JUNE 29, 2020

By Shailesh Sheth, Advocate Founder, M/s. SPS LEGAL

Simplicity in modern taxation is a problem of basic architectural design. Present legislation is insufferably complicated and nearly unintelligible. If it is not simplified, half of the population may have to become tax lawyers and tax accountants.

[Henry C. Simons]  

ON the conclusion of its 40th Meeting held via video conference on June 12, 2020, the GST Council announced very few but significant reliefs, mainly meant for the small taxpayers, that is, those with a turnover below Rs.5 crores. The relief package also covers the defaulting assesses who have failed to file the returns for past periods. This relief package shall be seen in continuation of the first 'regulatory and statutory compliance relief package' announced by the FM on March 24, 2020 and later, implemented by a set of notifications issued on April 3, 2020. [For a detailed discussion on both sets of relief measures, please refer to the author's articles titled "GST - A cobweb of fresh deadlines" and "GST Council's latest recommendations - Comprehending the conundrum" published on taxindiaonline.com on May 5, 2020 and June 20, 2020 respectively.]

The CBIC i.e. the Board has now issued total 6 (six) notifications (Nos. 49/2020-CT to 54/2020-CT) on June 24, 2020 implementing the recommendations made by the Council at its 40 th Meeting. The Board has also simultaneously issued a Circular no. 141/11/2020-GST (F. No. CBEC-20/06/04-2020-GST), in exercise of the powers vested in it under S.168(1) of the CGST Act clarifying various issues pertaining to the relevant notifications so as to ensure the uniformity in the implementation of the Act. The Circular to the extent relevant, also modifies the previous Circulars no. 136/06/2020-GST (F. No. CBEC-20/06/04-2020-GST) dated April 3, 2020 and 137/07/2020-GST (F. No. CBEC-20/06/04-2020-GST) dated April 13, 2020 issued by the Board in a similar manner under S.168(1) of the CGST Act in the context of various notifications issued on April 3, 2020.

A careful study of the latest set of notifications as further clarified by the Board by its Circular, would reveal that the reliefs granted thereby are, though, much more than what was perceived by the taxpayers when certain recommendations of the Council were announced through the customary Press Release, contain various complexities.

A final comprehensive picture that emerges from a conjoint reading of the relevant notifications dated June 24, 2020 and the Board's Circular of even date is presented in this article.

I. Waiver/reduction in late fees for past periods - Better late than never…!

The Council has, as a measure to clean up the pendency in return filing, waived/reduced the late fee for non-filing of returns in FORM GSTR-3B for the tax periods from July 2017 to January, 2020 as under:

i. 'Nil' late fee  if there is no tax liability (presently, late fees for delay in furnishing of GSTR-3B by the due date is Rs.20/- per day (Rs.10/- per day under CGST Act plus Rs.10/- per day under SGST Act) for Nil returns).

i. Maximum late fee of Rs. 500/- per return, (Rs. 250/- under CGST Act plus Rs.250/- under SGST Act)  in case there exists any tax liability. Presently, late fees for delay in furnishing of GSTR-3B with tax liability by the due date is Rs.50/- per day (Rs.25/- per day under CGST Act plus Rs. 25/- per day under SGST Act). This quantum is subject to a maximum amount of Rs.10,000/- (Rs.5,000/- under CGST Act and Rs.5,000/- under SGST Act).

This recommendation of the Council has now been implemented by Notification no. 52/2020-CT dated 24.06.2020 inserting fourth and fifth proviso in the parent notification no. 76/2018-CT dated 31.12.2018. [The scope and implications of this recommendation have already been discussed in detail by the author in his article dated June 12, 2020 and the same, for the sake of brevity, are not repeated here.].

However, it is reiterated that this benefit of waiver or reduction in late fees for the past periods would be available only if a defaulting taxpayer opts for the scheme and furnishes the returns in FORM GSTR-3B for the relevant period between July 1, 2020 and September 30, 2020. If the taxpayer fails to adhere to this time limit, he would be liable for the payment of late fees from the original due date of return, till the date on which the return is filed in terms of S.47 of the CGST Act at the rate as applicable during the relevant period.

