26 March 2020
Income Tax and Regulatory Relaxations – COVID-19 Outbreak
 
The outbreak of COVID-19 across the globe has been unprecedented, with major economies announcing bailout packages, regulatory relaxations amidst lockdowns. Following the suit, Finance Minister (FM), Ms. Nirmala Sitharaman announced certain relief measures on 24 March 2020 relating to Taxation, Corporate Affairs, Insolvency, and Bankruptcy Code (IBC), Fisheries, Financial Services, and Commerce Sector1.

Below is a brief snapshot of the announcement:

Direct Tax Measures

The taxpayers have most of their deadlines expiring at the end of the financial year i.e., 31 March 2020. Similarly, certain compliances have a threshold date of 30 April such as deposit of withholding taxes (WHT) for March or 31 May filing of statement of financial transactions (SFT), etc. Considering the significant impact, COVID-19 is having on businesses, the FM has proposed the following:
  • Timeline for filing delayed and revised tax returns for FY 2018-19 (i.e. AY 2019-20) has been extended from 31 March 2020 to 30 June June 2020. It is to be noted that there is no waiver in terms of late fee of INR 10,000 for filing the delayed return,
  • The timeline for various compliances falling between 20 March 2020 and 29 June 2020 has been extended to 30 June 2020
    • Issuance of notices falling within the above period, say notice for reopening of assessment under section 147 of domestic tax laws, penalty notices, issuance of the questionnaire under on-going assessments;
    • Time limit for filing appeals either by the taxpayers or revenue authorities before any appellate forum;
    • Issuance/processing of intimations under section 143(1)/ 200A of the Income Tax Statute;
    • Issuance of orders for completion of any proceedings under Direct Tax Laws;
    • Furnishing returns/statements (such as WHT), SFT, challan cum statement for WHT on sale/rental of immovable property etc.);
    • Issuance of WHT Certificates;
    • Filing of Country by Country Report for FY 2018-19;
    • Submission of statement (in Form No. 49C) by non-resident having a liaison office in India;
    • Investments by individual taxpayers for claiming deductions in their tax returns;
    • Filing of applications by the taxpayers under various provisions of the statute (such as revision applications/interest or penalty waiver applications) etc.
    The above measures are applicable mutatis mutandis to the applicable provisions under Wealth Tax Act, Prohibition of Benami Property Transaction Act, Black Money Act, STT law, CTT Law, Equalization Levy law, Vivad Se Vishwas law;
  • While the due dates for payment of taxes remain unchanged, the interest cost @ reduced rate of 0.75% per month/ part of the month may continue to be levied from their original due dates. However, the late fee/penalty on such delayed payments have been waived off. It is pertinent to note that the press release did not mention anything on the interest on delayed filing of returns/statements;
  • The first cut-off date for payment of taxes without any additional interest cost has been extended from 31 March to 30 June June 2020. Given that the press release issued by the government is silent on the closure date of the scheme, it is believed that the same remains to be 30 June 2020.
    Further, the scheme provided for the issuance of a certificate stating the amount payable, and issuance of the final settlement order within a gap of 15 days. With these relaxations, the authorities and taxpayer would be at ease, and the compliances would become practical;
  • Extension of PAN-Aadhar linking deadline till 30 June 2020

Corporate Affairs and IBC Measures

Given below is a brief snapshot of measures announced about Corporate affairs and IBC:
Regulatory Authority Relaxation Granted
Ministry of Corporate Affairs (MCA)
  1. The Ministry has clarified that spending funds for COVID-19 related activities shall be counted as an eligible (Corporate Social Responsibility) CSR activity.
  2. No additional fees shall be charged for late filing during the moratorium period from 1 April to 30 September. In respect of any document, return, statement, etc., required to be filed with MCA, irrespective of its due date.
  3. MCA has relaxed the mandatory requirement of holding meetings of the Board of the companies within the prescribed interval of 120 days by a period of 60 days till the next two quarters, i.e. till 30 September.
  4. The applicability of the Companies (Auditor’s Report) Order, 2020 is postponed and now made applicable from the financial year 2020-2021 instead of 2019-2020.
  5. The non-compliance with the requirement to hold one meeting by Independent Directors without the presence of Non-Independent Directors and Companies management as per Schedule 4 to the Companies Act, 2013 shall not be regarded as a violation.
  6. Requirement to create a reserve of 20% deposits maturing during the financial year 2020-21 before 30 April 2020 shall be complied till 30 June 2020.
  7. Requirement to invest 15% of debentures maturing during a particular year in specified instruments before 30 April 2020, may be done so till 30 June 2020.
  8. Newly incorporated companies shall be given a time period of one year instead of six months to file a declaration for Commencement of Business within six months of incorporation.
  9. Non-compliance with the requirement of having minimum one director resident in India for a period of at least 182 days, under Section 149 of the Companies Act, shall not be treated as a violation.
Insolvency & Bankruptcy Code, 2016 (the Code)
  1. The threshold of default to initiate insolvency action has been raised to INR 1 crore (from the existing threshold of INR 1 lakh as per section 4 of the Code), due to emerging financial distress faced by most companies on account of the large scale economic distress caused by COVID-19. It is stated that this will also prevent from triggering the insolvency proceedings against MSMEs.
  2. Ministry has also stated that if the current situation continues beyond 30 April 2020, they may consider suspending section 7, 9 and 10 of the Code for a period of six months to stop companies at large from being forced into insolvency proceedings in such force majeure causes of default.

