Impact of Covid from indirect tax perspective

1. Covid-19: Indirect Tax Measures

2. Index
2
• Impact on business: Covid-19
• Planning opportunities: good to consider
• Measures introduced: mitigation, by Government
• Measures requested: to sustain, by Industry

3. Covid 19: Impact cycle
3
Redemption cycle:
• Increase in consumption/ demand
• Increase in surplus or savings
• Increase in Government revenue
• Fiscal independence
• Enhanced owner’s capital
Individual
Savings
Government
Revenue
Increase in
fiscal deficit
Dependence
on Borrowed
capital
Business &
Employment

4. Covid 19: Projected impact on GST revenue
4
Analysis:
• Six month’s loss in GST revenue
projected as INR 133,000 Crores
• It may take 6 months to reach
previous year monthly revenue
• Projected revenue Vs. Budgeted
revenue gap to gradually reduce from
60% in Apr’20 to 92% in six months
• World GDP expected to fall by 4%
• Fitch expects decline in GDP to $2.8
trillion fall in global income levels
relative to 2019 and a loss of $4.5
trillion relative to pre-virus
expectations of 2020 global GDP.
• Fitch expects eurozone GDP to
decline by 7%, US GDP by 5.6% and
UK GDP by 6.3 % in 2020
• India GDP to grow below 1% (lower
by over 4% of expected growth)
Period GST Revenue Period
GST/
Projected
Revenue
Budgeted
Revenue
Projected (-)
Budgeted
Revenue
Projected (-)
Previous Year
Revenue
%
PR/
BR
(1) (2) (3) (4) (5) 6=(4)-(5) 7=(4)-(2)
Dec'18 94,726.00 Dec'19 1,03,184.00
Jan'19 1,02,503.00 Jan'20 1,10,818.00
Feb'19 97,247.00 Feb'20 1,05,366.00
Mar'19 1,06,577.00 Mar'20 97,597.00 1,14,777.00 -17,180.00 -8,980.00 85%
Apr'19 1,13,865.00 Apr'20 73,000.00 1,22,065.00 -49,065.00 -40,865.00 60%
May'19 1,00,289.00 May'20 81,367.00 1,08,489.00 -27,122.00 -18,922.00 75%
Jun'19 99,938.00 Jun'20 86,510.00 1,08,138.00 -21,628.00 -13,428.00 80%
Jul'19 1,02,083.00 Jul'20 93,741.00 1,10,283.00 -16,542.00 -8,342.00 85%
Aug'19 98,203.00 Aug'20 95,763.00 1,06,403.00 -10,640.00 -2,440.00 90%
Sep'19 91,917.00 Sep'20 91,917.00 1,00,117.00 -8,200.00 Nil 92%
Apr’19 to
Sep’19
6,06,295.00
Apr’20 to
Sep’20
5,22,298.00 6,55,495.00 -1,33,197.00
Actual GST Revenue Projected Revenue (Covid 19) Budgeted Revenue (Ordinary)
Projected (-) Budgeted Revenue Current Year Projected (-) Previous Year Revenue

5. Planning opportunities: good to consider

6. Planning opportunity
6
1) Credit on medical insurance and canteen
2) Credit on rent-a-cab: 14 Seater and above
3) Exports in INR with Foreign currency equivalent, to cap forex fluctuation
4) Transactions with Branch: Self-sustaining Branch and HO to bill balance
5) Reduce operating costs: defined work force to operate from home
6) Operating from SEZ Vs EOU: working capital free
7) Operating from EOU Vs. STPI: lower statutory fee [currently about 3 Million]
8) Filing of quarterly or monthly refund claims
9) No financial credit notes – highly litigative

7. Planning opportunity
7
10) Reduce intercompany transactions
a) Have salary split between entities – no cross charge for salary
b) Credit on mobile phone bills – 50% of bill, when used for office purposes
11) Raising invoice on last day vs. 1 day after, the end of relevant month
12) Cash discount vs. extended time for payment
13) Check payment to suppliers within 180 days from invoice date, for ITC credit
14) Reduce gap/ time-limit to avail credit: invoice date vs. date of availment
15) Gifts to employees, added as perquisites Vs. cost of GST
16) Surrender non-operative registrations

8. Measures introduced: mitigation, by Government

9. Mitigation strategy: extension of due dates
9
GSTR
3B
Period
Due Date
Interest, Late Fee &
Penalty: Nil, provided
GSTR 3B filed before
Due Date
Interest, Late Fee &
Penalty: Nil, provided
GSTR 3B filed before
Due Date
Interest, Late Fee &
Penalty: Nil, Provided
GSTR 3B filed before
Turnover < 15 Million Turnover > 15 Million < 50 Million Turnover > 50 Million
Feb’20 20-Mar-2020 30-Jun-2020 20-Mar-2020 29-Jun-2020 20-Mar-2020 No Late Fee/ Penalty.
Interest @9% after 15 days,
provided GSTR 3B filed
before 24-Jun-2020
Mar’20 20-Apr-2020 03-Jul-2020 20-Apr-2020 29-Jun-2020 20-Apr-2020
Apr’20 20-May-2020 06-Jul-2020 20-May-2020 30-Jun-2020 20-May-2020
May’20
State wise extension of due date to: 12-Jul-2020/ 14-Jul-2020
(For eg: Karnataka & Maharashtra: 12-Jul-2020/ Delhi & West Bengal: 14-Jul-2020)
Due date extended to: 27-Jun-2020
• Due dates for tax period Feb’20 to Apr’20 are Not Extended but the liability towards interest and late fee is fully/ partially relaxed
GSTR 1
Return Type
Tax Period Due Date Interest
Late Fee & Penalty: Nil
Provided GSTR 1 filed before
Monthly
March 2020 to May 2020
(3 Months)
11 days from end of
month
NA 30-Jun-2020
Quarterly Jan-Mar 2020 30-Apr-2020 NA 30-Jun-2020