It may also be kept in mind that the benefit of the scheme is only in respect of the late fee and not the tax and interest liability. Moreover, in view of the limitation imposed by S.16(4) of the CGST Act, the taxpayers opting for the scheme would not be able to avail input tax credit for the F.Y. 2017-18 and 2018-19. The taxpayer would only be able to avail the input tax credit for the period April, 2019 to January, 2020 if he has not filed the returns for this period for any reason but comes forward and avails the scheme.

It is also worth noting here that for some inexplicable reason, the Composition Taxpayers are forgotten here and left out of the benefit of the scheme. Earlier, when a similar amnesty scheme was launched by notification no. 77/2018-CT dated 31.12.2018 (along with notification no. 76/2018-CT ibid for regular taxpayer), the Composition Taxpayers were treated at par with regular taxpayers. However, while announcing the present scheme, the composition taxpayers are kept out for the entire period from July, 2017 to December, 2019.

II. Relaxations in filing of various returns and consequential reliefs in interest/late fee liability:

A. For Large Taxpayers:

a. GSTR-3B and relief in the interest liability - A surprisingly large-hearted gesture!

Now, this is one relief which has taken the large taxpayers, that is, those with a turnover of more than Rs.5 crores, and tax professionals by surprise! Readers are aware that in the first round of reliefs announced by the FM on March 24, 2020, large taxpayers were also covered. The reliefs granted to this class of taxpayers were the following:

i. Waiver of late fee in respect of filing of the returns in FORM GSTR-1 for March, 2020 to May, 2020;

ii. Waiver/reduction of interest and waiver of late fee in respect of filing of returns in FORM GSTR-3B for February, 2020 to April, 2020;

iii. Extension of due date for filing of return in FORM GSTR-3B for May, 2020.

[Notification no.31/2020-CT to 33/2020-CT and 36/2020-CT

all dated April 3, 2020 refers].

[The nature, scope and implications of the above relief measures have been explained in detail by the author in his article dated May 5, 2020 referred to supra].

It is pertinent to note here that insofar as the relief in the form of waiver/reduction in the interest for filing of FORM GSTR-3B for February, 2020 to April, 2020 was concerned, it was conditional on the filing of the returns by the taxpayers on or before the date mentioned in the Notification no. 31/2020-CT ibid. A taxpayer failing to file a return by the specified date was liable for the payment of interest @ 18% per annum from the due date of return, till the date on which the return was filed.

Now, in an unexpected but generous move, the above condition has been removed by Notification no. 51/2020-CT dated 24.06.2020 by substitution of the first proviso inserted in the first paragraph of Notification no. 13/2017-CT dated 28.06.2017 by Notification no. 31/2020-CT ibid. With this substitution, a Nil rate of interest for first 15 days after due date of filing return in FORM GSTR-3B for the relevant tax period and a lower rate of 9% thereafter till 24.06.2020 is notified. What is significant is that interest at full applicable rate of 18% will be charged only after 24.06.2020 for any further period of delay in furnishing the returns. [Ref: Para 3.2 of Circular no. 141/11/2020-GST dt. 24.06.2020].

As is evident, this relief granted to the large taxpayers is virtually 'out of the blue' but nevertheless, is quite significant. The taxpayers, with this relaxation, would certainly breathe easy in these critical times of a chronic financial crunch! What is, however, quite strange is the complete non-mention of this recommendation of the Council in the Press Release issued on conclusion of the meeting of the Council or even thereafter! One reason could be the constraints of time that must have been felt on June 12, 2020 in preparing and finalising the Press Release. The other plausible reason could be that any announcement of this relief might have put off many taxpayers from filing the returns in FORM GSTR-3B for this period by June 24, 2020 relaxing in their understanding that the interest liability at the full applicable rate would not relate back to the original due date!

