APRIL 08, 2020

By Dr G Gokul Kishore

IN the last two parts, certain relaxations and relief measures required under GST in view of Covid-19 were highlighted. Considering the gravity of the problems faced by the industry, the government has been pro-active in implementing several relief measures. In this Part-80, we take a look at some of them and the agenda ahead.

ITC restriction of 10% kept in abeyance

In Part-78 (March, 24, 2020), it was emphasised that the restriction on availment of input tax credit involved in invoices not uploaded in GSTR-1 or otherwise not displayed in buyer's GSTR-2A to the extent of 10% of the uploaded invoices should be temporarily suspended. This has been implemented by amending CGST Rules by Notification No. 30/2020-Central Tax dated 3-4-2020. The condition in Rule 36(4) for the months from February to August 2020 will be applicable cumulatively in the return for September, 2020. Circular No. 136/06/2020-GST dated 3-4-2020 issued by CBIC is cryptic and does not elaborate the amendment.

It is generally understood that input tax credit can be availed for these months without being affected by the restriction and without labouring to verify or follow-up non-uploaded invoices. ITC can be availed in respect of all eligible goods and services subject to conditions like receipt and availability of invoice. Buyers have time till September to initiate such follow-up and in the meanwhile, if the invisible invoices appear in GSTR-2A in any month before September, then taxpayers need not bother. Cumulative application of restriction means for all these months if some invoices are still not displayed in GSTR-2A, then at the time of filing for September, 2020, credit reversal will be required.

It is not known whether at that time, if Coronavirus dies down, department will demand interest for these 3 - 4 months on the extent of ineligible portion. May be, this relaxation is intended to provide some cushion in tax payment by liberalising credits. If one were to go by the interest moratorium on EMIs (announced by banks and financial institutions based on RBI's directions) whereby interest will be payable even for the period under moratorium when repayments resume after three months, then the above in respect of ITC cannot be ruled out.

Use of new Section 168A

In this series, it has been consistently advocated that return filing and payment of tax need to be delinked in GST. In the absence of such delinking, when return filing dates are being extended due to the present crisis, relaxations in respect of interest for delayed payment are also required and they have been provided by Notification No. 31/2020-Central Tax dated 3-4-2020. All taxpayers have been provided interest-free period of atleast 15 days from the due date for filing return and those with lower turnover, get more interest-free period.

For extending time-limit under various laws, issuance of ordinance was pleaded in Part-78 . In view of similar demand or advice provided to the government, the Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 has been issued. With different due dates based on turnover for various GST returns as per the latest notifications, all kinds of matrices are being floated in public domain. Even the CBIC is compelled to illustrate such changes in the Circular No. 136. Instead of all such maze of dates, interest waiver for different periods, late fee waiver, etc., the powers conferred under the Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance could have been effectively used. Section 168A inserted in CGST Act by this ordinance is solely intended to extend timelines for all statutory compliances. The Supreme Court and High Courts have extended stay granted in all matters without any condition. However, CBIC has opted for selective and restrictive use of such new provision.

Notification No. 35/2020-Central Tax dated 3-4-2020 has been issued whereby time-limit for completion or compliance of any action by any authority or by any person, as prescribed in the CGST Act which falls between 20-3-2020 and 29-6-2020 shall stand extended to 30-6-2020. This notification mentions appeal, reply, application, report, document, return, statement or record. To provide a wider coverage and to remove any ambiguity, it also uses the words "by whatever name called".

One would have thought when returns are covered by such extension, the due dates for GSTR-3B will also stand extended. But that would mean no revenue for the government for three months which cannot be implemented. Therefore, this notification provides a negative list or exclusions by mentioning various provisions in respect of which such extension will not be applicable. Coverage of provisions relating to powers like seizure and arrest in this list of exclusions is understandable. But, excluding all returns from such extension and then providing a separate notification to prescribe various extended due dates for different classes of taxpayers could have been avoided by providing such extended due dates also in the same notification and providing same relief to all taxpayers.

Coronavirus and the lockdown do not affect taxpayers and businesses based on turnover. If SMEs had to be provided much larger window for tax payment without interest which can serve as an indirect financial assistance in these difficult times, it could have also been specified in the same notification. During the period of pandemic, one should not find fault in drafting of notifications or exercise of powers so long as the industry gets some relief. The agenda of pending measures like exemption to certain goods and services at least for a few months, GST rate reduction for MSMEs, relaxation in respect of cross utilisation of CGST credit by distinct persons and imposing health or relief cess need the attention of the government. In the next round of measures, one may hope some of these are implemented.

[To be continued…]

[The author is an Advocate. The views expressed are strictly personal.]

See Part 79 .