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25 March 2020
Relaxation of tax and regulatory compliance timelines due to COVID-19 outbreak
Tax and regulatory payments and compliance filings deferred due to COVID-19 outbreak in India
The Finance Minister (FM), Nirmala Sitharaman held a press conference1 on Tuesday 24 March 2020 to announce various relief measures taken by the government on statutory and regulatory compliance matters in view of the outbreak of COVID–19. The decisions with respect to various compliance matters are summarised hereunder:
- Due date for filing belated and revised return of income per section 139(4) and 139(5) respectively for financial year (FY) 2018-19 relevant to Assessment Year 2019-20, extended from 31 March 2020 to 30 June 2020.
- Pursuant to section 139AA of the Income-tax Act, read with Rule 114AAA(1), person having Permanent Account Number (PAN) is required to intimate/link his Aadhaar number on or before 31st March 2020. Failure to do so shall make the PAN inoperative immediately after 31 March 2020. Extension has been granted for linking of Aadhaar with PAN from 31 March 2020 to 30 June 2020.
- Under the Vivad se Vishwas Act, if a taxpayer opts under the Act for withdrawal of appeals, the taxpayer is required to pay 100 percent of the disputed tax if paid by 31 March 2020, and if paid after 31 March 2020, 110 percent of the disputed tax is payable. Under the relief measures announced on Tuesday, additional 10 percent amount shall not be payable if the amount is paid by 30 June 2020.
- Due date of issue of notice, intimation, notification, approval order, sanction order, filing of appeal, furnishing of return, statements, applications, reports, any other documents and time limit for completion of proceedings by the authority and any compliance by the taxpayer, including investment in saving instruments or investments for roll over benefit of capital gains under Income Tax Act, Wealth Tax Act, Prohibition of Benami Property Transaction Act, Black Money Act, STT law, CTT law, Equalisation Levy law, Vivad Se Vishwas law where the time limit is expiring between 20th March 2020 to 29th June 2020, shall be extended to 30th June 2020.
- Delay in deposit of advance tax (section 234B / 234C of the Income-tax Act (ITA)), self-assessment tax (Section 234A of the ITA), regular tax (Section 220(2) of the ITA), TCS (Section 206C of the ITA), equalisation levy (Section 170 of the Finance Act (FA) 2016), Securities Transaction Tax (STT) (section 104 of the Finance (No.2) Act 2004), Commodities Transaction Tax (CTT) (section 123 of the FA 2013) attracts interest of 1 percent per month. Delay in deposit of TDS (Section 201 of the ITA), attracts interest 1.5 percent per month.
It has been decided that for delayed payments made during 20 March 2020 to 30 June 2020, interest of 9 percent per annum (i.e. 0.75 percent per month) will be charged for this period.
Goods and Services Tax:
- Due date of filing return under Form GSTR-3B for taxpayers having aggregate annual turnover of more than INR 5 crore, has been proposed to be relaxed for returns due in March 2020, April 2020 and May 2020 till last week of June 2020. However, interest at 9 percent from 15 days after the relevant due date (as opposed to the current 18 percent) would be charged. No late fee or penalty would be charged.
- Taxpayers having aggregate annual turnover less than INR 5 crore would also be allowed to file return under Form GSTR-3B for returns due in March 2020, April 2020 and May 2020, till last week of 30 June 2020. No interest, late fee, and penalty would be charged.
- Due date of filing annual return in Form GSTR-9 for the FY 2018-19 has been extended till 30 June 2020.*
- Due date for issue of notice, notification, approval order, sanction order, filing of appeal, furnishing of return, statements, applications, reports, any other documents, time limit for any compliance under the GST laws where the time limit is expiring between 20 March 2020 to 29 June 2020, has been proposed to be extended to 30 June 2020.
Legal circulars and legislative amendments to give effect to the aforesaid GST proposals shall be issued with the approval of GST Council.
*Notification no. 15/2020 – Central Tax dated 23 March 2020 has already been issued in relation to the extension of due date for filing annual return for FY 2018-19.
- Customs clearance on 24X7 basis proposed till 30 June 2020.
- Due date for issue of notice, notification, approval order, sanction order, filing of appeal, furnishing applications, reports, any other documents etc., time limit for any compliance under the Customs Act and other allied laws where the time limit is expiring between 20 March 2020 to 29 June 2020, has been proposed to be extended to 30 June 2020.