Whatever may be the reason behind the non-announcement of this 'interest(ing) bonanza' in offing for the large taxpayers, this relief will certainly gladden their hearts in these trying times!

b. GSTR-3B - Reliefs in Late fee - Status quo maintained

However, in so far as the levy of late fees under S.47 of the CGST Act for the filing of returns in FORM GSTR-3B for February, 2020 to April, 2020 beyond the 'waiver date' of '24.06.2020' is concerned, a status quo has been maintained. It will be recalled here that by Notification no. 32/2020-CT dated 03.04.2020 amending Notification no. 76/2018-CT dated 31.12.2018, a waiver of late fees was granted to large taxpayers in respect of the returns in FORM GSTR-3B for February, 2020 to April, 2020 if the same were furnished on or before 'June 24, 2020'. Thus, the waiver of late fee in such cases was conditional on adhering to this specified date in filing the returns for this period. However, unlike the reliefs granted in the matter of the levy of interest for filing of the returns in FORM GSTR-3B for the same period as explained above, there has been no change whatsoever in so far as the levy of late fee is concerned for this class of registered persons. Consequently, a large taxpayer who has failed to file the returns in FORM GSTR-3B for these months on or before 24.06.2020, the late fee shall be payable by such taxpayer in terms of S.47 of the CGST Act from the due date of the relevant return, till the date on which the return is filed.

One may feel that there is an apparent disparity between the relief in the matter of levy of interest and that in the matter of levy of late fee though the Form of returns, period and the class of registered persons are the same. Be that as it may, taxpayers may take note of the different treatment to the relief in interest and the relief in late fees and take an informed call in the matter of filing of the returns in FORM GSTR-3B for this period.

The above relaxations concerning the interest and late fee granted to the large taxpayers are comprehensively captured in the Table-1 below for the ease of understanding -

Table-1

Relaxations in the interest and late fee for the large taxpayers i.e. with an aggregate turnover of more than 5 crores

c. GSTR-1 and waiver of late fee - more relaxation…!

By Notification no. 53/2020-CT dated 24.06.2020, Notification no. 4/2018-CT dated 23.01.2018 has been amended by substituting 'fourth proviso' (the words 'third proviso' are corrected as 'fourth proviso' by corrigendum dated 25.06.2020) providing for the waiver of late fees in respect of the returns in FORM GSTR-1 for the months of March, 2020 to June, 2020 or the quarters ending March, 2020 and June, 2020 if the same are filed on or before the dates specified for each month/quarter in the notification.

It is pertinent to note here that this relaxation is granted to all taxpayers irrespective of their turnover. However, this relief hinges upon the taxpayer filing the return in FORM GSTR-1 for the relevant month/quarter on or before the specified date, failing which the late fee will be payable by him from the original due date till the date of filing the return.

[For the details, refer Table-4 appearing later in this article.]

B. Relaxation for small taxpayers:

Coming to small taxpayers, that is, those with a turnover upto Rs. 5 crores, the Council has provided various reliefs to this class of registered persons as announced through the Press Release on June 12, 2020. These recommendations have been implemented through notifications issued on June 24, 2020. It may be noted here that prior to issue of these notifications, the categorisation of small taxpayers was done on the basis of one or more of the following criteria viz:

- Taxpayers with turnover below Rs. 1.50 crore;

- Taxpayers with turnover above Rs.1.50 crore but not more than Rs. 5 crores;

- Location of the taxpayers i.e. whether in Category I or Category II States/UTs.

However, by the latest set of Notifications, both or either of the following two criterias are applied for considering an Assessee a 'small taxpayer' for the purposes of the grant of reliefs viz:

- His turnover being below Rs. 5 crore;

- The location of his principal place of business in a particular State/UT under Category I or Category II.

These consolidations, of a sort, of the varying criteria hitherto applied, may also be due to the technical difficulties being faced by the GSTN Portal. However, keeping this changed criterion in view, let us now understand the relevant notifications implementing the relaxations granted to the small taxpayers.

a. GSTR-3B and waiver/reduction of interest :

By Notification no. 51/2020-CT dated 24.06.2020, Notification no. 13/2017-CT dated 28.06.2017 has been amended so as to provide for a waiver/reduction in interest to small taxpayers in respect of the filing of the returns in FORM GSTR-3B and payment of tax for the months from February, 2020 to July, 2020 as specified therein. This relief in the form of "Nil' interest upto the specified date and the reduced rate of 9% per annum for a specified period is as prescribed in the Notification for each month. Different dates are specified for this purpose for such taxpayers depending upon the location of their principal place of business in a Category I or Category II States/UTs.

