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Direct Tax

India Considers Easier Loan, Tax Rules to Help Economy Endure Virus

COVID-19 has largely affected the Indian economy. India is considering offering easier loan repayment terms and tax breaks for small and medium-sized companies, extending loan tenors, and relaxing bad-debt norms for small firms. In a letter to the RBI, the finance ministry has proposed a moratorium of a few months on the payment of EMIs, interest and loan repayments, and a relaxation in the classification of bad loans.

Apart from various economic relief measures, on the regulatory front too, the Finance Minister announced numerous relief measures on 24 March 2020 related to Taxation (extension of due dates for multiple filings, deduction linked investments, Vivad Se Vishwas Scheme, etc.), Corporate Affairs, Insolvency, and Bankruptcy Code (IBC), Fisheries, Financial Services, and Commerce Sector. For details, refer to our tax alert dated 26 March 2020.

A rise in Income Tax surveys detect a steady increase in unreported income

A tougher enforcement action to widen the tax base has been a part of the government’s agenda of plugging the fiscal gap caused by unaccounted income. It was observed that the number of surveys jumped from 4,428 in FY16 to 15,401 in FY19, with the amount of previously undisclosed income detected or brought to taxation surging from INR 9,699.85 crore in FY16 to INR 16,125.58 crore in FY19. In this fiscal year through 31 March, 5,808 searches were made so far, which led to the detection of approximately INR 12,793.6 crore in undisclosed incomes. The figures for the current year are tentative and will be updated later.

Reduction in Corporate Taxes expected to boost the 'Make in India Initiative': Survey

In September 2019, with an upgrade in the Income Tax Act, tax rates applicable to companies were reduced from 30% to 22% for existing companies, and from 22% to 15% for newly set-up manufacturing units. A survey by Duff & Phelps reveals that the majority of the industry respondents believe that such a reduction would surely boost the Make-in-India initiative. With the current downward revision of GDP growth for India, the tax rate cut has provided a boost to the economy. The auto and ancillary sector is perceived to be the biggest beneficiary; it is followed by fast-moving consumer goods (FMCGs). Overall, the reduction in corporate tax rates will support start-ups, attracting more funding from venture capitalists. However, the overall impact depends on the corresponding increase in consumption levels, which remains to be seen and could be substantially delayed, given the current set back to the economy due to the COVID-19 outbreak.

SC adjourns software taxation matter by six weeks

Supreme Court adjourns IBM and 100+ assessees' appeal on software royalty taxation matter by six weeks. This is one of the most awaited and watched upon judgment by a large number of corporates.

New slabs make Income Tax structure more equitable: Ajay Bhushan Pandey

The number of slabs will increase to seven from four earlier. Ajay Pandey was of the opinion that fewer income tax slabs can lead to inequity, hitting low-income taxpayers more. He rejected suggestions that the introduction of more slab rates would make things complicated. He mentioned that Singapore has 11 slabs, and China has 7 with the highest rate at 45% - this helps to spread out the tax rates depending on the economic appetite of the taxpayers. IT-enabled tools such as pre-filled return forms would make it easy for taxpayers to file returns.

Empty restaurants call for relief on rent, tax, power usage

Restaurant owners have also suggested aggressive measures to beat the loss in business - Deferment of principal and interest for three quarters, with the deferred amount to be paid over 12 months; a 4% reduction in working capital interest rates; 50% increase in working capital credit limits for six months; 50% deferment of GST liability for the same period, and an extension of existing licenses for six months without charge.

The travel and hotel industry also made representations to the government, urging relief in taxation and waiving of GST to mitigate losses. Further, the industry body National Restaurant Association of India (NRAI) has sought relief on rents, energy costs, overall credit limits and taxation, as malls and restaurants have registered a 30-35% decline in footfalls with the spread of COVID-19 in the country.

Indirect Tax

Amendments to Foreign Trade Policy (FTP) 2015-2020

The 39th GST Council meeting is to be held on 14 March 2020. It is expected that the meeting’s agenda will be dominated by the GST portal glitches being faced by taxpayers even after almost three years of GST implementation. The issue gains significance given the new return filing mechanism expected to be implemented from April 2020.

[excerpts from the Business Standard]

Measures to further boost the GST revenues under consideration

  • The validity of FTP 2015-2020 has been extended from 31 March 2020 to 31 March 2021. Accordingly, the new FTP 2020-2025 would be introduced in April 2021.
  • The time limit for filing MEIS application for the shipping bills filed during the period 1 February 2019 to 31 May 2019 would be as under – Later of –
    • 15 months (earlier 12 months) from the Let Export Order (LEO) date or
    • 3 months from the date of uploading the EDI shipping bill into the DGFT server by Customs.
  • The due date to file Services Exports from India Scheme (SEIS) applications for export of services made during FY 2018-2019 has been extended from 31 March 2020 to 31 December 2020.
  • Various relaxations have also been announced in relation to norms, validity, etc. of Advance Authorisation and Export Promotion of Capital Goods (EPCG) schemes.

Amendments to GST Rules

  • The applicability of e-invoicing and QR code provisions has been postponed to 1 October 2020. Further, the following companies have been excluded from compliance with e-invoicing provisions –
    1. Insurance Company;
    2. Banking Companies and Financial Institutions;
    3. Non-banking Financial Institution (NBFC);
    4. Goods Transport Agency;
    5. Passenger Transportation Company;
    6. A company involved by way of admission to an exhibition of cinematographic films in multiplex screens.
  • The due date to furnish GSTR-9 (annual return) and GSTR-9C (reconciliation statement/GST audit) for FY 2-18-19 has been extended to 30 June 2020.
  • A restriction has been imposed in the GST refund-related provisions whereby the value of zero-rated supply of goods exported without payment of IGST has been restricted to the value that is 1.5 times the value of like goods domestically supplied by the same or, similarly placed, supplier.
Tax Street March 2020