The pandemic did hit the Pause button for all the commercial activities. Slowdown of entire economy is having its impact leading to occurrence of various events which lack any precedence in the recent past. However, with Unlock 1, there has been a resumption of commercial activities in a phased manner, it is important for the businesses to understand the various compliances more specifically the ones that become due in the month of June 2020. In this article, an attempt has been made to compile all such compliances at one place and provide inputs on key issues/ challenges faced in this regard.
|Tax period||Statutory Due Date||Relaxed Date||Conditions|
|Filing of Form GSTR 1|
|March, April and May 20/ and Quarter ending March 20||11.04.2020
|30.06.2020||No late fees payable if return filed by Relaxed Date i.e. 30th June 2020.
Our Comment: Full late fees for entire period (from statutory due date till the date of filing) would be applicable, if the return is filed after the said relaxed date.
|Filing of Form GSTR 3B having aggregate Turnover
more than 5 Cr
|24.06.2020||If return is filed within 15 days from original statutory due date then no interest shall be payable.
If return is filed by 24.06.2020 then interest at the rate of 9% p.a. shall be payable from said 16th day till the date of filing return. No late fee if filed within relaxed date.
Our Comments: If filed beyond relaxed date, then interest @18% p.a. shall be payable from the original statutory date.
If filed beyond relaxed date late fees would be levied from the original statutory date.
E.g., If return for the month of March 20 is filed on 03.05 no interest, if filed on 20.05, interest @9% from 5th to 20th would be leviable. Further if filed on 30.06. interest @18% from 20.04 to 30.06 i.e., no benefit of reduced interest.
|May-20||20.06.2020||27.06.2020||If filed beyond relaxed date interest @18% p.a. shall be payable from the original statutory date.
If filed beyond relaxed date late fees would be levied from the original statutory date.
|Filing of Form GSTR 3B having aggregate Turnover more than
1.5 Cr but less than 5 Cr
|Feb-20 and Mar-20||22.03.2020
|29.06.2020||No interest & late fee if filed till relaxed date. However, 9% interest would be leviable if filed beyond relaxed date till 30.09.2020.
Our Comments: Press release is silent on the levy of late fee after relaxed date till 30.09.2020.
|Filing of Form GSTR 3B having aggregate Turnover less than 1.5 Cr|
|Filing of Form GSTR 3B having aggregate Turnover less than 5 Cr
(including less than 1.5 Cr)
|May-20||20.06.2020||Sept’20 (staggered dates to be notified)||No interest & late fee if filed till relaxed date.|
|Form GSTR 4 and CMP 08 for Composition Taxpayers|
|FY 19-20||30.04.2020||15.07.2020||No interest or late fee if filed till the relaxed dates|
|Quarter ending March’20||18.04.2020||07.07.2020|
|Filing of ISD return, TDS return and Form ITC-04|
|Mar-20 to May-20||13th day of following month||30.06.2020||Vide Notification number 35/2020, Where due date of compliance falls during the period from 20.03.2020 to 29.06.2020 is extended till 30.06.2020|
|Mar-20 to May-20||10th day of following month|
|Jan-20 to Mar-20||25.04.2020|
|Form GSTR 9 & GSTR 9C|
|FY 18-19||30.06.2020||30.09.2020||Registered persons having aggregate turnover for more than Rs. 2 Crores are required to file annual returns in Form GSTR 9. Further, registered persons having aggregate turnover of more than Rs. 5 Crores are required to file reconciliation statement duly certified in Form GSTR 9C.|
Initially, vide Notification No. 35/2020 CT dated 03.04.2020, department had extended the validity of those e-way bills, expiry date of which was falling during the period 20th day of March 2020 to 15th April 2020. Now, by way of a further amendment, the validity of those e-way bills which were generated on or before the 24th day of March 2020 and the validity of which has been expired on or after 20th March 2020 has been be extended till 30th June 2020.