It may be noted that the benefit of Nil/reduced rate of interest is not dependent upon the filing of FORM GSTR-3B for the relevant month on or before the date specified for the said month.

[For the details, please refer to Table-2 and Table-3 in the ensuing paragraphs].

b. Filing of GSTR-3B and waiver of late fees:

Simultaneously with the waiver/reduction in interest, a waiver of late fees has also been granted to small taxpayers in respect of the filing of returns in FORM GSTR-3B for the months of February, 2020 to July, 2020 by Notification no. 52/2020-CT dated 24.06.2020 amending Notification No. 76/2018-CT ibid. For this purpose also, the taxpayers are divided into two classes based upon the State/UT in which their principal place of business is situated.

Here, it should again be noted that this waiver of late fees is dependent upon the condition that the taxpayer files the return in FORM GSTR-3B for the relevant month on or before the date specified in the Notification for the said month. F ailure to comply with this condition will render the taxpayer to the levy of late fees from the original due date, till the date of filing of return, in terms of S.47 of the CGST Act.

The details of the notification no. 51/2020-CT and 52/2020-CT are captured comprehensively in Table-2 and Table-3 below:

Table-2

Relaxations in interest and late fees for the small taxpayers with turnover upto Rs. 5 crores

* Chhattisgarh, Madhya Pradesh, Gujarat, Maharashtra, Karnataka, Goa, Kerala, Tamil Nadu, Telangana, Andhra Pradesh, UTs of Daman & Diu and Dadra & Nagar Haveli, Puducherry, Andaman and Nicobar Islands and Lakshwadeep.

Table-3

Relaxations in interest and late fees for the small taxpayers with turnover upto Rs. 5 crores

* Himachal Pradesh, Punjab, Uttarakhand, Haryana, Rajasthan, Uttar Pradesh, Bihar, Sikkim, Arunachal Pradesh, Nagaland, Manipur, Mizoram, Tripura, Meghalaya, Assam, West Bengal, Jharkhand, Odisha or UTs of Jammu and Kashmir, Ladakh, Chandigarh and Delhi.

c. GSTR-3B for August, 2020:

By notification no. 54/2020-CT dated 24.06.2020, the due date for filing GSTR-3B for the month of August, 2020 for the small taxpayers situated in Category I and Category II States/UTs is postponed to 01.10.2020 and 03.10.2020 respectively.

d. GSTR-1 and waiver of late fee:

As already explained in the context of the large taxpayer, by Notification no. 53/2020-CT ibid, a waiver of late fee is granted in respect of filing of return in FORM GSTR-1 for the months from March, 2020 to June, 2020 or the quarters ending March, 2020 and June, 2020 provided the return is filed on or before the date specified for each month/quarter. It is also pertinent to note here that in this case, no distinction in respect of the small taxpayers is made on the basis of the location of their principal place of business nor is there any reference in the notification to the turnover of a taxpayer as a deciding factor. As already explained, the relief granted by the notification covers all taxpayers irrespective of their turnover. Different dates are specified on the basis of return i.e. whether it is monthly or quarterly.

The details of the relief granted by the notification are given in Table-4 below:

Table-4

Relaxations in respect of late fees for all taxpayers

Relaxation in filing of GSTR-3B and GSTR-1 - Putting the cart before the horse?

While the reliefs granted by the Council on various counts as aforesaid will be welcomed by the taxpayers, a close look at the various specified dates for filing FORM GSTR-3B and FORM GSTR-1 for the relevant months reveals a strange incongruity. The 'waiver dates' specified for the purposes of the waiver/reduction in interest and waiver of late fee in case of filing of FORM GSTR-3B for the period from February, 2020 to June, 2020 precede the corresponding 'waiver dates' specified for claiming waiver of late fees in case of filing of FORM GSTR-1 for the same period.

For instance, in case of taxpayers with aggregate turnover of more than Rs.5 crores, the closing 'waiver date' for claiming the benefit of 'Nil' and reduced rate of interest as well as waiver of late fee for filing FORM GSTR-3B for February, 2020 and March, 2020 is common and that is, '24.06.2020'. However, for the same months, the closing 'waiver date' for claiming waiver of late fee for filing FORM GSTR-1 for these months is 10.07.2020 and 24.07.2020 respectively.

