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Taxation in the Month of March - Revenue is cruel, perhaps, only to be kind!

TIOL - COB( WEB) - 755
MARCH 18, 2021

By Shailendra Kumar, Founder Editor

THE month of March marks the onset of spring. And it brings, as per the lunar calendar, a season of bilateral pouring of coloured water and gulal a la Holi festival. But in the highly forgettable year of 2020, the global pandemic changed the hue of 'gulal' and put the legions of Indians in gulags! The family of Coronavirus turned out to be a clan of sculptors, reshaping everything it has touched a la 'Asol Poriborton' syndrome pervading the terrain of West Bengal! On 24th March the alien phenomenon, now known as LOCKDOWN, will have its first anniversary in India. If we dive deep into history, the Roman year also used to roll out in the month of March. After excluding 60-odd winter days, it had only 10 months in its calendar. Only around 700BC, two more months were added, but it was Julius Caesar who reformed the calendar in 46BC and the missing months were added. And since the city's newly-elected consuls began their tenure during this period, January was officially reckoned as the beginning of the year - a major swing in calendric emphasis from agrarian cycles to civil rotations!

Let me now turn to the world of taxation and quantify the significance of the month of March! Sans a kerfuffle even for a trice, it is seemingly the cruellest and the most nerve-wracking period in the entire fiscal calendar, not only for the taxpayers and the tax professionals but also the Revenue! The Revenue too!! Yes, the awesomely ruthless arms of tax gathering spares none! It mandates that tax collectors cannot avoid being cruel but only to be kind! Revenue sets its own targets in the beginning of the year. The same is periodically revised Range-wise, based on prevailing economic conditions. If the scenario is grim, the Revised Targets are a little kinder for the field officials who may in turn be equally kinder to 'poor earthlings'! If the target-fixation is fraught and based on overheated imagination (that is the normal practice in India!), the taxpayers may suffer repeated jabs in their stomach! And such a hefty dose of Schadenfreude may continue till midnight of March 31st which brings the palliative shutter down on taxpayers' pain!

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For individual taxpayers, March is a rude wake-up call for the laggards! If one has not linked one's Aadhaar with the PAN, the multiple times extended deadline is galloping towards 31st March. If one has not furnished details of one's investments to one's employer and is keen to avoid being TDS-ed on one's annual income, one needs to hurry and invest in tax-saving plans including donation eligible for Sec 80 benefits. It is the month to pore through one's downloaded 26AS account and check details like credit for TDS deducted on purchase of Mutual Funds above Rs two lakh; purchase of motor vehicle above Rs 10 lakh and sale and purchase of property above Rs 50 lakh. A pensioner is required to take care of Form 15G or H. A professional has to take care of one's total turnover and tax audit if it is above the notified threshold.

For the firms and companies, tedious verification for missing TDS to avoid being disallowed 30 per cent of expenditure is to be undertaken with religiosity-tinged sincerity! Incorporated entities are required to compute depreciation & LTCG and work on the magnum opus called projected and comparative balance-sheets and Profit & Loss Accounts besides reconciling bank and loan accounts.

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The most harried in this month is the community of professionals. If they are seen panting, one need not put the blame on pandemic alone! March-end is a breaking point for thousands of professionals who are in the compliance race! March-end is the due date for filing TDS return for AY 2020-21; filing ITR for 2020-21 with penalty for all cases; for revising ITR for FY 2019-20 and payment of tax under Vivad se Vishwas Scheme. On GST front, March 31 is the deadline for GSTR-9 and 9C for 2019-20. Though GSTR-9 is optional for taxpayers having aggregate turnover up to Rs two crore but going by the past trend of abusing gullibility of small taxpayers, a good number of returns are likely to be filed by the month-end. The deadline for GSTR-9 & 9C for FY 2018-19 has just expired on February 28 where return-filing percentage has been 60%. Whether the percentage is going to be lower than previous year for the FY 2019-20, it is yet to be seen. However, the most sensitive question before the Revenue is that whether it would first prefer hunting for those who have defaulted in filing their GSTRs notwithstanding several extensions of the due date or would prefer barrelling its steam towards auditing the returns filed? What is it going to do with the returns which were optional? Are GST authorities going to examine them and take them to task? Besides the GSTRs, the March-end is also the last-month chance for a taxpayer to opt for Composition Scheme by filing CMP-02. For exporters, March 31 is the due date for furnishing LoU for FY 2021-22.