(i) Instead of generating a multiple fresh e-way bills for the same invoice, one must resort to this beneficial amendment wherein the time limit for the original e-way bill has been extended. However, if invoice is generated and no movement has taken place, then one may also consider the option of nullifying the invoice by issuing a credit note and issuing a fresh invoice as and when again the movement of goods is to be made in which case a fresh e-way bill has to be generated. This can also ease the working capital blockage to the extent of GST element.
(ii) One should also note that although the validity of e-way bill has been legally extended, the e-way bill portal is not updated with such amendment. Therefore, although legally the expiry of certain e-way bills stand extended, the status of such e-way bills on the portal still appear as ‘valid till original expiry date as per provisions’ instead of ‘valid till extended date’. In such a case, it is advisable to carry copy of the updated Notification No 35/2020 to avoid unnecessary delay and confusion at customer’s end.
(iii) This can lead to practical difficulties for those entities whose internal systems are aligned with the e-way bill portal and restricts the acceptance of the consignment for those e-way bills status of which is being reflected as ‘valid till original expiry date as per provisions’ instead of ‘valid till extended date’. One needs to directly log in to the e-way bill portal and cause the above changes.
Generally, an assessee is required to opt for the composition scheme at the inception of the financial year. However, due to COVID outbreak, a relaxation has been given in this regard wherein if any assessee wishes to opt for the composition scheme for FY 2020-21, then he may apply for the same prior to 30th June 2020.
(i) Composition scheme is a very good tax planning option for those assessess (where eligible) who fall in the category wherein ITC cannot be claimed against their supply or where the ITC is not substantial.
(ii) Further, tax payers in restaurant, real estate sector, etc. who cannot claim ITC on their procurements can also advise their vendors to choose composition levy in order to reduce their tax burden in the supply chain. Businesses must take action immediately since the compliance due date is kept at 30th June 2020.
An assessee making a zero-rated supply of goods or services (i.e. exports or supplies to SEZ) needs to file LUT for making such supplies without the payment of tax. It needs to be separately filed for each financial year. Presently, the LUT for FY 2020-21 has to filed within 30th June 2020.
(i) Taxpayer can make the supply without payment of taxes under LUT during the Q1 of FY 20-21, with the condition of filing LUT on or before 30.06.2020. Taxpayers may quote the reference no. of the LUT for the year 2019-20 in the relevant documents. Refund claim applied by the registered person for Q1 will not be affected even if LUT for FY 20-21 filed within 30th
(ii) It is pertinent to note that if such LUT is not applied for prior to June 30, 2020, then the taxpayer can face issues in claiming the refund accumulated on account of zero-rated supplies. Therefore, this compliance must be immediately undertaken.
CBIC vide Notification No. 35/2020-CT dated 3rd April 2020, has extended the period to 30th June 2020 for compliance of any action against which the statutory date falls in the period between 20th March to 29th June 2020. Therefore, if any notice, letter or order has been served during or even prior to outbreak of the pandemic and if the compliance to give reply to the notice or filing of the appeal falls in the above stated period, then the same can be made on or before 30th June 2020.
(i) One must take abundant precaution to ensure that an appeal is filed well within the prescribed statutory period. Although law has provided additional condonable period of 30 days to the discretion of Appellate authority, however if the appeal is not filed by this additional period then the statute does not even provide power to the respective authority to entertain the appeal after the due date. In the case of Singh Enterprises versus Commissioner of C. Ex., Jamshedpur Hon’ble Apex court had settled that, beyond the condonable period, Appellate Authority cannot entertain the Appeal for whatsoever reason. To state otherwise, delay in filing appeal beyond the condonable period is as good as a dead end in the path of judicial proceedings and doors get open in very few of the exceptional cases. Therefore, it is sacrosanct to revisit the statutory deadlines to respond to Orders/Notices/ departmental correspondences.
(ii) Apart from statutory limitations, compliance in GST also faces resistance due to practical limitation. There could be various practical difficulties in filing the appeal which may consume unexpected time. Due to COVID and otherwise, the Departmental proceedings/ correspondences have heavily shifted to the electronic mode. However, the receipt of order physically or through email triggers the limited period to file the appeal but appeal against the said order can be filed via online mode only.