Similarly, in case of the taxpayers with turnover upto Rs. 5 crores, such aberration is noticed for the months of March, 2020 and April, 2020. The closing 'waiver date', for claiming Nil interest for filing FORM GSTR-3B for March, 2020 to April, 2020 are as under:

The corresponding waiver dates for claiming waiver of 'late fees' for this period for filing of FORM GSTR-1 are as follows:

1. 10.07.2020

2. 24.07.2020

It is, thus, evident that the 'waiver dates' for filing FORM GSTR-3B for these months fall due before the corresponding 'waiver dates' specified for filing FORM GSTR-1 for the same months. This is indeed quite strange! Ideally, the 'due date' for filing of FORM GSTR-1, even for claiming any reliefs should precede the 'due date' for filing of FORM GSTR-3B for any tax period. While a taxpayer may be able to file FORM GSTR-3B before he files FORM GSTR-1 for a month, by putting an estimated amount of tax liability in FORM GSTR-3B for the month, it is not a healthy practice nor the same needs to be encouraged. No doubt, the revenue realisation happens only on the filing of FORM GSTR-3B by a taxpayer, but that cannot be a justifiable basis for giving precedence to it over the FORM GSTR-1 in the matter of order of filing!

Recovery of petty amount of interest - Incongruent…Incomprehensible!

There is yet another strange aspect of the relief of the reduced interest granted to small taxpayers by Notification no. 51/2020-CT ibid. Readers may carefully observe that in case of small taxpayers located in Category-I States/UTs, the reduced rate of interest of 9% per annum will apply only for a few days in respect of FORM GSTR-3B filed for the months of May, 2020, June, 2020 and July, 2020. The number of days for which the interest will be required to be computed works out to 18, 7 and 3 respectively for these three months! For small taxpayers located in the Category-II States/UTs, the number of days to be reckoned for the calculation of interest for the same tax periods i.e. May, 2020, June, 2020 and July, 2020 works out to 15, 5 and 1 respectively!

One really fails to understand the purpose and logic behind proposing the recovery of interest, albeit, at a reduced rate, for such a negligible period from small taxpayers! As it is, the last dates for availing the benefit of Nil interest in respect of the filing of FORM GSTR-3B for May, 2020, June, 2020 and July, 2020 for small taxpayers are falling due in one month only i.e. September, 2020. Why subject them to the further agony of computing the interest, albeit, at the reduced rate, for such meagre period? One simply fails to visualise any significant gain to the exchequer by this grand exercise!

CMP-08 and GSTR-4 for the Composition Taxpayers - A narrow gap between two quarters!

As per notification No. 34/2020-CT dt. 03.04.2020, the Composition Taxpayers have been allowed to (a) furnish the statement of details of payment of self-assessed tax in FORM GST CMP-08 for the quarter January to March, 2020 by 07.07.2020 and (b) furnish the return in FORM GSTR-4 for the financial year 2019-20 by 15.07.2020.

The composition taxpayers' main concern is that the due date for CMP-08 for the quarter April to June, 2020 is 18.07.2020. Thus, the gap between the due dates for the two quarters ending March, 2020 and June, 2020 is too less which may found to be quite burdensome by such taxpayers.

Board's Circular and exercise of the powers under S.168(1) - Is it proper?

As stated in the beginning, the Board has, by a Circular issued on June 24, 2020 itself, clarified various issues relating to the notifications issued on the said date implementing the recommendations of the Council. This Circular is issued by the Board in exercise of the powers vested in it under S.168(1) of the CGST Act. The relevant abstracts of S.168(1) are reproduced below for the ease of reference:

"S.168. (1) The Board may, if it considers it necessary or expedient so to do for the purpose of uniformity in the implementation of this Act, issue such orders, instructions or directions to the central tax officers as it may deem fit, and thereupon all such officers and all other persons employed in the implementation of this Act shall observe and follow such orders, instructions or directions."