Sabka Vishwas - (Legacy Dispute Resolution) Scheme, 2019:
- Payment date under Sabka Vishwas - (Legacy Dispute Resolution) Scheme, 2019 has been proposed to be extended to 30 June 2020. Interest for this period would not be charged, if payment is made by 30 June 2020.
- Waiver of additional fees for delay in filing of any form, document, return, statement etc. with Ministry of Corporate Affairs (MCA), during the moratorium period starting from 1 April 2020 to 30 September 2020. This will allow non-compliant companies/ LLPs to clear their backlog of pending filings and make a 'fresh start'.
- The maximum time gap to hold meeting of Board of Directors’ under Companies Act, 2013 (the 2013 Act) (viz., 120 days) has been extended by 60 days for quarter ending 30 June 2020 and 30 September 2020. In other words, time gap between two consecutive board meetings can be 180 days for this period.
- The recently notified Companies (Auditor’s Report) Order, 2020 will be applicable from FY 2020-2021 instead of FY 2019-2020.
- Inability to hold separate meetings of Independent Directors (without the attendance of non-independent directors and members of the management) in FY 2019-2020, will not be considered as non-compliance with the provisions of Schedule IV of the 2013 Act. Independent Directors may share their views amongst themselves through telephone / e-mail or other mode of communication as they deem fit.
- Timelines for creation of deposit repayment reserve of 20% of the deposits maturing during FY 2020-2021 relaxed from 30 April 2020 till 30 June 2020.
- Requirement to invest 15 percent of debentures maturing during FY 2020-2021 in specified instruments, extended from 30 April 2020 to 30 June 2020.
- Additional time period of 6 months allowed to newly incorporated companies to file a declaration for Commencement of Business (in Form INC-20A). Accordingly, the newly incorporated companies can file form INC-20A within 1 year of its incorporation.
- Inability to meet minimum residency requirement of stay in India for 182 days by at least one director, shall not be treated as a violation for FY 2019-20.
- In order to prevent triggering of insolvency proceedings against MSMEs, the thresholds for default under section 4 of Insolvency and Bankruptcy Code, 2016 (IBC 2016) has been raised to INR 10 million (from the existing threshold of INR 100,000).
If COVID-19 outbreak continues beyond 30 April 2020, the government may consider suspending section 7, 9 and 10 of the IBC 2016 for a period of 6 months to stop companies at large from being forced into insolvency proceedings in such force majeure causes of default.
Following relaxations announced with respect to banking related transactions for a period of 3 months:
- No charges to be levied on cash withdrawal through Debit Card from any other bank’s ATM.
- Waiver of fees for maintaining minimum balance requirement.
- Reduction in bank charges for digital trade transactions for all trade finance consumers.
Considering the difficulties being faced by the industry in adhering to the due dates for compliances under direct tax, indirect tax and company laws, the announcements of the government should benefit India Inc at this time of lockdowns due to outbreak of COVID-19.
The timeline for filing of Advance Pricing Agreements (APA) which is due by 31 March, 2020 and CbC report related Forms i.e Form 3CEAC and 3CEAD which is due for filing between March 20, 2020 to June 29, 2020 (depending on the accounting year of the parent entity) shall be extended to June 30, 2020.
Reporting statements in Form 61, 61A, 61B etc due by 31 May 2020, should also be extended till 30 June 2020
This is only a Press Release and so the circular and legislative amendments will need to be looked into for the actual amendments in the respective sections of the Acts.
The Supreme Court vide its order dated 23 March 2020 in SUO MOTU WRIT PETITION (CIVIL) No(s).3/2020 IN RE : COGNIZANCE FOR EXTENSION OF LIMITATION, “has taken Suo Motu cognizance of the situation arising out of the challenge faced by the country on account of Covid-19 Virus and resultant difficulties that may be faced by litigants across the country in filing their petitions/applications/suits/ appeals/all other proceedings within the period of limitation prescribed under the general law of limitation or under Special Laws (both Central and/or State). To obviate such difficulties and to ensure that lawyers/litigants do not have to come physically to file such proceedings in respective Courts/Tribunals across the country including this Court, it is hereby ordered that a period of limitation in all such proceedings, irrespective of the limitation prescribed under the general law or Special Laws whether condonable or not shall stand extended w.e.f. 15th March 2020 till further order/s to be passed by this Court in present proceedings. We are exercising this power under Article 142 read with Article 141 of the Constitution of India and declare that this order is a binding order within the meaning of Article 141 on all Courts/Tribunals and authorities.”
