COVID-19 lockdown: Businesses need GST return filing extensions

The COVID-19 pandemic has already beaten the Indian markets black and blue, with the Nifty and Sensex today hitting the lower circuits for the second time in less than a month. At a microscopic level, businesses have come to a halt! Leave alone the tax compliances, but entities are having a tough time managing their day-to-day business operations.

The government of India has imposed lockdowns across several districts of the country since the 22nd of March 2020 up till the 31st of March 2020. It has been done in a bid to reduce the further spread of the coronavirus. States have also been ordered to take legal action against any violators.

The crisis has led to the businesses not being able to perform certain crucial year-end tasks, including the closure of the Books of Accounts and collecting the investment proofs from their employees. 

Not only that, but tax and bank-related monthly compliances are also getting hampered. There is considerably lower compliance of the GST returns in GSTR-3B this month. A certain category of taxpayers such as small businesses, the composition dealers and the exporters have year-end filings such as opting for the quarterly GSTR-1, CMP-02 and LUT respectively for the upcoming fiscal year. 

On the other hand, the submission of the details of the closing stock and receivables with the bankers towards the cash credits/working capital loan accounts will get delayed this month. Banks usually determine the monthly credit limits of their borrowers based on this submission.

Most of the businesses, especially the IT&BP sector, have asked their employees to work from home. The establishments under certain sectors can possibly adopt a work from home style. But there are businesses having teams such as production, inspection and audit in a typical manufacturing setup who are the disadvantaged lot. 

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Even in case of the finance, payroll and billing teams across the various sectors, not all documents are digitised to deal with any online tax compliance requirements. Certain companies also have strict policies not to carry the company documents home. Businesses that do not use cloud-based softwares will face tremendous challenges. Accordingly, the crisis has affected the Chartered Accountants community, who usually collect data from their clients for completing the GST return filings.

The underlying problem in India is that most of the businesses are designed to function at physical establishments and continue to do so. These businesses use conventional desktop systems and desktop-based applications such as Tally to bill and to maintain the Books of Accounts. Despite the tax systems shifting online, there are a lot of MSMEs that still use the conventional ‘bahi-khata’ to-date. It is used for billing, recording sales and purchases and for maintaining ledgers of debtors and creditors.

Although there are many modes of generating the e-way bills, most of the taxpayers under GST use the bulk generation facility. For working on this facility, invoice/document data is populated in an excel or CSV files before uploading on the e-way bill portal. These are mostly done from the desktop systems and operated by the billing team in any ideal business establishment.

The Ministries of Finance and Corporate Affairs must, therefore, consider relieving the taxpayers and companies from certain compliance requirements this quarter. It should begin with the granting of an extension in the GST return filing and certain year-end GST compliances by at least a month to smoothly cope with the crisis. 

Two of the GSTR-3B deadlines have already passed, one on the 20th and the other on the 22nd of March 2020, covering most of the states and UTs. The last one is due on the 24th of March 2020, for certain states and UTs. The taxpayers of those states and UTs who may have already missed these deadlines are worried about the impending interest and late fee liability on them. Some of them may have also paid interest and late fee due to a day or two of delay. Only an extension can put these confusions to rest.

Hence, a cumulative extension must be granted for the GSTR-3B filing, CMP-02 filing, opting for quarterly GSTR-1, LUT filing as well as the TRAN-01 submission at the earliest.

For any clarifications/feedback on the topic, please contact the writer at annapoorna.m@cleartax.in