(iii) Despite having the physical copy or email communicated copy of the order, the appeal cannot be filed in the absence of availability of the online order on the common portal. Therefore, there are high chances to face practical difficulty in filing the appeal.
(iv) The uncertain technical glitches on portal is yet another practical challenge which may also consume a portion from the limited period of filing appeal. Therefore, considering scarce recourse available in case of lapse of condonable period along practical challenges in filing the hassle free appeal, it would be a prudent approach to take quick actions which may include the following:
√ One must make sure that the copy of Order/Notice is available online on the common portal.
√ After filing the appeal online, ensure that (Department) certified copy of the order appealed against, is submitted within 7 days of filing of appeal online.
√ In case such order is submitted after 7 days, then the date of submission of certified copy shall be considered as date of filing the appeal.
√ In case Reply/Appeal is ready but cannot be submitted for the want of signature of authorized individual then proceed to file the documents along with required declaration to that effect.
√ Build a strategy to move ahead in the litigation with the guidance of experts.
√ Prepare and file the appeal along with all the relevant supporting documents.
For uninterrupted judicial proceedings, Department has resorted to conduct personal hearing via ‘virtual’ mode. A set of common guidelines are issued in this regard vide Instruction No. F. No. 390/Misc/3/2019-JC dated 27/04/2020 to undertake personal hearing under Custom laws, Excise Laws and Service Tax laws and GST. Key aspects of the said guidelines are listed below:
(i) Consent has to be given by the party (Appellant/Respondent) regarding availment of personal hearing through video conferencing mode at the time of filing appeal/reply itself.
(ii) Authorized representative of the assessee should file his vakalatnama/ authorization letter, with copy of his photo id and contact details. The mentioned documents shall be filed before the adjudicating/appellate authority through their official email id.
(iii) Virtual hearing shall be conducted via the available applications like VIDYO or any other secured computer network.
(iv) The submissions made by the party through video conference will be reduced in writing and a statement of the same shall be prepared and shared with the party within one day of the hearing.
(v) The party (if wish to), can modify such statement received by signing the modified record and send the scanned version of duly signed copy to the respective authority.
(vi) If party do not revert with modified statement within 3 days, it shall be presumed that statements have been accepted by the party.
(vii) No modification shall be entertained after this period. To calculate 3 days, date of receipt of mail by ‘authority’ shall be excluded.
One of the major reasons for rejection of a refund application is due to filing of the said application beyond the prescribed period. In majority of the case, law provides for a time-limit of 2 years from relevant date for filing an application of refund claim. Therefore, this becomes more critical for taxpayers whose refund applications are on the verge of completion of the period of 2 years between March’ 2020 to June’2020 i.e. mainly where the refund claim pertain to the tax period of Feb’2018, Mar’2018, Apr’2018 and May’2018. It is important for such taxpayers to immediately assess the eligibility of the refund, make a computation of the amount of eligible refund and file an application in this regard prior to June 30, 2020.
(i) Although it is prescribed that refund applications should be disposed of within 15 days, however at ground level the situation is different because of various reasons. It is thus advisable to reduce the unwarranted gap to the extent possible due to the reasons which are under control of the assessee. One such major reason is lack of preparation and filing of refund application without complete documents. Refund application should be filed only after collating all the required documents to reduce the correspondences against obvious deficiency memos.
(ii) Another blow to the justice process is the passing of unwarranted ex-parte orders without providing of an opportunity of being heard (not even by way of a video conferencing) which is being resorted more popularly by the errant officers especially during this lockdown more specially in cases of refund applications.
(iii) It is noteworthy that vide Instruction No. 2/1/2020-GST, Department has instructed the field officer to sanction the refund claim immediately considering the COVID pandemic, even though prescribed period as per GST law is 60 days. It is specifically instructed that law, does not mandate physical submission of documents and any such practice should be avoided.
(iv) While Refund amounting to Rs 11,052/- Cr has been sanctioned during the period 8th April to 24th May 2020, however this is not even near to what could have been granted. The reality remains that it is not the law but the people implementing the law must change to make it a good and simple tax.
