Think Tank

GST in the Age of Covid: An Update and the Way Ahead

Sandeep Chilana, Managing Partner, Chilana & Chilana Law Offices

The GST has remained a topic of debate and, in many cases, trauma compounded by frequent changes in tax rates, confusing and sometimes conflicting rules on input credit and the continuing threat of anti-profiteering action by the authorities. Further, with collections falling short of expectations in recent months, and especially with Covid-19 now wreaking havoc on economic activity, the path ahead may not necessarily favour industry. Whilst everyone agrees that GST is a ‘good thing’ in the long term, the fact remains it continues to create implementation and compliance challenges for CFOs. At recent all-India CFO Forum sessions, Sandeep Chilana, Managing Partner at Chilana & Chilana Law Offices, provided an update on recent developments in the GST regime and the possible implications of Covid-19.


Numerous relaxations for GST compliances





Recent changes in GST rules due to Covid-19
The government has not yet announced any substantive stimulus or exemptions under the GST but it has granted various relaxations with regard to statutory compliances falling due during the lockdown period. ‘The Taxation and Other Laws’ (Relaxation of Certain Provisions) Ordinance 2020 promulgated on 31st March provides for extensions to a number of tax compliance (other than tax payment) deadlines.


For organisations with >Rs 5 crore turnover: the due date for filing GSTR-3B return for May extended to 27th June

For taxpayers with an aggregate turnover of more than Rs 5 crores in the preceding financial year:

  • There is no extension to the due date for filing GSTR-3B return or payment of taxes for February, March or April 2020.
  • With regard to interest rates:
    • No interest is payable if returns are filed within 15 days of the due date.
    • Interest is payable at 9% p.a. if returns are filed beyond 15 days of the due date but by 24th June 2020.
    • Full interest at 18% is payable from the original date if returns are filed beyond 24th June 2020.
  • No late fee is payable for such returns if the same are filed on or before 26th June 2020.
  • The due date of filing GSTR-3B returns for the month of May 2020 has been extended to 27th June 2020.


For organisations with a turnover of Rs 1.5-5.0 crores, the due date for May has been extended to 12-14th July

For taxpayers with an aggregate turnover of Rs 1.5-5.0 crores in the preceding financial year:

  • There is no extension to the due date for filing GSTR-3B return or payment of taxes for February, March or April 2020.
  • With regard to interest rates:
    • No interest is payable if returns for February and March are filed by 29th June 2020, and that for April by 30th June 2020.
    • Full interest at 18% is payable from the original date if returns are filed beyond these dates.
    • No late fee is payable for such returns if the same are filed on or before aforementioned dates.
  • The due date for filing GSTR-3B returns for May 2020 has been extended to the 12th/14th July 2020 (varying across states).


Time extension granted for other returns: GSTRs 6, 7, 8, 9/9C

Other relaxations

  • The deadline for filing other returns, such as ISD (GSTR 6), TDS (GSTR 7) and TCS (GSTR 8) have been extended to the 30th of June.
  • The due date for filing annual returns (GSTR 9/9C) has been extended to 30th September.
  • The validity of e-way bills generated on or before 24th March has been extended to 31st May.
  • An overarching extension, to 30th June, has been granted for other compliances under the GST Act that were due between 20th March 2020 and 29th June. These extensions apply to:
    • The completion of any proceeding or issuance of any order, notice, intimation, notification, sanction or approval etc.
    • Filing of any appeal, reply or application or furnishing of any report, document, return or statement.
    • Extensions do not apply to issues pertaining to the time of supply, liability to obtain registration, validity of registration certificate of casual dealers and non-resident taxable persons, obligation to raise tax invoice or file returns, payment of interest and late fee (except as waived in terms of aforesaid notification), powers to arrest, penalties for specified offences, detention and seizure of goods in specified cases, or obligation to generate e-way bills.


The ordinance 2020 broadens the scope for extensions under various Acts


Rules under various Acts
The recent ordinance gives effect to the Finance Minister’s earlier announcements, and extensions to the various compliance deadlines under the Customs, Central Excise and Service Tax Laws, the Sabka Vishwas Scheme and the Central GST Act.


Time limit under customs, central excise and service tax laws extended till 30th June


Customs, Central Excise & Service Tax Laws:

  • The time limit specified for issuance of an order, notice, intimation, notification, sanction or approval by any authority, commission or tribunal which falls during the period from 20th March to 29th June stands extended to 30th June, and can be further extended via notifications.
  • The extension also covers the filing of an appeal, reply or application or furnishing of any report, document, return or statement.


