Impact of COVID-19 and reliefs granted under GST

GST was implemented in India w.e.f 1^st July 2017 and it has been almost 3 years. Though GST has been implemented with an aim to reduce the compliance burden under different laws, the businesses are still struggling with various compliances under GST. With the sudden outbreak of Covid-19 the entire world is on a stand still including India which is impacting the businesses and professions. In this article an attempt has been made to discuss the impact of the pandemic on businesses and the relief measures announced by government from GST perspective.

Impact of COVID-19:

To contain the spread of COVID-19 the Central Government has imposed lock down for 21 days starting from 25.03.2020 which was extended by another 2 weeks. Subsequently, the same has been further extended to 17.05.2020. Due to lock down all the businesses have been abruptly closed without any certainty. Due to such tough decision of lockdown by the Government many businesses and professions is facing challenges with respect to working capital and other fixed costs like rent for the premises, employee salaries, bank interest etc. It may take significant time for the businesses to recover. The stakeholders of GST are not an exception to all these challenges. This would have a great impact on compliances under various provisions of GST such as raising invoices, filing of returns, availment of ITC, raising of e-way bill, reversal of ITC, filing of replies, appeals and appearance before GST authorities.

Considering the adverse impact of the pandemic, the Hon’ble Finance Minister has announced certain relief (s) to the taxpayers. Few of such reliefs are as follows:

1. Extension of time limit for completion or compliance of any action under the provisions of the Act: Where an assessee is required to comply with any of the provisions of GST Act, 2017 between 20.03.2020 to 29.06.2020, the same shall stand extended to 30.06.2020 vide Notification No. 35/2020 – CT dated 03.04.2020. Few compliances for which this relief is applicable are as follows:

• Section 16(2) of the Act requires reversal of ITC if the recipient fails to pay the amount to the supplier within 180 days from the date of invoice along with interest under Section 50. In case the 180 days is getting expired between 20.03.2020 and 29.06.2020, then the time limit for such compliance shall stand extended to 30.06.2020.
• Section 54(1) prescribes the time limit of 2 years from the relevant date for filing refund application. In case such time limit is expiring in between 20.03.2020 and 29.06.2020, the time limit for filing refund application shall stand extended to 30.06.2020.
• Section 143 prescribes the time limit for a person sending goods on job work basis to get back the inputs and capital goods within 1 or 3 years as the case may be.  In case such time limit is getting expired in between 20.03.2020 and then such the time limit shall stand extended to 30.06.2020.

2. It should be noted that the above extension shall not apply to the compliances under following provisions and the rules made thereunder:

• Chapter IV (Time and value of Supply): Where any supply has been affected during the pandemic period, the provision of time of supply and value of supply under chapter IV and the invoicing provisions under Section 31 are still applicable and there is no relief in such compliance;

• Where the turnover of the composite dealer exceeded the specified limits during aforesaid period, he shall be liable to obtain the normal registration despite of the benefit under Notification No. 35/2020 – CT dated 03.04.2020;
• Section 39 except sub-section (3), (4) and (5) regarding filing of returns;
• Mechanism of charging interest under Section 50 shall be affected subjected to the Notification No. 31/2020 – CT dated 03-04-2020;
• Section 68, in so far as e-way bill is concerned;
• Sections 25, 27, 31, 37, 47, 50, 69, 90, 122, 129;

3. Extension of Various due dates under the Act: Due dates under various provisions of the Act are extended as below:

4. Benefit of reduced rate of interest under Section 50 of CGST Act, 2017 and waiver of Late filing under section 47 of the Act.

• Benefit of interest at a reduced rate of 9% per annum or Nil rate of interest against the rate of interest applicable under Section 50 of the Act (Applicable rate of interest is 18%) – (Notification No. 31/2020 – CT dated 03-04-2020)
• Waived off late filing fee for GSTR 3B under Section 47 of the Act (Notification No. 32/2020 – CT dated 03-04-2020)
• Notification No. 33/2020 – CT dated 03-04-2020 waived off late filing fee for GSTR 1 under section 47 of the Act which are summarized as follows:

• It should be noted that for the months of February 2020, March 2020 and April 2020 there is no extension of due date but the benefit of reduced rate of interest or Nil rate of interest as the case may be, and waiver of late fee under Section 47 is provided in terms of the applicable notifications.