Financial Services Measures
  • Three months’ relaxation for:
    • No charges on cash withdrawal from other bank’s ATM,
    • Waiver of minimum balance fee;
    • Reduced bank charges for digital trade transactions by all trade finance consumers.

Necessary circulars/ notification effecting above legislative amendments are yet to be issued by the Ministry of Finance & Corporate Affairs.

Our Comments

The above relief measures announced by the government are unprecedented and welcomed by all the taxpayers. These extensions are in line with the Supreme Court of India’s suo moto order issued on 23 March 20202 extending the limitation period for petitions/applications/suits/ appeals/all other proceedings.

However, taxpayers should take cognizance of the following points:

  • Extensions have been made only for various compliances prescribed under the statute and not to the dates by which amendments to the respective statutes are effective (changes brought in by Budget 2020, unless their period of operation has been specifically extended by Finance Act, 2020);
  • Due dates for filing of audit reports/ tax returns for FY 2019-20 have not been extended. Considering the difficulties which may be faced by the taxpayers, the government may be expected to come up with similar relaxation for filing of tax returns for FY 2019-20 as well;
  • Whether this could have an impact on assessments time barring on 30 September 2020, this is also yet to be seen;
  • While moratorium granted to additional fees payable to MCA reduces the compliance as well as financial burden at large, it remains to be seen if past non-compliances in the nature of filings also get resolved without payment of any additional fees – if so – this will be an opportunity for the corporate sector to regularize the past compliance issues.

While these measures would help businesses in planning their affairs with limited resources, they are only indicative, and one has to wait for the fine-print before implementing them.


1 Government of India Press Release dated March 24, 2020
2 Suo Motu Writ Petition (Civil) No(S).3/2020
Ease in GST compliances in light of COVID-19 pandemic 
 
The COVID-19 pandemic is severely affecting businesses across the country. In view of this, Finance Minister Nirmala Sitharaman announced a slew of measures to ease the GST compliance burden on businesses. We have captured the key indirect tax announcements below.
  • Relaxation in GST compliance requirements
    • Taxpayers will be allowed to file their GST returns for February, March, and April 2020 towards the end of June 2020 [staggered due dates around 30 June 2020] without any interest [subject to below], late fee and penalty.
    • However, in the case of businesses with an aggregate turnover of more than INR 50 million, there will be a levy of interest at a reduced rate of 9% p.a. (as against the actual interest rate of 18% p.a.), in case of delay of more than 15 days in payment of tax, from the due dates applicable presently.
  • Extension of payment date under the Sabka Vishwas Scheme
    • The due date for payment under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 has been extended to 30 June 2020;
    • Further, no interest would be charged for this extended period, provided the payment is made by 30 June 2020.
  • Customs clearance to be an ‘essential service’
    • The clearance of customs shipments has been declared as an ‘essential service’ to ensure that imports and exports are not affected due to the lockdown announced by Central and State authorities. The customs clearance will continue to operate 24/7, at least till 30 June 2020.
  • Extension in due dates for notices, applications, etc.
    • The due date for issue of notice, notification, filing an appeal, applications, or time limit for any compliance under the GST, customs, and other allied laws where the time limit is expiring between 20 March 2020 to 29 June 2020 has been extended to 30 June 2020.
Our Comments
The relaxation in GST return due dates and the associated penal provisions should help taxpayers to focus and stabilize their core business processes in these testing times.
Nexdigm (SKP)
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+91 22 6730 9000 | skp.tax@skpgroup.com | www.nexdigm.comwww.skpgroup.com
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