When the lockdown was suddenly announced, a lot of matters were left hanging midway. Filing of GST returns in one such matter, which needs to be analyzed.
Non Availability of DSCs
With the sudden announcement of the lockdown, digital signature certificates (DSCs) are still locked up in offices or are not readily available for use. In such a scenario, technical difficulty in the filing of GST returns will be faced. The entire process is a mechanism, wherein taxes can be paid through certain adjustments that are made in the GSTR 3B returns, that are filed by the businesses. These taxes are paid either by utilizing the input tax credit or by cash. Due to the lockdown, DSCs are still stuck in offices, and movements to gain access to them are restricted.
Cash tax payment
Even those companies who are in a position to, and wish to pay their taxes on time to avoid any interest liabilities, later on, are facing a lot of concerns, since they are unable to file the returns in the absence of the DSCs. Another issue that they are facing is with regards to claiming their input tax credits for March, April, and May without having filed GSTR-3B. As per section 50, interest is presently applicable only on net liability, which means the tax payable in cash; this is after having offset the available input tax credit. For the companies who will file their GST returns late, naturally, the inputs for their receivers will also be credited late. In such a situation, those companies that are willing to belatedly file the returns are still doubtful about where or not the reduced interest rate would apply on the liability payable in cash, while the input tax credit would be credited to their electronic credit ledger later on in the year.
Blocking of the ECL since January 2020
On 17 January this year, authorities decided to block the electronic credit ledgers of businesses, to initiate an investigation on their part. This was a part of the anti-evasive drive, meant to prevent misuse of credits that had been availed fraudulently. Now, with the ongoing lockdown, these investigations will continue to remain pending for a long time. Meanwhile, businesses are not in a position to use their ECL credit.
Printed versus digital investigations
On the day of the lockdown, many investigations were still under progress. These have now been paused since the most lower levels of the revenue authorities were working on the conventional models of the printed document. As a universal truth, these credit ledgers will now be blocked, because of which, even for genuine and authentic cases, these can now not be unblocked. To ease out the liquidity of the business and to reduce this liquidity pressure, provisional credit will be allowed, until the investigations reach some concrete conclusion. On the other hand, digital investigations could have been easily conducted after having temporarily unblocked the credit ledger in cases where preliminary information was provided to the tax officers via email or other digital means.
Because of the global slowdown of the economy, various sectors such as travel and tour operators, tourism, the hospitality and aviation industry are looking forward to getting some kind of supplementary help from the government. This aid may include rate cuts, tax waivers and other similar financial measures. Even after the lockdown ends, it is very obvious that there would only be a lukewarm response to these sectors. In such a scenario, businesses should first try to stabilize their functionalities in some way. This is large because spending on tourism, hotels and the hospitality sector would only be done by those who need these services once the lockdown ends.
GST Audit for the previous financial year
Businesses and tax professionals would take time to stabilize their functions because of the lockdown. Moreover, the due dates of filing all GST returns also collided in June 2020. It is thus very obvious that the GST audit date for the previous financial year, which was June 30, 2020, would also require some extension. Even if the lockdown ended immediately, a month and a half would not suffice to complete the GST audits and meet other compliances.
An input tax credit will not be available for the goods which were either lost or stolen or in any way destroyed, written off or even disposed of by way of gift or free samples. In the FMCG sector, there are plenty of cases where the stock would not be realizable at the market value, and where it may be lower than the cost value. The government would also have to address all these issues, for stock that was destroyed or written off due to the lockdown, and look for solutions.
In conclusion, it can be safely stated that the government has no doubt empathized with the suffering sectors, and has followed a proactive approach in the present situation. At the same time, it has taken proactive measures to ease the burdens of these businesses to a considerable extent. Businesses are looking up to the government to offer them timely solutions to the above stated genuine problems that they are going through, along with issuing appropriate reliefs and clarifications at the same time.
Disclaimer: All possible care has been taken to ensure that the above-given information is completely genuine and authentic. Readers, however, are advised to recheck and confirm the same from the relevant departments in case of any need. The company shall be in no way responsible for any loss or damage that any person faces on account of the same. All views expressed above are solely personal and are in no way to be used as legal opinions for any matter.