The next GST Council meeting is scheduled to be held on 12.06.2020 through video conferencing mode. This is the first meeting post COVID-19 lockdown in the Country. Though Govt. has tried to give various reliefs in the month of April & May’2020 through Ordinance, Notifications & Circulars but the same seems to be meager in the wake of wide spread impact of COVID-19 on Trade & Industry. Further the declining trend in GST revenue since last couple of months is also a big challenge before the Govt. In such a situation the Govt. will try to meet the deficit and there is an apprehension that a new cess or enhancement in existing tax rate of some non-essential items may be announced. Before moving further let’s first understand the key benefits or relief measures provided by the Govt. during this period of lockdown.
Relief given during lock down:
- Extension of due dates for filing various tax returns without late fee and on payment of concessional interest in some cases.
- Blanket Extension of all other the proceedings, due dates, time etc. falling in between the period of 20.03.2020 to 29.06.2020 upto 30.06.2020.
- Extension of timelines for expired E-way bill upto 30.06.2020.
- Allowing full claim of ITC for the period Feb’2020 to Aug’2020 without restriction of 10% limit with reference to GSTR-2A under rule 36(4).
- Extension of due dates for GST Annual return and Audit for the F.Y. 2018-19 and providing exemption from Audit to small assessees having turnover upto 5 Crore.
- Facility to file GST returns through mobile /e-mail OTP for corporate assesses and LLPs.
- Disposal and release of pending refund claims.
- Facility to export goods based on the LUT generated for F.Y.2019-20 only upto 30.06.2020.
- Facility to transfer amount from one head to another vide PMT-09.
The above relaxations are no doubt a good attempt on the part of the Govt. but the trade and Industries seems to be not satisfied with the same. The main reasons for the same are highlighted as follows:
- The lockdown was partially lifted in the Country w.e.f. 04.05.2020 only and the Govt. is expecting to pay GST for the month of March’2020 by 5th May’2020 without any interest (for taxpayers having turnover > 5 Crores).The month of April was completely under lock down so how can tax payers make payment when they have just opened their premises first time after a gap of around 43 days (10 days of March + 30 days of April + 3 days of May).The due date of filing tax returns perhaps was announced by the Govt. keeping in mind lockdown 1.0 only which subsequently got extended. Many States have chosen this lockdown till 30.06.2020. So this is one area where Trade and Industry seems to be not happy with the announcements.
- Levy of interest on non-filing of tax return beyond the stipulated /extended period is also becoming a costly affair to Trade & Industry. Most of the business houses used their funds in meeting salary and wages for the lock down period and now with the limited funds in hands they find it really difficult to manage the show. Moreover, Bank finance also attracts interest. So it is like a double edge sword disturbing a lot.
- After lockdown there will be certainly a bargaining for post sales discounts by debtors and some amount may also run into Bad debts. But till the date no guidelines are issued by the Govt. for reversal of output tax in case of such post sales discounts & Bad debts. Thus on the one hand there is a threat of non-recovery of full consideration and on the other hand they are compelled to make full GST payments on such transactions. This seems to be unreasonable and unjustifiable.
- During lock down period, there will be loss or damage of perishable goods. Further some products have tendency to damage in a closed environment. Technically, business houses are not eligible for ITC on such damaged or lost goods. Thus reversal of ITC under section 17(5)(h) on account of goods lost, damaged, destroyed or stolen during lock down is another matter of concern. No amendment in law is yet made nor any relief measure provided on account of same. So without fault (as lockdown was at the instance of Govt. only) the traders have to reverse ITC also over and above the loss of goods.
- Time of Supply provisions for issuance of invoice etc. is also creating problem inasmuch as the same is not given any extension. As a result the GST liability arises in the very next month of preparation of invoice irrespective of actual realization of the billed amount from the buyer. So in such situation there is no option but to discharge liability from one’s own pocket else bear interest and late fee burden.
- There is also confusion with regards to the fulfillment of condition of payment to vendors within 180 days from the date of invoice. Whether the lockdown period shall be excluded while calculating limit of 180 days? Though notification 35/2020 dated: 30.04.2020 has granted a blanket extension of various dates/periods/timeliness etc. due in between 20.03.2020 to 29.06.2020. But still there is confusion about this 180 days timeliness. So until and unless it is suitably clarified by the Govt. this dilemma is also adding problems.
Expectations from the next GST Council meeting:
- Complete waiver of interest on delayed payment of taxes for the period February’2020 to Sep’2020 irrespective of the class of the taxpayers and their turnover.
- Complete waiver of late fee is also expected for above referred periods.
- Facility to allow payment of tax in the Electronic credit ledger in installments without levying any interest which is presently being demanded till the date of final set off from cash ledger.
- Keeping demand and recovery proceedings in abeyance till 30.09.2020 except in some serious and exceptional cases where recovery is necessary.