Source: Press release issued by Ministry of Finance dated 24 March 2020, General Circular no. 11/2020 dated 24 March 2020 issued by MCA, Notification no. S.O. 1205(E) dated 24 March 2020 issued by MCA.
16 March 2020
The GST Council at its 39th meeting held on 14 March 2020 recommended changes in law, procedure and GST rates
The GST Council recommended deferment of e-invoice and new returns. Due date of filing annual return and reconciliation statement for financial year 2018-19 also extended. Increase in GST rate of mobile phones and specified parts recommended.
The GST Council has recommended the following changes related to law and procedure:
- Retrospective amendment from 1 July 2017 to be brought out in the GST law with respect to interest for delay in payment of GST. Such interest is proposed to be charged on the net tax liability discharged in cash
- Due date for filing the Annual Return in Form GSTR-9 and the Reconciliation Statement in Form GSTR-9C for financial year 2018-19 proposed to be extended to 30 June 2020
- Taxpayers having turnover less than INR 5 crore would not be required to file GSTR-9C for financial year 2018-19
- Filing of GST returns in the new formats proposed to be deferred. Existing system of furnishing Form GSTR-1 and Form GSTR-3B proposed to continue till September 2020
- Date for implementation of e-invoicing and QR Code proposed to be extended to 1 October 2020
- Certain class of registered persons including insurance companies, banking companies, financial institutions, non-banking financial institutions, GTA, passenger transportation services proposed to be exempted from issuing e-invoices or capturing dynamic QR code
- For facilitation of exporters, it has been proposed that combined refund applications across financial years can be filed
- Exemptions from IGST and cess on the imports made under the Advance Authorisation / Export Promotion Capital Goods / Export Oriented Units schemes, proposed to be extended till 31 March 2021
- A new facility called ‘Know Your Supplier’, proposed to be introduced so as to enable every registered person to have some basic information about the suppliers with whom they conduct or propose to conduct business
- Where registrations were cancelled till 14 March 2020, the period of filing application for revocation of cancellation of registration proposed to be extended till 30 June 2020
- A special procedure is proposed to be prescribed for registered persons who are corporate debtors under the provisions of the Insolvency and Bankruptcy Code, 2016 and are undergoing the corporate insolvency resolution process to enable them to comply with the provisions of GST laws during the Corporate Insolvency Resolution Process period
- The Central Goods and Services Tax Rules, 2017 are proposed to be amended to bring out the following changes:
- Procedure for reversal of input tax credit in respect of capital goods partly used for affecting taxable supplies and partly for exempt supplies
- Ceiling to be fixed for the value of the export supply for the purpose of calculation of refund on zero rated supplies
- To allow for refund to be sanctioned in both cash and credit in case of excess payment of tax
- To provide for recovery of refund on export of goods where export proceeds are not realised within the time prescribed under Foreign Exchange Management Act, 1999
- Circulars would be issued for providing clarity on the following issues:
- Apportionment of ITC in cases of business reorganisation
- Appeals during non-constitution of the Appellate Tribunal
- Refund related issues
- Special procedure for registered persons who are corporate debtors under the provisions of the Insolvency and Bankruptcy Code, 2016, undergoing the corporate insolvency resolution process
The GST Council has recommended the following changes related to GST rates on goods and services:
- GST rate on mobile phones and specified parts proposed to be increased from 12 percent to 18 percent
- GST rate on Maintenance, Repair and Overhaul (MRO) services in respect of aircraft proposed to be reduced from 18 percent to 5 percent with full ITC
- The place of supply for B2B MRO services is proposed to be changed to “location of recipient” which is currently taxed as per “place of performance”. This change is likely to assist in setting up of MRO services in India
The above GST rate changes would be applicable from 1 April 2020
The following suggestions have been made to resolve system related issues:
- Linking of details of statement of outward supplies in Form GSTR-1 to the liability in Form GSTR-3B, followed by linking of input tax credit in Form GSTR-3B to the details of the supplies reflected in the Form GSTR-2A
- Implementation of Aadhaar authentication and spike rules would also be initiated to tackle tax evasion
While the e-invoicing system was put to trial for large taxpayers, industry still needed time in getting accustomed to the same and carrying out ERP changes. The release of updated schemas shows that the system is still in development phase and the deferment would help in fixing the glitches and building a robust system for effective implementation.