[Emphasis supplied]

From the highlighted portion of the provision, it will be seen that the Board can issue such orders, instructions or directions as may be deemed fit for the purpose of uniformity in the implementation of the CGST Act. One may wonder whether the Board can exercise powers under S.168(1) of the Act for issuing instructions/clarifications in relation to a notification as has been done by the captioned Circulars? And whether words 'for the purpose of uniformity in the implementation of this Act' used in the provision would take within its ambit 'the notification' as well? The answer to this question is in the affirmative. In the case of Orient Weaving Mills (P) Ltd. vs. CCE - 1978 (2) ELT (J 311) (SC), the Constitutional Bench of the Supreme Court (5-Member Bench), while examining the constitutional validity of SSI exemption, held that excise rules and notifications issued by the Central Government are part of the taxing statute. Thus, there is nothing illegal or irregular for the Board to exercise its powers under S.168(1) of the Act to issue instructions /clarifications on any issue relating to a notification so as to ensure the uniformity in the implementation of the notification. However, it may be prudent to have the words "or the rules or a notification issued under this Act " inserted after the words "this Act " wherever they appear in the provision to put the matter beyond any doubt or to ward off any unnecessary challenge.

While on this, it may be pointed out that the provision of S. 168(1) is patterned on the lines of S.37B of the Central Excise Act, 1944 which is reproduced below for the ease of understanding:

"SECTION 37B. Instructions to Central Excise Officers.  - The Central Board of Excise and Customs constituted under the Central Boards of Revenue Act, 1963 (54 of 1963), may, if it considers it necessary or expedient so to do for the purpose of uniformity in the classification of excisable goods or with respect to levy of duties of excise on [such goods or for the implementation of any other provision of this Act], issue such orders, instructions and directions to the Central Excise Officers as it may deem fit, and such officers and all other persons employed in the execution of this Act shall observe and follow such orders, instructions and directions of the said Board :

Provided  that no such orders, instructions or directions shall be issued -

(a) so as to require any Central Excise Officer to make a particular assessment or to dispose of a particular case in a particular manner; or

(b) so as to interfere with the discretion of the Commissioner of Central Excise (Appeals) in the exercise of his appellate functions."

[Emphasis supplied]

As can be seen, the in-built safeguards contained in the proviso to S.37B are 'conspicuous in their absence' in S.168(1) of the CGST Act. This tends to create an impression that any instructions or clarifications issued by the Board are required to be followed by all central tax officers as if it is a 'gospel truth ', leaving no scope of any independent and judicious application of mind by them in a given case even if circumstances demand this! As it is, the CGST Act suffers from the vice of excessive delegation and S.168 (1) is only one glaring example of this undisputed fact. One can only hope that the provision will be suitably amended in the next round of revamping exercise, if and when it takes place, and reasonable safeguards are put in place in the provision on the lines of S.37B of the erstwhile Central Excise Act, 1944.

To sum up…

While the relaxations granted by the Council are most welcome, the maze of the complexities created around them is simply baffling! The logic behind differing treatment in the matter of reliefs in interest and late fee as explained above, is also difficult to comprehend, and so is the logic behind specifying the 'waiver dates' for the FORM GSTR-3B that precede the 'waiver dates" for the FORM GSTR-1! A taxpayer and a tax professional may have to spend considerable time in understanding and adhering to these multiple deadlines and in arranging their affairs accordingly in these crisis-laden times when normalcy is far from returning in most parts of the country. One should not be surprised if one finds oneself completely lost in this 'Bhulbhulaiya' ! It is rather unfortunate that a simple and procedural matter like grant of extensions is marred by so many needless complexities and confusion. Even if the load-bearing capacity of the GSTN Portal might, conceivably have played a role in specifying the extensions for various purposes in a staggered manner, there is no reason why the reliefs could not have been granted in a simple, hassle-free and pragmatic manner?

We are only days away from the 3rd GST anniversary and the slew of notifications discussed in this write-up would confirm one's belief that, after all, it is not a good and simple tax that it was meant to be!

"If we don't do something to simplify the tax system, we're going to end up with a national police force of internal revenue agents."

[Leon Panetta]

[The views expressed are strictly personal.]