The Indian government is considering several GST relief goodies to revive the businesses hit by the COVID-19 crisis. The sectors to benefit from these relief measures include the aviation, restaurant, tourism, real estate, hospitality and other service sectors. The government may also provide further statutory reliefs for these sectors.
It has been proposed that the businesses in these sectors could win a six-month relaxation in the GST payments without charging any interest. In other words, their last dates for GST payments could be pushed by six months, as reported by The Economic Times publication based on an interview with a government official.
Another significant proposal is to move from an invoice-based tax levy system to a cash-based tax levy system under GST. It involves a lateral call for providing GST relief to those businesses who recorded bad debts due to non-realisation of receivables and defaults on account of the month-long lockdown.
Currently, the businesses become liable for GST once they raise the invoices. It means that they must pay tax even if the payment towards an invoice is not received. If we move to a cash-based system, the GST will have to be paid only on the invoice payment received by such businesses.
These relief measures are much-needed to give a boost to the already cash-strapped businesses and ease their liquidity pressure. While we can expect these decisions to be taken only by the GST Council, several reports suggest that the Council may meet only by the end of June 2020.
These measures will impact the GST collections for the upcoming months southwards. However, a lower GST can also prompt a higher demand. The states and Union Territories are also expected to back the decision.
Presently, the real estate businesses have to pay GST either at 5% or 12% on construction services provided. If the government considers cutting rates, there could be more investment in this sector.
These relief measures are not spared from drawbacks. For instance, the GST payment deferment option for specific sectors may lead to a delay in the availability of input tax credits for the businesses and other areas immediately along the supply chain. Since there could be delays in the filing of GST returns in forms GSTR-1 and GSTR-3B.
The anti-profiteering wing of the tax department will need to be vigilant of any consumer abuse by not passing the rate cuts benefits. There is already speculation that the new GST return system together with the e-invoicing system, will be pushed for implementation from next year.
The CBIC had launched the ‘Special Refund and Drawback Disposal’ drive a few weeks back to process all the pending GST and customs refund to businesses by the 30th of April 2020. Accordingly, the authority has been able to clear more than Rs 10,700 crore worth refunds in GST and customs duty between the 8th and the 23rd of April 2020.
Further, GSTN has taken upfront initiatives to ease the procedural gaps and reduce the window time to process GST compliance. The introduction of the PMT-09 facility recently on the GST portal is a way to ensure that businesses have enough cash resources at their disposal during these times of crisis.
All these collective rescue efforts by the Finance Ministry and the tax authority will go a long way to ensure that the COVID-19 crisis does not further hit the economy.
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Annapoorna, popularly known as Anna, is an aspiring Chartered Accountant with a flair for GST. She spends most of her day Singing hymns to the tune of jee-es-tee! Well, not most of her day, just now and then.