3 February 2020
Gujarat High Court strikes down levy of IGST on ocean freight
Levy of IGST on ocean freight held impermissible in law by Gujarat High Court. The Gujarat High Court has held that the levy of IGST on ocean freight is not permissible and declares the relevant notifications as unconstitutional.
Facts of the case:
Writ petitions were filed by various assessees before the Gujarat High Court challenging the levy of IGST on ocean freight for the services provided by a person located in a non-taxable territory by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India.
IGST was levied on ocean freight through notification no. 8/2017-Integrated Tax (Rate) dated 28 June 2017. Further, the liability to pay tax on such service was fixed on the importer as the recipient of service vide entry at serial no. 10 to notification no. 10/2017-Integrated Tax (Rate) dated 28 June 2017.
Gujarat High Court disposed of a batch of writ petitions vide common judgment in the case of Mohit Minerals Pvt. Ltd.1 (writ petitioner) on 23 January 2020.
Contentions of writ petitioner:
- The writ petitioner submitted that levy of IGST on ocean freight tantamounts to double taxation as IGST was already discharged once on the import of goods where such freight amount already formed a part of the valuation of goods.
- It was contended that the services of foreign shipping lines were procured by the foreign exporter. The writ petitioner was not a part of the said transaction and hence, cannot be said to be the “recipient” of services for the purpose of payment of IGST.
- In terms of notification 10/2017-Integrated tax (Rate), the recipient of service is liable to pay tax under reverse charge mechanism (RCM). Since the writ petitioner is not the recipient of the services, it cannot be made liable to pay tax.
- The entire gamut of transaction occurred outside India. Supply of service of transportation of goods by a person in a non-taxable territory to another person in a non-taxable territory from a place outside India up to the Customs station of clearance in India is neither an inter-state supply nor an intra-state supply. In such circumstances, no GST can be levied and collected from the writ petitioner.
- Further, the services cannot be construed as import of services by the writ petitioner as the location of supplier of service, i.e. foreign shipping line and the location of recipient of services, i.e. foreign exporter, are both outside India and hence, outside the scope of levy of GST.
Contentions of Revenue:
- The Revenue contended that IGST on ocean freight is levied based on representations received from Indian shipping industry to provide a level playing field to Indian shipping lines.
- Further, the IGST paid under reverse charge mechanism was available as input tax credit to the importer and hence, there was no additional cost.
- The Gujarat High Court examined the provisions of GST law and observed that taxing statutes have to be given a strict interpretation. Importers cannot be deemed to be covered within the scope of the term “recipient” defined under the GST law for the purpose of levy of IGST on ocean freight services.
- The Revenue has erred in treating importers as recipient of services as the services are actually received by the foreign exporter. The Indian importers were not even liable to pay consideration to the foreign shipping lines and hence, cannot be held liable to pay tax on such services.
- It was observed that the transaction is not entered into by supplier or the recipient located in India. The mere fact that the transportation of goods terminates in India, will not make such supply of transportation of goods as taking place in India.
- Since the importer of goods was not the recipient of supply of ocean freight services, input tax credit could not be availed, which was sought to be recovered under the impugned notifications.
- Accordingly, the Gujarat High Court allowed the writ petitions and declared the impugned notifications as unconstitutional being ultra-vires the provisions of IGST Act.
The judgment is likely to provide closure to the contentious issue of levy of IGST on ocean freight services and provides relief to importers who were subjected to double taxation.
While this judgement would provide guidelines to matters pending before High Courts in other states, the final judgment of these courts would have to be seen. Also, we need to keep a watch on Revenue approaching the Hon’ble Supreme Court against this judgment.
1Special Civil Application No. 726 of 2018
30 January 2020
Madras High Court holds notice pay recovery being outside the scope of levy of service tax
Service tax not applicable on notice pay recovery made by employer from employees. The Madras High Court, while disposing the writ petition filed by GE T&D India Limited (writ petitioner), has held that notice pay recovery made by an employer from its employees is outside the scope of levy of service tax.
Service tax not applicable on notice pay recovery made by employer from employees.
The Madras High Court, while disposing the writ petition filed by GE T&D India Limited1 (writ petitioner), has held that notice pay recovery made by an employer from its employees is outside the scope of levy of service tax.