Let me now trudge to the issue of mandatory implementation of QR Code for B2C invoices generated by the taxpayers having above Rs 500 Crore turnover from April 1, 2021. This is an extended deadline for the industry and trade. But, unlike the e-invoice project which was notified for B2B invoices, there are many unanswered questions in the mind of taxpayers, giving rise to blind spots. For e-invoice, there was a dedicated portal to hand-hold and clarify doubts. There is none for the B2C project. There is no nodal agency announced thus far. The CBIC has clarified only a few questions and left unattended cracky dozens! Now embracing Sphinx-like silence! Every large taxpayer will have to develop a customised software for printing QR Code. Industry is visibly bewildered about what purpose a cross-reference may serve in cases of pre-paid supplies like Zomato or Swiggy deliveries! A good number of influential industry bodies and bilateral trade bodies which shovel investments into India, appear to be splitting their hair over dark corners as they find themselves caught into endless 'policy buffering' where official clarifications are woefully sporadic!

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Ideally, there should have been Hasmukh Adhia-era 'Namaste' if not hand-holding, workshops a la the Corona times! The GST Council should have issued mandate to tie up with all banks to make it easier for the taxpayers but the Government seems bent on favouring the monopoly of NPCI by promoting UPI payment mode alone! Even the RBI is in principle against evolving a monopolistic market. An unintended victim is going to be the spirit of competition in the economy! Secondly, NPCI retains all the lethargic traits of a laggard in the absence of any competition in the market. For e-invoice, GSTN had done a good job but the same can hardly be expected of the NPCI. Thanks to the well-ushered e-invoice mechanism with minimum consternation to the taxpayers, the Revenue has, in a short span of time, notified e-invoicing mandatory even for the taxpayers between Rs 50 Cr to Rs 100 Crore turnover from April 1, 2021 - a worth-imitating exemplar!

As soon as March-31 deadline comes to an end, every GST taxpayer will be required to start a new series of invoice number from April 1, 2021. And it ought not to exceed 16 characters. New series of RCM invoice is to be implemented along with new series of job work challans for the FY 2021-22. Similarly, new series of export invoice is to be quoted in shipping bill, failing which refund if any, will be stuck.

What is likely to be much greater challenge for the taxpayers is going to be the mandatory mention of four digit or six digit HSN in invoices and GSTR-1 from April 1. For goods, it is relatively predictable as the GST borrows it from the Customs but for the Services, the unfinished homework may pose piquant situations! Though the GSTN deserves kudos for working out certain codes for Services but it is probably a case of only half job done. In the glaring absence of codes, service providers may go through drowning and roiling experience. A ground reality ripe for abuse! What may trigger a groundswell of boisterous protest is the provision of penalty of Rs 50,000 for not mentioning correct HSN or SAC. A large number of taxpayers would inevitably miss it or end up making cardinal errors, warranting painful jabs in their financial ribs.

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I am sure that there would be several distortions leading to classification disputes. With the Revenue having little truck with taxpayers' pain, disputers over classification of items like sanitizers, railway parts and fryums would continue to roil the GST turf. There are many HSN Codes in GST notifications which do not match with the Customs Tariff! If no advance solution is worked out, the compliance gravitas would be lost. The Customs is scheduled to adopt a new HSN from January 1, 2022. This largely means that even before the GST taxpayers tend to cotton on to the changes being implemented from April 1, 2021, they would have to kick into gear for a new set of HSN Codes!

Ideally, the policy makers should first work on anachronistic flaws before introducing new changes which often turn out to be cracker-barrel ideas! A ragbag of new reforms are certainly desirable but only if the changes are fire-tested and likely to be a crackerjack. Tut-tutting all demands of taxpayers for a slow and steady implementation of new changes is like snuffing life out of the businesses trying hard to resuscitate themselves. Much greater onus falls on our policy makers to ensure that a good and simple GST as touted by the Prime Minister does not remain a theological philosophy for animated conversation in the private or the public!

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