RECENT DEVELOPMENTS IN GST

[Dr. Sanjiv Agarwal]

We are now in June, 2020 and India moves into the orbit of Lockdown 5.0 or Unlock 1.0 as most of the restrictions get lifted and businesses and life being allowed to move on, of course with Covid -19 on board. The economy has been announced to be opened up to a large extent, though slowly. It will take a reasonable time of atleast a few months to be back on track and be somewhere near normal. Things may not be the same again as in many cases, businesses will undergo a major change, production capacities will remain under- utilized, acute labour shortage will be witnessed, some businesses may even not find the customers or in some cases, business models itself will change. However, digital economy and related businesses may find a spur in growth.

Last month, our Prime Minister announcing a huge financial and economic package of ₹ 20 lakh crore, Finance Minister declared a set of reforms / stimulus in five tranches covering major sectors of the economy and within fiscal eco system of India. This included financial relief, tax sops, steps to boost liquidity, access to credit, market driven reforms, package for businesses, MSME’s and certain other fiscal and business related decisions to be implemented soon. Though these may not reflect any direct cash outgo but are intended to provide a breather and ease of doing business in near future.

Though there have been questions on so called package, both in term of intention and the quantum, we would say that come what may, it ought to be implemented in letter and spirit, now. That’s more crucial. Whatever announcements have been made must see the light of the day. Covid-19 pandemic will continue to impact the economy lock down may be seen as a new normal in short term.

Not only this, the way of thinking, actions and implementation of government, regulators and administration will undergo a visible change. Infact it has already started. Certain new opportunities are being created and understood. The world in not going to be the same again economy is also going to witness a change in its composition rate and growth sectors. The way we work, office environment, life style, personal habits and what not …….all will change. Luxury and life style will get revisited and redefined. All of us may not be the same persons or individuals we were before.

Of late, there is demand for further lowering of tax rates in view of the slowdown of economy and recession in demand from various quarters. However, the thinking in government is that the GST rate reduction is not justified as any further reduction or exemption will result in blocking of input tax credit or create problems of inverted duty structure. There is however, a logic in both the arguments and as such a middle path need to be explored for certain sectors where demand push is necessary. Some of the measures which may spur economy may inter alia, include direct and indirect tax sops to spur demand; tax and other incentives to bigger sectors like real estate, automobile, infrastructure; lowering of GST rates for FMCG and essential items; relief to stressed sector; increased investment in infrastructure etc.

Indian economy is likely to contract in the range of 40-50 percent, as per many agencies but there are hopes for a fast recovery in Q2 of current fiscal. Unemployment will also go up but may see people coming back in next quarter reducing the unemployment levels. India needs to put a proper strategy and operational plan in place to create demand and employment, work on logistics to manage migrant workers, provide liquidity and further tax sops, even temporarily and rescue the economy immediately. This has to be coupled with enhancing infrastructure spends, and nursing specific sectors like agriculture, MSMEs, real estate etc.

Indian economy shall be deeply hit by present Covid 19 crises and GDP growth could be in the range of 1-2%. There is uncertainly all around in major economic sectors and businesses. The problem of unemployment and demand also looms large.

Covid 19 has badly affected GST collection in last in March – May 2020 in current fiscal. Figures are dismal for April and May, 2020 with negative growth of about 90% on YoY basis. Central goods and service tax (CGST) collection stood at ₹ 5934 crore in April, a fall of 87 percent compared with the ₹ 46848 crore collected in the same month last year. IGST collected is ₹ 9749 crore is April, 2020. GST revenue is therefore, now under mask itself. How long ! Only time to tell.

For most of the deadlines in  GST, earlier, a decision was taken to defer the same to on or before 30^th June, 2020. In India, Government has not provided any major stimulus to trade and industry to protect themselves from Corona hit economy except deferring the dates of payment or delayed filings or limited reduced rate of interest. These are not enough and does  not provide the required push. The rate of GST has so far not been touched. There ought to be tangible benefits dolled out in terms of input tax credit, refunds, deferment of tax payments, reduced GST rates on selective basis so that demand is encouraged. Many countries have reduced the GST / VAT rates to as low as 5% or lowered by upto more than 50 percent. In some cases, tax has been waived. It is expected that next meeting of GST Council may be held in 2^nd week of June 2020 via video conference.

CBIC has taken a decision to allow for personal hearing via video conferencing which need to be tested before fully implementing. A new amendment has been made in ITC transitional credit, that too w.e.f. retrospective effect and goes against the various court decisions for allowing transitional credit.