The time frame for making payments under SVLDRS scheme stands extended till 30th June


Sabka Vishwas (Legal Dispute Resolution) Scheme:
Under the SVLDRS Scheme, the designated committee was required to issue a statement/demand where:

  • If the amount declared by the assessee was equal to the amount estimated by the designated committee: It is mandated to submit a statement within 60 days from the date of receipt of the said declaration. The time limit for issuance of the declaration has been extended to 31st May.
  • If the amount declared by the assessee was not equal to the amount estimated by the designated committee: It is mandatory to submit an estimate within 30 days from the date of receipt of the said declaration, and a statement within 60 days of filing the declaration. The time limit has been extended to 1st May, and that for issuance of the statement to 31st May.
  • The time frame for making payments under SVLDRS scheme has been extended to 30th June.


Covid-19 classified as force majeure by the government, but its applicability depends on the terms of individual contracts


CGST Act:

  • The Ordinance provides for an enabling provision by way of inserting Section 168A of the CGST Act 2017 to allow the government to extend the time limit for any actions contemplated under the CGST Act which cannot be completed or complied with due to force majeure events such as Covid-19. However, the applicability of force majeure will be determined by the terms of existing contracts.
  • GST PMT-09 has been enabled retrospectively w.e.f. 21st April for transfer of cash balances from one head of account to another. However, ITC transfers are not allowed.
  • Rule 26 of the CGST Act has been amended to allow companies to file returns through EVC instead of DSC from 21st April to 30th June.
  • Filing of ‘Nil’ GSTR-3B returns via SMS (plus an OTP) from a registered mobile number has been allowed. This is especially helpful during the lockdown, when obtaining digital signatures is a challenge.
  • The restriction on availing ITC (up to 10% of ITC not available in GSTR-2A) has been postponed to October. The said condition shall apply cumulatively for the period from February to August 2020; and the return in Form GSTR-3B for the tax period September 2020 shall be furnished with the cumulative adjustment of input tax credit for the said months.


GST on goods in transit…







…will lead to working capital challenges

Covid-19: GST impact
Incomplete supplies

The lockdown may have resulted in instances where tax invoices were raised and goods were put in transit but the delivery of goods did not take place, the order was cancelled, or the buyer refused to accept the supplies. In such cases:

  • Full tax is payable along with the GSTR-3B return for the month in which the tax invoice was raised.
  • The tax liability can be adjusted by issuing a credit note, but the excess tax paid can only be adjusted in the month in which the credit note was issued.
  • This may lead to short-term excess cash outflows, possibly creating working capital challenges.


Discounts on goods can be adjusted via a credit note


Discount/re-negotiation of consideration post supply

Post-supply discounts/re-negotiation of price may happen on account of special circumstances, or to ensure recoveries. In such cases:

  • Full tax is payable along with GSTR-3B return for the month in which the tax invoice was raised.
  • The additional tax paid on the discount amount can be adjusted by issuing a credit note, provided:
    • Such discounts are established in the terms of an agreement entered into at or before the time of such supply, and specifically linked to relevant invoices;
    • Input tax credit, as attributable to the discount, is based on a document issued by the supplier, and has been reversed by the recipient of the supply.
  • Excess tax paid is adjustable in the month in which the credit note was issued.


In case of cancellation of an export order, GST has to paid and adjusted after issuance of a credit note

Failure to export goods within three months
By submitting a letter of undertaking (LUT), exporters can opt not to pay GST on export-bound goods. However, this is subject to the condition that the goods must be exported within three months from the issuance of the export invoice. In cases where goods cannot be exported, such as due to supply chain disruptions, lock-downs or the cancellation of an order, the exporter is liable to deposit the GST amount on the value of the invoice. Although it can later be claimed back as a refund, it would lead to a blockage of funds in the interim period. In the case of an order cancellation, GST must paid and adjusted after issuance of a credit note.


Exporters holding dues gone bad may be exposed to additional GST liabilities

Non-receipt of payment for exports within one year
Exporters are also liable to pay tax on the export invoice if the payment, in convertible foreign exchange, is not received within one year from the date of issuance of the export invoice, or such additional period as permitted. In the case of bad debts on exports due to a changed market scenario, exporters may be exposed to additional GST liabilities. It is therefore critical to keep track of outstanding payments and apply for extensions if the payment is likely to be received after more than a year.