5. Expeditious processing of Refunds to provide immediate assistance: The Government has taken measure to process all GST and Customs refunds amounting to Rs. 18,000 Crores benefiting 1 Lakh business entities including MSMEs. Further, as per the instructions vide Instruction No. 2/1/2020-GST dated 09-04-2020, refunds shall be processed expeditiously with a view to provide immediate relief to the taxpayers in these difficult times even though the GST Law provides 15 days for issuing acknowledgement or deficiency memo and total 60 days for disposing off refund claims, all pending refund applications must be taken up for processing immediately.
6. Benefit of cumulative effect on restriction Rule 36(4) of CGST Rules: Rule 36(4) place a restriction on availment of ITC on the invoices/debit notes/credit notes which are not uploaded by the supplier. As per the said rule, a registered person shall be allowed to avail 110% of the ITC which is reflected in GSTR 2A. The restriction has placed considerable hardship on business and had become worst with the Covid19 outbreak. Considering this Notification No. 30/2020 – CT dated 03-04-2020 had given a relief for the taxpayers by providing the benefit of cumulative effect to the restriction of 110% of availing of ITC under rule 36(4) for the period Feb’2020 to Aug’2020 & the return in form GSTR 3B for the tax period September 2020 shall be furnished with cumulative adjustment of input tax credit for the said months.
7. Extension of validity of E-way bill: With the restriction placed by the government on movement of vehicles across the states, the movement of conveyance and goods halted right in the mid transit resulting in the delayed movement of conveyance or goods. In most of the cases, the E-way bill generated within normal time limits were about to expire and in the present situations the movement of goods or conveyance may not reach the destination within such time. Considering such hardship the validity of e-way bills generated on or before 24th March 2020 & the validity expires during 20-03-2020 to 15-04-2020 shall now been extended till 31-05-2020 thereby a relief has been given with respect to the imposition of penalties under Section 129 of the Act[Notification No. 35/2020 – CT dated 03.04.2020].
8. Extension of time limit for filing replies, appeals: The Supreme Court have taken-up the current situation as suo-moto and issued an ordinance by extending limitation clauses under all the acts. This includes extension of time limits for adjudication and other proceedings under the GST Act and exclusion of period of lockdown from calculating time limits for filing an appeal under the provisions of the Act.

Issues and Challenges: Few issues and challenges which may arise are discussed as follows:

• As per the section 15(2)(d) of the CGST Act, 2017, the value of supply shall include interest or late fee or penalty for delayed payment of any consideration for any supply. In case where a recipient had failed to pay the consideration to the supplier within stipulated time on account of Covid19 crisis, the supplier may charge interest or penalty for not complying with the terms and conditions and such additional consideration shall also be liable to GST.
• In the current adverse situations, businesses may not be able to trade as usually. They may be under compulsion to sell their goods by offering heavy discounts. In such cases ITC shall be allowed only if it is in compliance with the circular No. 105/24/2019-GST-dated 28-06-2019. On the other hand, there might be certain cases there is a need to write off goods or even disposal. In all such cases the input tax credit is not allowed as they specifically blocked under section 17(5).
• Since most of the business are running in cash crunches, businesses might not be able pay the GST in compliance with the Act. Hence, it likely to result in the decline in the revenue from the GST.

Conclusion: Covid19 had affected the business adversely, in certain cases the survival of the business itself is questioned. In order to protect the interest of the stakeholders and business, Government has taken various measures and is likely to take few more measures. In cases the measures taken by the Government is not sufficient for a particular category of taxpayers, they can submit their recommendations to the Governments through their associations.