GSTN has now provided the facility of registration for insolvency professionals (IRPs or RPs) w.e.f. 27.05.2020. Resolution professionals have been made liable as taxable persons and obtain registration under the GST law for discharging the tax liability of companies under insolvency proceedings.

Safeguard advisory on GST refunds

• Some fraudulent messages are being circulated on WhatsApp, Email and SMS, claiming to process GST refund. It shows that some miscreants have started to take undue advantage of Covid-19 crisis, by sending out fake messages with phishing links. One such link takes to a portal claimed to have been developed by GSTN. This is fake and Government has notified only www.gst.gov.in as the common portal, under the GST Laws.
• Through such links, the taxpayers are asked to fill important information such as- Personal details, Address, Refund Details and KYC Verification, which may not just cause financial losses to the taxpayer but also enable such unscrupulous elements to steal their personal data for mala fide intentions.
• CBIC has advised that GST refunds can be claimed through GST portal www.gst.gov.in only. Any other source, portal with similar interface, message claiming to process GST refunds are fraudulent.

[Source: GSTN]

Retrospective amendment to section 140 (Transitional Credit)

• CBIC has appointed 18.05.2020 from which retrospective amendment in Section 140 of the CGST Act, 2017 prescribing the time limits for taking transitional credits as per Section 128 of the Finance Act, 2020 shall come into force.
• The amendment is made effective retrospectively from 01.07.2017.
• By virtue of this retrospective amendment , the relief given by various Courts to GST tax payers had been taken away by the Government.

[Source: Notification No. 43/2020 – Central Tax, dated 16.05.2020]

Courts / Tribunals to function through video conferencing

• Guidelines from Order in Suo motu Writ No. 5/2020 dated 06.04.2020 by Supreme Court of India.
• In wake of Covid 2019 lockdown.
• In compliance of Apex Court Order, CBIC issued instruction dated 27.04.2020.
• Directions issued for virtual working environment and personal hearings to take place in virtual mode through video conference via VIDYO as well as through Whatsapp.
• Employed for hearing arguments.
• Evidence not to be recorded without mutual consent of parties.
• Record of personal hearing to be documented.

[Source: Suo motu Writ No. 5/2020 dated 06.04.2020; CBIC Instructions dated 27.04.2020]

GST registration of Resolution Professionals (IRP / RPs)

• Facility for registration of IRPs / RPs has now been made available on GSTN portal w.e.f. 27.05.2020
• IRP’s / RPs can apply for new registration on GST Portal, on behalf of the Corporate Debtors, in each of the States or Union Territories, on the PAN and CIN of the Corporate Debtor, where the corporate debtor was registered earlier, within thirty days of their appointment as IRP/RP.
• IRP / RP should select the reason for Registration as “Corporate Debtor undergoing the Corporate Insolvency Resolution Process with IRP/RP” from the drop down menu.
• The date of commencement of business for IRP/RPs will be the date of their appointment.
• The person appointed as IRP/RP shall be the Primary Authorized Signatory for the newly registered company.
• The new registration by IRP/RP will be required only once.
• Where IRP / RP are different, the change in the GST system may be carried out by a non- core amendment in the registration form.

[Source: Notification No. 11/2020-CT dated 21.03.2020 ;

GSTN (https: // www.gst.gov.in/)]

SOP for conduct of personal hearing in virtual mode

• In view of COVID-19 pandemic, it has been decided that personal hearings in respect of proceedings under the provisions of Central Excise Act, 1944; the Finance Act, 1994 and Central Goods and Service Tax Act, may be conducted through video conferencing facility.
• The Commissioner of CGST, Mumbai has considered Whatsapp Video conferencing as the most suitable mode, on the ground that it facilitates ‘end to end encryption’.
• The Commissionerate has prescribed the Standard Operating Procedure (SOP) to be followed i.e. all the noticee’s must agree that they are willing to opt for a personal hearing via Whatsapp Video Conferencing and provide Whatsapp number for the same.  Further, the noticee shall be intimated of the date and time of the hearing; which inturn needs to be confirmed by the noticee via text by the given Whatsapp Number 15 minutes prior to the given date and time.

[Source: F.No. V(Misc)/ Adjudication /PH / Thane /2020 Mumbai  dated 18.05.2020 issued by Mumbai Commissionerate based on CBIC Instructions F.No. 390/Misc/3/2019-JC dated 27.04.2020]