interest of well-being of the logistic boys and due to restrictions from the local authorities, the companies said to have shut down their operations and the web sites are down. Under these circumstances, the residents compelled to stay at home without groceries causes extreme hardship. The government should come out with clear assurances and make the market players operate and they be permitted to deliver the groceries with all precautions still keeping the safety of the delivery boys. Unable to get the groceries delivered at home, the residents at home are compelled to go out and wait in long queues, even defying the orders of curfew or section 144. The online purchases made for which payments were made through paytm and other facilities have started refunding due to cancellation of the orders by the e-commerce operators.
5.10 MESSAGES FROM CPC
In order to make the Vivad se Vishwas Scheme popular, the CPC has been sending the messages by mails and SMS intimating about the position of tax demands posted in the portal. The messages have been coming despite the replies given in ITBA portal that the tax payers disagree with the demand for the reasons stated. The Government may advice CPC not to send such messages at least till 30-6-2020 and direct the officials to attend to the complaints raised against wrong/disputed demands posted.
5.11 MISMATCH NOTICES AND TRANSFER OF FILES TO THE AOs BY THE CPC
Of late, assessees have been receiving mails from the CPC for transfer of files to the AOs concerned for carrying out rectifications, assessments etc even in respect of 3 to 4 previous years for no reasons stated. It implies that the CPC is unable to process the files electronically, however making it compulsory that the Assessing Officers should carry out corrections for which the attendance of the taxpayer or the authorised agent is necessary. Even otherwise, the AOs should keep sending electronic notices and the taxpayer have to keep responding to such notices. The CPC is unable to carry out such corrections for the reasons unknown despite e-proceedings facility available.
CPC is also sending quite a few intimations about mismatches proposing to make adjustments u/s 143(1)(a) and the portal is kept open only for two weeks. Under these circumstances of lockdown, the time for reply should be kept open for longer period else, the mismatches are converted into intimations followed by demands for which there is no other reason except going for an appeal which is an avoidable hardship to the taxpayer. It was also noticed that many of the mismatches reported by the CPC did not have any substance.
5.12 REDUCTION OF MANPOWER IN DIGITAL SUPPORT SERVICES
The telecom operators, banks issuing credit cards, insurance companies, DTH, customer care services have been sending messages to the customers prompting that online customer support services could face challenges and services are limited to emergencies only due to reduction of manpower and further prompted the customers that the staff working in shops/offices are lowered as a preventive measure for public safety. This implies scaling down of business support services.
5.13 CSR EXPENDITURE – INTERPLAY WITH INCOME TAX
The Ministry of Company Affairs in general circular 10/2020 dated 23/03/2020 included expenditure on COVID 19 as a part off CSR expenditure. The notification does not specify the ways and means and methods of incurring expenditure namely direct v. indirect ways of supporting.
The government should incentivise more corporates coming forward and spending on COVID 19 projects by way of allowing the CSR expenditure under Income Tax Law as permissible deduction. Presently the expenditure on CSR is not allowed as a deduction which is a dis-incentive. Given the present magnitude of the impact of COVID 19, the government should provide for weighted deduction, both under Income Tax Law as well as under Company Law so that more corporates come forward and support the government initiative in mitigating the hardship.
5.14 PENALTY PROVISIONS
The Income Tax Act contains various penal provisions for non-payment of taxes, TDS, disallowance of dues to be paid to the government such as 43B, 36(i)(v) besides levy of interest. The government should take note of the difficulties of the business people and relax such penal provisions and give way for reliefs.
5.15 DIRECTIVES TO ESSENTIAL SERVICE PROVIDERS AND CORPORATES
The corporates providing consumer services such as DTH, telephones, internet, credit cards, debit cards, paytm, ATM Cards, electric supply, water supply and all agencies providing essential services to keep the connections live, not to disconnect the services for non-payment of the bills during the lockdown period and ensure uninterrupted supply of services and facilities to the countrymen and the cards are not blocked for non payment. This initiative can either come from the corporates or agencies on their own or the government should intervene. Personal loans given by Financial Companies should not harass for non-payment of EMIs during this period.
5.16 INCENTIVE PACKAGES TO COVID-19 SUPPORTING ACTIVITIES
The countrymen have taken note of the extensive support being provided by healthcare employees and the related supporting sectors and the Prime Minister joined the countrymen in thanking the healthcare employees for risking their lives to save lives of others. This gratitude must be shown in different ways also by way of allowing weighted deductions, bank funding options, scrutiny less assessments, free from all penalties under the Tax Laws etc.
The government needs to announce support packages to Covid-19 sectors. Otherwise the panic and lock-down due to virus may lead to collapse of many essential sectors (for say, aviation sector, cab operators, e-commerce operators, restaurants, hotel, delivery chains) and ultimately giving a dent on the economy in the form of loss to revenue, unemployment etc.
5.17 DIRECTIVE TO HEALTH INSURANCE COMPANIES.
The government should give directives to the Health Insurance companies who provided insurance policies to cover the COVID affected patients including home guarantied persons to reimburse the full cost of treatment even if not admitted in a hospital.
5.18 LOSS OF EMPLOYMENTS.
The lock-down may lead to mass retrenchments and closures for survival of MSMEs particularly. The government should step in to ensure that employments and social securities are protected keeping note of citizens sentiments.
5.19 EDUCATION SECTOR
All the schools, colleges and universities shall not close the admissions for the next academic year till such time of lifting the lock down and further should extend the due dates for payment of school and college fees and also provide instalment facility for payment of next year fees, than payment in one lumpsum, which most of the institutions have been doing.
5.19 COORDINATED EFFORTS
Both Central and State Governments may work hand in hand and give directions for local authorities, RWAs, Local associations, to keep the environment clean and hygienic, reduce the manual scavengers, employ the machinery in cleaning the roads, sanitise the places, use disinfections, provide clean drinking water, provide and distribute groceries and rope in NGOs, Corporates, volunteers to minimise the impact of COVID-19.