The assessee who has applied under the SVLDRS, 2019 and who has been issued with the Form SVLDRS 3 needs to make the payment before 30th June 2020 as specified in Notification No. 01/2020 CE (N.T.) dated 14.05.2020 in order to get the discharge certificate under the said scheme.
(i) If a person who has applied under SVLDRS amnesty scheme fails to make the payment within stipulated time they would not be issued with the discharge certificate which would results in opting out from the said scheme and the original demand, order would get reinstated along with the applicable interest and penalties. Therefore, it is very important for the taxpayers to make the balance payments pending as per Form SVLDRS 3 and obtain a discharge certificate prior to June 30, 2020.
CBIC vide Notification No. 30/2020-CT dated 3rd April 2020, provided that the restriction of ITC on invoices not appearing in GSTR 2A to the extent of 10% of eligible ITC appearing in GSTR 2A shall now apply cumulatively for the period Feb ‘20 to Aug ‘20 & the return in form GSTR 3B for the tax period Sept’20 shall be furnished with cumulative adjustment of input tax credit for the said months. Basically, it means that the assessee needs to perform the activity of the reconciliation of credits with the books cumulatively for the period Feb’20 to Aug’20 and the compliance towards the same needs to be performed while filing the form GSTR 3B for the month of Sept’20.
(i) This amendment is a big relaxation and it interalia means that the assessee can claim the ITC on the basis of invoices in compliance with the conditions as specified in Section 16 of CGST Act 2017 for the return to be filed for the months from Feb’20 to Aug’20. However, the cumulative adjustment for reflection of ITC in GSTR 2A can be done at the time of filing the return for the month of Sept’20.
(ii) In case ITC is claimed but not reflected in GSTR 2A till the due date of filing the return for September, then excess ITC shall be reversed. However, question may arise on the applicability of interest on such reversal. In case ITC is required to be reversed, then interest liability might be attracted in such case for the reason that extension of time limit for certain compliance as notified in Notification No. 35/2020 is not applicable on the provisions of section 50, i.e. interest on late payment of taxes. Therefore, reversal of ITC which substantiates excess claim of ITC can attract interest liability.
(iii) However, another school of thought advocates that when on one hand Department has relaxed and waived the interest and late fees for late payment of taxes and belated filing of returns respectively, then on the other hand Department cannot fasten the interest liability which is directly linked to the cause of action of belated filing of returns i.e. other side of the coin.
(iv) Department has not provided with any mechanism wherein an individual could abide by the said provision in spite of supplier filing the returns by the relaxed dates. Reference is drawn to the decision of Hon’ble Delhi High Court in case of Arise India Ltd. [2017 (10) TMI 1020]. In the said case dealer failed to deposit the VAT collected from the assessee. The High Court held that Section 9(2)(g) of the DVAT Act infringed Article 14 of the Constitution of India between bona fide purchasing dealers & those dealers who are not so. The HC made it clear that the VAT officer could not have penalize a bona fide purchasing dealer, for the failure of a selling dealer to submit the requisite records proving the genuineness of the transaction.
(v) Considering the same if interest liability is triggered, then it would be expecting impossible from the assessee and also it would virtually make all the extensions in respect of filing of returns redundant from buyers’ perspective.
(vi) Further, although provision of Rule 36(4) has been relaxed but time to time reconciliation of ITC and its corresponding reflection in GSTR 2A should be done. This is important to identify the compliant and non-compliant vendors. Accordingly, appropriate follow ups could be initiated against the flagged vendors.
(vii) We have discussed the scenario wherein ITC reflected in GSTR 2A is less than compared to books of accounts. However, practically the inverse position could also appear. In case credit is more in 2A and less in books, then there could be high chances of ITC missed to be accounted for. The reconciliation mentioned at (iv) above would also identify those vendors/invoices whose credit is reflected in GSTR 2A but missed to be accounted for. However, if any excess ITC is reflected against which invoices are not in possession or other conditions of Section 16 are not met with, then such credit cannot be claimed merely on the basis that they are reflected in GSTR 2A. To avail such eligible ITC one should follow up with the vendor and get the copy of invoice under the cover of which one can avail the ITC.