Facts of the case:
Employment agreements of the writ petitioner provides for serving a notice period of 2-3 months before quitting employment.
In case an employee desires to quit employment before serving the notice period then the said employee is required to pay the equivalent salary for not serving the notice period.
The petitioner had received certain amounts in lieu of notice period not served by the outgoing employees.
The service tax authorities had issued show cause notices in relation to notice pay recovered by the employers from the employees.
The authorities were of the view that such recovery was covered within the scope of “declared services” defined in clause (e) of Section 66E of Chapter V of Finance Act, 1994 and that the employer was “tolerating an act” of immediate quitting from service, by the employees and such agreement/ toleration results in the rendition of a taxable service.
- The Madras High Court observed that the employer cannot be said to have rendered any “service” and has merely facilitated the exit of the employee upon imposition of a cost upon him for the sudden exit.
- The definition of “declared service” is not attracted to this scenario as the employer has not “tolerated any act” of the employee but has permitted a sudden exit upon being compensated by the employee.
- For chargeability of service tax on notice pay recovery, contract of employment has to be read as a whole. There are situations in a contract that constitute rendition of service such as breach of a stipulation of non-compete. However, in case of notice pay (in lieu of sudden termination) rendition of service does not arise either by the employer or by the employee. Accordingly, service tax shall not be applicable of notice pay recovery.
This judgement brings relief to companies receiving notices from the authorities demanding service tax on notice pay recovery. It is pertinent to note that the CESTAT, Allahabad2 had also adopted a similar view while quashing the demand raised on such notice pay recovery.
Under the GST regime, businesses should analyse the applicability of GST on notice pay recovery in light of the provisions of GST law and judicial pronouncements under service tax along with the relevant terms of the employment contracts.
1W.P.Nos.35728 to 35734 of 2016
2HCL Learning Limited vs. Commissioner of Central Goods and Service Tax, Noida Service Tax Appeal No. 70580 of 2018
7 January 2020
FAQs released by GSTN provide clarity on e-invoicing under GST
The GST Network has issued a compilation of Frequently Asked Questions (FAQs) relating to e- invoicing under GST. The key aspects are:
- On uploading of the relevant details on Invoice Registration Portal (IRP), IRP will validate GSTIN existence (of supplier and recipient) and duplication of invoice. If non-existent GSTIN and / or a duplicate invoice is found, the invoice will be returned with relevant error codes, without registering it.
- Post validation on IRP, a signed Invoice Reference Number (IRN) will be provided to the supplier. IRP will also return a QR code, with digital signatures of IRP. In case an invoice is required to be printed by the supplier, the same shall also contain IRN and QR code.
- IRN shall be generated only through IRP basis GSTIN of supplier, invoice number of supplier, financial year.
- Invoice in PDF format shall not be generated on IRP. Also, emails shall not be sent by IRP to the recipient.
- Option to upload details of e-invoices on IRP in bulk shall be available. However, IRP shall accept one invoice at a time. Line items supported in an e-invoice have been increased from 250 to 10,000 per e-invoice.
- IRN shall also be required on debit notes, credit notes, export invoices and Input Service Distributor’s invoices and credit notes.
- IRN is not required to be obtained for delivery challan and bill of supply. Further, in case of imports, for bill of entry generated by the Customs authorities, it is not required to obtain IRN.
- No amendment is permitted of an invoice whose IRN has been generated. If a business wants to cancel an already reported invoice, the same may be done by uploading IRN or by uploading the following details:
- Type of document
- Document number and date
- Once an invoice is cancelled, the same invoice number cannot be used again to generate another invoice.
- Foreign service provider can integrate with IRP from India only.
- Amendments to be made in the GST law for bringing consistency in the contents of e-invoice template (Form GST INV-01) with the particulars prescribed to be contained in a tax invoice.
The recent initiatives of the government around e-invoicing shows the government’s progress towards the target start date for mandatory implementation of e-invoicing system from 1 April 2020.
The FAQs provide further clarification on issues such as no requirement of generation of IRN for bill of entry in case of import, bill of supply and delivery challan, number of line items supported by an e-invoice, etc. Further developments are expected from the government and businesses should monitor the same to be compliant with the prescribed regulations.
While the government planned to introduce the e-invoicing system on trial basis from 1 January 2020, APIs are still expected to be released.
Industry also need to set up internal procedures and IT related processes for adapting to the e-invoicing system and test the same before the mandatory rollout.