10. Mitigation strategy: input tax credits
10
Notification No. Subject
30/2020-Central Tax,
dated 23-Mar-2020
In terms of Rule 36 (4) of the CGST Act, 2017, ITC to be availed by a registered person which are
not appearing in FORM GSTR 2A, shall not exceed 10% of eligible credits appearing in FORM
GSTR 2A
The said condition has been relaxed for the Period Feb’20 to Aug’20, provided the condition is
applied cumulatively in Form GSTR 3B of Sept’20

11. Mitigation strategy: composition tax
11
Notification No. Subject
30/2020-Central Tax,
dated 23-Mar-2020
Option for Composition Scheme - Extends the time limit to file FORM CMP-02 from 31-Mar-2020
to 30-Jun-2020.
Further, Declaration for ITC reversal in FORM ITC-03 on opting composition levy has been
extended from 30-May-2020 to 31-Jul-2020
34/2020-Central Tax,
dated 03-Apr-2020
Extension in payment of self assessment tax by composition tax payer in FORM CMP-08 for quarter
ending Mar’20 is extended from 18-Apr-2020 to 07-Jul-2020
Filing of return for FY 2019-20 in FORM GSTR-4 is extended from 30-Apr-2020 to 15-Jul-2020

12. Mitigation strategy: extended time limits
12
Section 168A: Inserted by an Ordinance Benefit of extended time limit, will not apply to:
• Time limits, falling between 20-Mar-2020
to 29-Jun-2020, for compliance or
completion by the Authorities or by any
person, extended upto 30-Jun-2020
• The extended time limit will apply to
notices, appeals, refund applications,
specified returns, etc.
• Time & Value of Supply
• Action required when turnover exceeds the composition limits
• Registration
• Special provisions for casual taxable person & non-resident taxable person
• Issuance of Tax Invoice, Credit or Debit Notes
• Power to arrest and liability of partners to pay tax
• Inspection of goods in movement for e-way bill
• Penalties under Section 122, detention, seizure of vehicle and goods
• E-way bill generated and whose validity is expiring between 20-Mar-2020 to 15-Apr-2020, is extended till 30-Apr-2020

13. Mitigation strategy: additional relief
13
Particular
Monthly profession tax payments and returns – respective States
Profession tax annual fee
PF dues for Mar’20 15-Apr-20 Additional 30 days
FTP 2015-2020 31-Mar-2021
Claims under SEIS and MEIS 12 months from end of FY 15 Months from end of FY
Duty exemption for EOU/STP/EHTP 31-Mar-2021
Payment under Sabka Vishwas Legacy Dispute Resolution Scheme 31-Mar-2020 30-Jun-2020
• GST portal has been amended to allow returns filing thru EVC instead of DSC.
• Form PMT-09 has been enabled to transfer the cash balance from one head to another or to interest or late fee etc
• Amendment in Customs Shipping bill to enable the refund pending due to SB005 error
• Facility to accept undertaking in lieu of Bond for Customs clearance has been extended till 30-May-2020
• Customs clearance made almost automated like acceptance of e-country of origin certificate, e-communication of Final e-Out
of Charge copy, BOE and e-gatepass
• Pending refund claims to be expeditiously processed
• BCD exemption on ventilators, face and surgical mask, PPE, covid-19 testing kit
• Extension of time to comply with EPCG and Advance Authorisation Schemes

14. Measures requested: to sustain, by Industry

15. Measures requested: to sustain, by Industry
15
1) Increase government spending, to boost consumption
2) Delay in conduct of assessments or audits by Government
3) No coercive action for litigation from interpretation issues, with amnesty option
4) Lower tax rates on consumer products and products/ services with end consumption
5) Lower interest rates for delay in payment and lower penalties for ordinary default’s
6) Promote strategic foreign investments, for boosting industrial growth
7) Incentivise employment generating industry
8) Preferential trade agreements outside China
9) Extended time for GST audit for FY 2018-19 and e-invoicing
10) Extended time limit for vendor payment i.e. 180 days to 270 days
11) Upfront exemption or rebate for EOU’s or inverted duty (working capital)
12) Benefit of input credit, not to be denied, for Covid-19 donations or supplies

16. Accolet supports “Bhiksh Daan Foundation”, a registered charitable trust. Bhiksh Daan, is a means to social cause. We are honored to be part of the noble cause.
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