Services offered by the head office to branches to enable WFH is taxable under the GST

Work from home and relevant IT infrastructure
The GST laws treat the head office of a company and its branches in other states as distinct persons. Specifically, according to Schedule-I of the CGST Act, any services provided by one distinct person to another would qualify as ‘deemed supply’. Similarly, services provided by related parties, including foreign group companies, and without any consideration, would also qualify as deemed supply. Therefore, the need is to determine if one or more offices of a company or a group company are supporting the technical infrastructure for enabling work from home and whether the same would qualify as ‘deemed supplies’. This is not a non-issue for regular businesses that are within the ambit of GST as they can raise nominal value intra-office invoices and the input credit can be adjusted in each other’s books. However, for businesses that are exempt from GST, such invoicing must not only follow a defined pricing formula, the GST too will not be available for set off due to the exempt nature of the entity.


ITC on Covid supplies are still not exempt under the GST

Other cases

  • Write-off of stocks: If goods are damaged in transit or due to other circumstances, it would entail an ITC reversal.
  • ITC mismatch: Non-payment of taxes or non-filing of returns by vendors expose companies to the risk of ITC mismatches and reversal, and subsequently to the risk of a coercive action.
  • ITC on Covid supplies: The government is looking at the issue of granting an exemption to allow ITC on Covid supplies like PPE suits, gloves, sanitisers, health services, etc.


Delhi high court in a historical decision allowed Tran 1 form till June 30

Managing liquidity: impact of recent judgements
Filing of TRAN 1: Reliance Electrik Works vs UoI
(Delhi HC Judgment dated 5th May 2020)
Recently, the Delhi High Court ruled that the time limit provided for filing TRAN 1 as prescribed under Rule 117 is only indicative and therefore, the same would not result in the forfeiture of the rights. CENVAT credit can be availed in perpetuity. Therefore, in terms of the residuary provisions of the Limitation Act, the period of three years should be the guiding principle and CENVAT credit of erstwhile taxes can be claimed till 30th June 2020. In case companies have not filed or have missed out certain credits in TRAN 1, the same can be availed basis this judgment, and by filing a manual application before 30th June 2020. However, if GST authorities outside Delhi deny the claim, the same can be enforced by way of approaching jurisdictional High Courts.


GSTR-3B allowed to be rectified

Revising of GSTR-3B: Bharti Airtel Limited vs UoI
(Delhi HC judgement dated 5th May 2020)
The Delhi High Court held that the failure of the government to operationalise the statutory returns – GSTR 2, 2A and 3 prescribed under the CGST Act – cannot prejudice the rights of the taxpayer to correct mistakes in the GSTR-3B returns. The Court observed that GSTR-3B was merely an alternative arrangement in the form of a summary return and did not have the statutory features of the returns prescribed under the CGST Act. Therefore, the Court allowed the petitioner to rectify the GSTR-3B of the very month in which the said errors occurred. The judgment would allow companies to explore opportunities for correcting mistakes in GSTR-3B in the same month, thereby reducing interest liabilities by adjusting ITCs in the relevant month.


No GST on ocean freight

GST Paid on Ocean Freight: Mohit Minerals Vs UoI
(Gujarat HC judgement dated 23rd January 2020)
The Gujarat High Court held that no GST is leviable under the IGST Act on ocean freight for 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. Since the levy has been held unconstitutional, the same can be claimed back by way of refund especially by companies (such as in the oil, gas and power sectors) who have no output GST liabilities. Other companies can stop paying such tax depending upon ITC utilisation and cash flow management requirements.


The transition of cesses into GST regime allowed

Transitional Credit of Cesses: Sutherland Global Services Private Limited Vs Assistant Commissioner CST
(Madras HC judgement dated 5th September 2019)
The availability of ITC on cesses payable under the erstwhile regime has remained a disputed question ever since the introduction of the GST. While interpreting the transition provision, the Madras High Court has allowed the transition of credit of cesses (Education Cess, Secondary and Higher Education Cess and Krishi Kalyan Cess) into the GST regime through the TRAN 1 declaration. Taxpayers can take advantage of the said judgment and file a manual application for claiming the transition of cesses. If and when such a claim is rejected, taxpayers may approach courts by way of a writ to obtain similar relief.



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