- Temporary waiver of the condition of reversal of ITC on damaged goods, lost goods, stolen goods etc. u/s 17(5) of the CGST Act during the period March’2020 to June’2020 which will give some relief to the taxpayers.
- Issuing clarity on availability of ITC on masks, hand gloves, sanitizers, & other medical facilities etc. provided to the staffs during pandemic crises.
- Allowing ITC on food and beverages, transport facilities, Hiring of vehicle, mediclaim policy etc. offered to staffs and employees during pandemic period.
- Allowing reversal of output tax in case of post sales discounts and Bad debts by making suitable amendments in section 34 of the CGST Act, 2017.
- Release of Budgetary support claims on priority basis to the Industrial units and issuing necessary instructions to the States also to release the amount. Many States have chosen to defer such refund claims for 3-6 months which may be instructed to release forthwith. Otherwise it will be difficult for Industries to maintain liquidity.
- Some incentives to the badly affected sectors like Airlines, Tourism, Hotel & restaurants, Entertainment, real estate etc. in the form of allowing ITC on blocked items and some concession in the output tax as well. This will pumped up those industries with some liquidity.
- The criteria for reversal of ITC in case of non-payment of consideration within 180 days from the date of invoice u/s 16(2) should be temporarily waived. Rather it should be clarified that such condition should be considered only from the date of amount actually payable as contractually agreed between the parties.
- The 90% provisional refund as envisaged in the GST law to be released immediately to all taxable persons. Further, it is requested that instructions should be given to the officers to not insist on matching of input tax credit in view of the current pandemic where relaxation in filing of GSTR 1 has been granted to the taxable persons.
- Time limit for availing input tax credit should be relaxed by allowing claim of ITC by the due date of filing annual return for relevant FY.
- Facility of revision or rectification in GSTR returns should be introduced.
- Waiver of late fee for the Annual return filing for F.Y.2017-18 for all the assessees.
- Complete suspension of section 16(4) and rule 36(4) for last financial year as well as for the current financial year.
Fulfillment of old Promises:
- Though the Govt. has already announced in its GST Council meeting that interest on delayed payment u/s 50 will be applicable only on the net amount (after ITC) with retrospective effect. However, no suitable notification is yet issued in this respect. On the other hand Govt. is seen quite active in making the retrospective amendments to section 140 of the CGST Act by way of ordinance in respect of transitional credit claim allowed by the Delhi High Court. This amendment has nullified the argument of time limit as upheld by the Hon’ble Delhi High Court. Thus one can easily understand that when question of revenue comes Govt. is not hesitating in making retrospective amendments over night even during lockdown but when it comes to extending genuine relief to taxpayers Govt. is reluctant in issuing notification. Such an action creates mistrust and reduces mutual faith between tax payers and Govt.
- There is a general demand for waiver of late fee on non-filing GSTR 3B returns for the period from July 2017 to January 2020. The Govt. however responded to the same vide press release dated: 01.06.2020 that all decisions are taken by the Centre and the State with the approval of the GST Council. It would not be possible or desirable for the Central Government to unilaterally take a view on this issue and therefore, the trade is informed that the issue of late fee would be taken up for discussion in the next GST Council meeting. So we hope the Council will definitely come out with positive decision.
Also, the late fee already paid by the taxpayers for the above period shall be refunded which will to some extent provide liquidity in their business and will do away with the problem of discrimination in their minds.
- GST law vs. GST Portal dichotomy needs to be done away with immediately. The key areas where provision of law is something and GST portal is not working in line with law are:
- Due date for furnishing online return/form by builders for purchases from unregistered suppliers is 30th June whereas the same is not yet available on the portal
- GSTR-1 returns do not allow single credit-note against multiple invoices whereas amendment in law in this respect was done long back.
- GSTR-3B Returns does not allow disclosure of negative values leading to artificial adjustment of tax liabilities. This creates problem while filing Annual return and audit reconciliations.
- GSTR-1 returns do not allow multiple B2Cs Amendment to B2B still whereas there is no bar in law as such.
- Clarification issued stating that the taxpayer can file refund application by clubbing multiple financial years not yet functional on the portal.
- Rounding off of tax Amounts as envisaged under GST law is nearest to rupee whereas portal demanding the same upto two decimal places.
- Portal accepts interest figures under CGST and SGST with equal amount but in real life it is not necessary that the same will always be equal.
It can thus be concluded that the next GST Council meeting is very crucial from the view of the Govt. as well as stakeholders. The Govt. will try to revive economy and will take measures to augment revenue whereas stakeholders are interested in ease of doing business with less compliance and financial burden. Therefore it will be interesting to see how Govt. makes balance in between and come out with a strong plan to make the stakeholders pride again.
Note: The above write up is prepared based on the input received from trade and Industry and personal experience of the writer. The views expressed above are strictly personal views of the writer and the possibility of other views also cannot be ruled out.