COVID-19: TAX ALERT

March 2020

On March 24, 2020, the Ministry of Finance, Government of India, announced certain measures to combat the economic impact of the Covid-19 pandemic. These focus at providing relaxations to stakeholders across different sectors and industries in matters of, amongst others, statutory and regulatory compliance. While the central government is yet to issue circulars and/or notifications in this behalf, information regarding these measures can be accessed on the Press Information Bureau’s website: https://pib.gov.in/newsite/erelease.aspx

This Alert highlights key measures with respect to direct and indirect tax.

1. Direct Taxes 

  • The due-date for Aadhar-PAN linkage and filing of income-tax return for FY 2018-19, is extended from March 31 to June 30, 2020.
  • Under 8 tax laws, the limitation period for submission of returns, applications, reports, filing of appeals against assessment orders and any other compliance, which is due to expire between March 20 and June 29, 2020, is extended to June 30, 2020. Similarly, limitation for issue of notices, sanction orders, and completion of proceedings by income-tax authority, is also extended till June 30, 2020.
  • Vivad se Vishwas Scheme, 2020 (“VSV”): The aim of VSV is settlement of pending income-tax litigation by encouraging taxpayers to pay disputed tax amount and get waiver from payment of interest and penalty. To avail benefits under VSV, a taxpayer has to pay the entire disputed amount to the income-tax authority on or before March 31, 2020. If payment is made after March 31, but before June 30, the taxpayer must pay an additional 10% of the disputed amount. The government has now waived payment of this additional 10%.
  • Delayed payments made towards advance tax, self-assessment tax, regular tax, tax deducted at source, tax collected at source, securities transaction tax, commodities transaction tax and equalization levy during March 20 and June 30, 2020, shall attract a reduced interest @9% per annum, instead of the prevailing interest rate of 12% (or 18%). No late fee or penalty shall be levied during the given period.

2. Indirect Taxes

  • Due-dates for issue of various notices, sanction orders, filing of appeals, returns, applications, under both Goods and Services Tax Act, and Customs Act, have been extended to June 30, 2020. Specific relaxations are mentioned below:
  • For taxpayers with aggregate annual turnover of less than INR 5 Crores, i.e. about USD 657,895 (USD 1 = INR 76), due-date for filing monthly returns for March, April and May, 2020, under Form GSTR-3B, is extended till last week of June 2020. However, the exact due-date is yet to be notified. These taxpayers shall not be charged any late fee or penal interest.
  • Other taxpayers can also file their monthly returns till June 30, 2020, but subject to levy of a reduced rate of interest, i.e. @9% per annum (instead of the prevailing 18% per annum). Late fee and penalty shall not be levied on taxpayers who file their returns before June 30.
  • Taxpayers registered under the composition levy scheme (“CLS”) can pay GST for quarter ending March 31, 2020 and file return for FY 2019-20 by the last week of June 2020. CLS is an optional scheme for taxpayers having aggregate turnover of less than INR 1 Crore (about USD 131,579). The benefits of CLS include quarterly payment of tax, quarterly returns, etc. Detailed provisions related to composition levy are provided under section 10 of the Central Goods and Services Act and Rules thereunder. Similarly, the due-date for entities who want to register under CLS has been extended till last week of June, 2020. The exact due-dates for payment of GST, filing of quarterly return and new registrations under CLS are yet to be notified.
  • 24×7 custom clearance will be allowed until June 30, 2020.

PSA’s view: In view of the prevailing conditions, ease of tax related compliance by extension of due-dates, waiver of late fees or penalties or reduction of penal interest are surely steps in the right direction and will provide some respite to entities and individuals alike. While certainly helpful, but, these may not be adequate for providing necessary relief during the current global and regional economic slowdown plus liquidity crunch and the government may consider a tax holiday for a specified period.

By:

Varun Kalsi and Resham Jain