On 24.03.2020, the Government of India has issued order No. 40-3/2020-DM-1(A) where under strong measures have been enforced to prevent the spread of COVID-19 and a nationwide lockdown has been declared for a period of 21 days w.e.f. 25.03.2020. The entire country is under sudden lockdown from 25.03.2020 except for essential services/goods, office are not open, business are not running, people of country are forced to live inside their house due to COVID-19 pandemic.

The Central Government in this emergent situation issued an ordinance which empowers the Government to extend the time limit.The Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 issued on 31-03-2020 has inserted a new Section 168A in the CGST Act, 2017, which empowers the Government to extend the time limit, in respect of actions which could not be completed due to force majeure, namely, war, epidemic, flood, drought, etc. or any other calamity caused by nature affecting the implementations of provisions of CGST Act, 2017.

Section 168A of CGST Act 2017

(1) Not with standing anything contained in this Act, the Government may, on the recommendations of the Council, by notification, extend the time limit specified in, or prescribed or notified under, this Act in respect of actions which cannot be completed or complied with due to force majeure.

(2) The power to issue notification under sub-section (1) shall include the power to give retrospective effect to such notification from a date not earlier than the date of commencement of this Act.

Explanation.- For the purposes of this section, the expression “force majeure” means a case of war, epidemic, flood, drought, fire, cyclone, earthquake or any other calamity caused by nature or otherwise affecting the implementation of any of the provisions of this Act.

Further, the Govt of India in exercise of the powers under section 168A issued a notification no 35/2020-CT dated 03.04.2020 wherein in view of the spread of pandemic COVID-19 across many countries of the world including India, the Government, on the recommendations of the Council, extended the time limit for various compliance under CGST Act, which falls during the period from the 20th day of March, 2020 to the 29th day of June, 2020, and where completion or compliance of such action has not been made within such time,upto the 30th day of June, 2020.

Further under the notification no 35/2020-Central Tax dated 03.04.2020, there are few sections and rules there under which are covered under exceptions to this blanket extension of time for the compliances of the CGST Act. One of the sections covered under exception is section 31 of CGST Act 2017 and rules made under the section 31. Rule 46 and Rule 47 of CGST Rules 2017 are in relation to Section 31.

As per the section 31(2) of CGST Act

A registered person supplying taxable services shall, before or after the provision of service but within a prescribed period, issue a tax invoice, showing the description, value, tax charged thereon and such other particulars as may be prescribed…..

Further Rule 47 of CGST Act 2017 provide for Time limit for issuing tax invoice.-

The invoice referred to in rule 46, in the case of the taxable supply of services, shall be issued within a period of thirty days from the date of the supply of service:

Therefore as per above mentioned section 31(2) read with rule 47, in case of services a registered person supplying taxable services shall issue invoice within a period of thirty days from the date of the supply of service.

Since more than 50% of GDP in India comes from services sector, there are service industry wherein billing is done on periodic basis i.e. monthly/quarterly like in case of retainers, professionals, advertisers, advisors, renting of immoveable property, royalty, hiring of equipment, manpower supply, Real Estate wherein demand is raised on periodic basis. But due to the spread of pandemic COVID-19 and sudden lockdown announced by the Govt ofIndia,the situation is beyond control of these service provider sexcept for essential services/goods shops, offices, warehouses, restaurants, public & private transport all are closed. Therefore during lockdown, service providers as well as services receivers both are out of operations. Hence periodic billing cannot be done on time and if the actual billing date exceeds 30 days from the date provision of service, section 31 read with rule 47 (which is thirty days from the date of the supply of service) shall not be complied with.

Further section 13 of CGST Act provides how to determine the time of supply for payment of tax liability in case of services.

Section 13 Time of Supply

(1) The liability to pay tax on services shall arise at the time of supply, as determined in accordance with the provisions of this section.

(2) The time of supply of services shall be the earliest of the following dates, namely:-

(a) the date of issue of invoice by the supplier, if the invoice is issued within the period prescribed under section 31 or the date of receipt of payment, whichever is earlier; or

(b) the date of provision of service, if the invoice is not issued within the period prescribed under section 31 or the date of receipt of payment, whichever is earlier; or

(c) the date on which the recipient shows the receipt of services in his books of account, in a case where the provisions of clause (a) or clause (b) do not apply:

As per the above mentioned clause (b) of sub-section (2) of section 13 of CGST Act 2017,

The time of supply of services shall be the earliest of:

i. the date of provision of service, if the invoice is not issued within the period prescribed under section 31 or

ii. the date of receipt of payment,

Now as mentioned above those numerous services providers, whose terms of the agreement provide for the billing on periodic basisand due to the pandemic COVID-19 lockdown,are not in a position to raise invoices as per the term of the agreement and the actual billing date exceeds 30 days from the date provision of service,would not be able to comply with the section 31 read with Rule 47. Since the invoices are not issued within the period prescribed under section 31,time of supply provision u/s 13(2)(b) shall apply and accordingly the time of supply for payment of tax liability shall be the date of provision of service and not the date of issuing invoices.

This denial of extension of time for raising invoices may lead to enormous hardship for the service industry. It will lead to legal repercussion and also open Pandora box for future litigation.

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