(viii) Further in absence of Original invoice, even scan copy of the original invoice could sufficient condition for claiming ITC. However, in order to file the returns for the period Feb’20 to May’20, accounting in respect of same has to be concluded at earliest. Only after the accounting one could derive respective amount of ITC.
Recently, Hon’ble Delhi High court in the case of Brand Equity Pvt. Ltd held that CENVAT credit which stood accrued and vested is the property of the assessee and constitutional right which cannot be taken away by the legislation by framing rules without any overarching provision in the GST Act. The Court has directed the respondents to “publicize this judgment widely including by way of publishing the same on their website so that others who may not have been able to file TRAN-1 till date are permitted to do so on or before 30.06.2020”.
(i) The important observations made by Hon’ble court are as follows:
It is also noteworthy that similar judgement for allowing filing of TRAN return till 30.06.2020 has been passed by Hon’ble Kolkata High Court in case of SMVD Polypack Ltd.
(ii) However, after the said judgement in case of Brand Equity (supra) a retrospective amendment to section 140 of CGST Act has been notified vide Notification No. 43/2020 CT dated 16.05.2020. Section 128 of Finance Act, 2020 amends the said section 140, ibid to insert the words ‘within such time’ (w.e.f. 01.07.2017).
(iii) The consequence of the amendment is that the Government has the power to prescribe the time limit for claiming Transitional Credit through the rules. Earlier such delegation to prescribe rules was missing in the Parent Statute (CGST Act, 2017) as observed by courts in various judgements including Brand Equity (supra) as mentioned above.
(iv) However, it must be noted that despite the above retrospective amendment, the transitional credit cannot be denied as it is a vested right which is already accrued to the assessee. Most important, even if the time-limit as provided I the rules is considered i.e. 180 days from the date of implementation of the GST law, it can be clearly noted that the said time was not made available practically in as much as that the portal itself to avail the transitional credits commenced functioning in mid of September 2017.
(v) Therefore, taxpayers can consider the above order to avail transitional credit before 30th June 2020.
It is very much possible in the current scenario that the vendor payments be substantially delayed. In this regard, second proviso to sec 16(2) of CGST Act, 2017, if a registered person fails to pay to the vendor within 180 days from the date of issuance of the invoice, then he needs to reverse the ITC with condition of reclaiming only once payment is made. Relaxation is duly provided in the Notification No. 35/2020-CT wherein it is stated that the compliances in this regard can be done by June 30, 2020.
(i) Such relaxation would be relevant only if 180th day falls between 20th March to 29th June and in such a case reversal would be required to be done on 30th June 2020. However, if the said 180th day falls on any other date then no relaxation would be applicable, and reversal ought to be done on the said date only.
(ii) It is pertinent to note that the question of reversal comes only if there is a failure to payment within 180 days. Therefore, if the terms of payment as agreed with the vendor is itself beyond 180 days or if the same is renegotiated considering the current pandemic to be beyond 180 days, then there cannot be the question of reversal of ITC as there is no failure of payment in the first place. This requires assesses to relook at the terms of the agreement and proactively communicate with the vendors to take suitable action.
(iii) As stated above, provisions of section 50 are not subject to the relaxation provided vide Notification No. 35/2020. Therefore, if reversal is done at anytime after the lapse of the said period of 180 then interest liability can trigger. However, one should also consider that interest cannot be demanded unless the tax amount was due and payable. In this context, reference can be made to the landmark judgement of Hon’ble Apex Court in case of Pratibha Processors V/s UOI [1996 (11) SCC 101] wherein it was held that ‘Interest is compensatory character and is imposed on an assessee who has withheld payment of any tax as and when it is due and payable.
(iv) The levy of interest is geared to actual tax withheld and the extent of delay in paying the tax on the due date.’ Thus, if one considers the relaxation in extension of the said compliance as extension of tax liability itself, then interest liability may be defended in such a case.
