Aligned to measures taken by countries around the globe for countering the COVID-19 economic impact, the Indian Government last week had announced a slew of measures including some reliefs from a GSTperspective as well. The said measures essentially included extension of due dates for most GST compliances and flexibility of delayed payment of GST with/ without interest, depending on the size of business and period of delay.

Similar to the country’s approval and support for a decision on lockdown to counter this pandemic, businesses as well applauded the various relief measures announced by the Government. However, reaping of desired aids on some of these measures announced in the press briefing, was a challenge for businesses – with the predominant one being reconciliation of input tax credits. As background, the GST law currently restricts credits on undisclosed supplies to only 10% of those disclosed; entailing a requirement for businesses to reconcile the outward supplies disclosed by vendors in their GSTR-1 return and the Company’s purchase register.

Ambiguities which found a resolution soon

To recap, businesses avail input tax credit in a month (on purchases disclosed by vendors in their GSTR-1 and an additional 10%, if required for undisclosed supplies) and utilize the same for payment of GST liability; with the differential liability being paid in cash. As the Notifications allowed for filing of GSTR-1 for March to May 2020 without payment of late fee with corresponding dates for payment of taxes not being extended to provide lead time for executing the said reconciliations and availing input tax credit, businesses were apprehensive on being strained to shell out more cash to pay off the taxes due.

To address the said concern, various businesses had also reached out to their vendors for filing the GSTR-1 within the original timelines to avoid any litigation from revenue authorities on available credits or shelling out additional cash. The Government has proactively addressed the said concern, with relaxing the said reconciliation obligation for the period starting from February 2020 to August 2020; with an aggregated reconciliation being allowed for these tax periods in the month of September 2020.

This relaxation has provided the much-needed relief for businesses, who were grappling to find alternatives to this impasse for reaping the benefits of relief measures announced. However, on ground agreement to deferral of the said compliance in related matters like granting of refunds (where the said reconciliation is imperative for sanctioning refunds filed), etc would need to be seen with businesses expecting similar relaxation for related matters as well.

Another aspect which most businesses were seeking a clarity/ relaxation was on the compliances with the vehicles stranded on road due to lockdown. With E-Way Bills having expired for the movements initiated by these stranded vehicles and a reissuance/ updation not being procedurally possible, businesses were apprehensive on any adverse actions by revenue authorities. Also, there remained an ambiguity on the modus-operandi for such movements post upliftment of the lockdown. The Government has notified extension of validity for E-Way Bills expiring between 20 March and 15 April 2020 till 30 April 2020; thereby addressing the concerns of businesses on unwarranted interception of stranded vehicles and completion of journey post upliftment of lockdown.

Pending relief

A concern which still remains to be addressed is on the filing of GSTR-3B, essentially because of a sudden lockdown being announced with digital signature certificates (DSCs) not being available with them for filing of returns. To recap, currently taxes can be paid through adjustments made in the GSTR-3B return filed by businesses; the said taxes being paid either through utilization of input tax credit or in cash.

Various companies who wish to pay taxes on time/ extended time to avoid interest liabilities, have been facing a concern on adjusting the said taxes deposited – as they are unable to file the returns without DSC. Another challenge is on claiming input tax credits for the months of March, April and May without filing GSTR-3B. To recap, currently interest is only applicable on net liability i.e., tax payable in cash – after offsetting the available input tax credit. Where companies opt to belatedly file GSTR-3B returns, they are apprehensive on whether the reduced interest would apply on only the liability payable in cash with input tax credit available during the month being factored; irrespective of the same being credited to the electronic credit ledger at a later date.

One other area of concern for some businesses has been adverse/ labelled precautionary actions taken by revenue authorities for investigations underway. There have been multiple cases, where revenue authorities had blocked electronic credit ledgers of businesses with initiating investigations as a part of the anti-evasion drive; this essentially to prevent further misuse of fraudulently availed credits.

On the day of announcement of lockdown, most of these investigations were underway and have now been stalled as most lower level revenue authorities were operating on the conventional printed document model. The said has entailed such credit ledger continuing to be blocked; even while typically for genuine cases these could have been unblocked where investigations were continued. For companies which opt for paying taxes within the due date/ extended due date, such blocked credit ledgers may further exacerbate the financial pressure. These businesses have been looking forward to digital investigations being conducted with temporary unblocking of credit ledger where preliminary information is provided by them (through email or other digital means).

Another apprehension for businesses has been on the Government only allowing a waiver of late fee/ interest on delayed filings of GSTR3B/ GSTR 1without due dates for the same being extended. Businesses are apprehensive on delayed filings (even within extended timelines) continuing to qualify as non-compliances for reporting purposes. Also, there remains an ambiguity on possible blockage of E-Way Bill generation by companies where GST returns for two consecutive months are not filed within the due date envisaged in the law; as companies avail benefit of the relief measures announced by the Government.

While the above asks are universal, specifically reeling sectors like tourism, hospitality and aviation would also look forward to supplementary help from the Government including rate cuts, tax waivers and similar fiscal measures.

India’s policy makers have undoubtedly understood and addressed concerns of businesses historically and in the current situation as well; with proactive steps to ease the burden of businesses to a large extent. Given this, businesses, in general believe and expect that the above genuine hardships would also be soon considered by the Government and appropriate reliefs/ clarifications be issued.

Source: Economic Times