One of the prominent compliances to be done in GST is in case where any common credit is availed by the assesse which is used for effecting both taxable and also exempt supplies. In such case, the input tax credit on inputs and input services is liable to be reversed provisionally on a monthly in proportion to the exempt supply and the final adjustment for the same must be again carried out in the subsequent financial year and the same would be liable for interest in case the reversal excess reversal, if any based on the yearly adjustment is not done by 1st April of the subsequent financial year.
(i) It is important to note that in case of annual reversal of the credit for FY 19-20, there exists two school of thoughts. The first which advocates payment of interest w.e.f. 1st April relying on the sub-rule(2)(a) to Rule 42. The said rule explicitly provides that reversal can be done in the month not later than September of the following financial year and such reversal shall be liable for interest from the 1st day of April 2020. Further, this would not get covered with the ambit of relaxation granted by way of Notification 35/2020 since the exception is not provided to cover section 50 i.e. Interest and thus wherever interest is applicable the benefit would not be available.
(ii) another school of thought runs in a manner that the relaxation as provided vide Notification No. 35/2020 covers any action of compliance and takes within its ambit the action of reversal of credit which fall due within the period 20th March 2020 to 29th June 2020 and that the reversal itself is to be carried out by June 30, 2020, thereby leading to no interest implication till June 30, 2020. The second school of thought is also substantiated with the fact that the exceptions provided to the applicability of said notification does not cover the mother section 17, against which Rule 42 is prescribed.
(iii) In this regard it is noteworthy that Rule 42 itself prescribes the interest application on such reversal. The said rule borrows only the rate of interest from section 50 and not the entire provisions of section 50. However, one needs to take the call considering the amount of interest involved vis-à-vis practical challenges as the law explicitly provides for calculating the interest w.e.f. 1st
As per sec 17(5)(h) of CGST Act, 2017 input tax credit shall not be available in respect of goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples. Due to unprecedented national level lockdown, the FMCG sector has been hit by loss of perishable goods due to small shelf life. The loss might have an additional baggage followed by it, which is reversal of credit on account of destruction of the goods as provided by section 17(5).
(i) Prima facie, it may appear that the provisions of the said section are attracted in such a case. However, a view may be possible that where inputs are used in manufacture of finished goods and such finished goods are destroyed before sale then the reversal of ITC availed on inputs may not be required as the inputs are used in the course of business as they have been used in the manufacture of finished goods.
(ii) Another reasoning for the same conclusion can be that, section 17(5) of CGST deals with blocked credit. The test whether or not the credit is ‘blocked’ has to be run at the time of procurement of the goods or service. To say otherwise, if at the time of procurement itself the credit has been blocked, it cannot be availed. However, in case the credit was eligible at the time of procurement and was rightly availed, then the same cannot be termed as ‘blocked’ credit when provisions of 17(5) are attracted on any later date after the procurement.
(iii) It is for this reason, section 17(5) does not provide for reversal of credit but provides for complete blockage of credit itself. Therefore, when credit was rightly claimed in case finished goods or raw material at the time of procurement, then the same cannot be termed as blocked credit when the shelf life of perishable goods get expire and the goods decay or become useless.
(iv) In this regard, provisions of Schedule I are also to be considered wherein permanent transfer or disposal of business assets where input tax credit has been availed is considered as supply of goods even when consideration is not involved. However, one should consider that the said provision applies on permanent disposal of business assets and not on business expenses.
While unlock of the many areas have been permitted by the various government authorities from the month of June 2020 and resumption of the business operations with an intent to ease the cash flows remains to be one of the most prominent tasks in front of the businesses. While that as is so, one also needs to take cognizance to the various compliances in the tax laws that are plotted to be fulfilled in the same month of unlock i.e. June 2020. Attempt is made by way of this article to compile the key compliances in the GST law and provide critical inputs to enable the taxpayers in making an appropriate decision and a timely action for the undertaking compliances slated in the month of June 2020.
“In this world nothing can be said to be certain, except death and taxes.” – Benjamin Franklin