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Government Relief Measures Announced on March 24, 2020, for Income Tax, GST, and Corporate Affairs

On March 24, 2020, the Indian government announced a comprehensive package of relief measures across income tax, GST, customs, financial services, corporate affairs, IBC, commerce, and fisheries sectors. These initiatives, prompted by the COVID-19 pandemic and nationwide lockdown, aimed to ease compliance burdens and provide financial flexibility for businesses and individuals. Key extensions included revised deadlines for tax filings, reduced interest rates on delayed payments, and moratoriums on late fees for various corporate submissions. The government also adapted regulations to support MSMEs and ensure essential services continued during the crisis.

📖 5 min read read🏷️ COVID-19 Reliefs, Tax Compliance

The COVID-19 pandemic significantly impacted nearly every economic sector. To curb its spread, Prime Minister Modi declared a 21-day nationwide lockdown effective until April 14, 2020. Concurrently, Union Finance Minister Smt. Nirmala Sitharaman presented various relief measures designed to assist businesses through these challenging times. These announcements were made during a video conference press briefing on March 24, 2020, where she was joined by Shri Anurag Thakur, Union Minister of State for Finance and Corporate Affairs.

Income Tax Reliefs

Several income tax announcements necessitate legal circulars and legislative amendments for implementation.

  • The deadline for filing belated or revised income tax returns for Financial Year 2018-19 (Assessment Year 2019-20) was postponed from March 31, 2020, to June 30, 2020.
  • The due date for linking Aadhaar with PAN was extended from March 31, 2020, to June 30, 2020.
  • The Vivad Se Vishwas scheme's application period was prolonged until June 30, 2020. The waiver of the 10% additional charge under this scheme also remained valid until June 30, 2020, rather than the initial March 31, 2020, cutoff.
  • For delayed payments or deposits of income tax liabilities, including Advance Tax, TDS, TCS, Self-assessment tax, Equalisation levy, Security Transaction Tax (STT), and Commodity Transaction Tax (CTT), made between March 20, 2020, and June 30, 2020, a reduced interest rate of 9% per annum applied, instead of 12% or 18%. It is important to note that the original payment deadlines were not extended, only the interest rate for delays within this specific period. No late fees or penalties were imposed for delays during this timeframe.
  • Taxpayers and tax authorities received an extension until June 30, 2020, for various compliance activities whose original deadlines fell between March 20, 2020, and June 29, 2020. This covered issuing notices, orders, or approvals; filing appeals, returns, or statements; and completing proceedings by tax authorities. It also included investments in saving instruments or those for capital gains rollover benefits under various acts such as the Income Tax Act, Wealth Tax Act, Prohibition of Benami Property Transaction Act, Black Money Act, STT law, CTT Law, Equalisation Levy law, and Vivad Se Vishwas law.

GST, Excise, and Service Tax Measures

These announcements required approval from the GST Council and subsequent notification through legal circulars and amendments.

  • For taxpayers with annual aggregate turnover up to Rs 5 crore: The deadlines for GSTR-3B filings for February, March, and April 2020 were extended to the last week of June 2020. During this period, no late fees, interest, or penalties were applied.
  • For taxpayers with annual aggregate turnover exceeding Rs 5 crore: GSTR-3B due dates for February, March, and April 2020 were also extended to the last week of June 2020. No late fees or penalties were levied. However, tax payments made more than 15 days after their original due dates attracted a reduced interest rate of 9% per annum, instead of 18%. This reduced rate applied to payments made between March 20, 2020, and June 30, 2020.
  • For taxpayers under the composition scheme: The due date for filing the CMP-08 statement-cum-challan for the January-March 2020 quarter (FY 2019-20) was moved to the last week of June 2020. Similarly, the GSTR-4 filing deadline for FY 2019-20 was extended from April 30, 2020, to the last week of June 2020. Furthermore, the last date to opt for the composition scheme for FY 2020-21 was extended from March 31, 2020, to June 30, 2020. This applied to schemes under Section 10 of the CGST Act and Notification No. 2/2019 dated March 7, 2019.
  • Sabka Vishwas Scheme (LDRS): The final date to utilize this scheme was extended to June 30, 2020. No interest was charged if payments were completed by this new deadline.
  • Extended compliance timelines: Taxpayers and tax authorities benefited from an extended time limit until June 30, 2020, for compliance matters originally due between March 20, 2020, and June 29, 2020. This encompassed issuing notices, orders, or approvals, and filing appeals, returns, statements, applications, or other documents.

Customs Facilitation

  • Exporters and importers were guaranteed smooth customs clearance, as operations were made 24x7 until June 30, 2020.
  • An extension until June 30, 2020, was granted to taxpayers and tax authorities for compliance matters, including issuing notices, orders, or approvals, and filing appeals, applications, or other documents, where original deadlines fell between March 20, 2020, and June 29, 2020.

Relaxations in Financial Services

Certain financial and banking services received relaxations for a period of up to three months.

  • Debit cardholders could perform free cash withdrawals from any bank's ATM.
  • Minimum balance fees were temporarily waived.
  • Consumers utilizing trade finance services benefited from reduced bank charges for all digital trade transactions.

Corporate Affairs Concessions

  • MCA 21 Registry Compliance: A moratorium was established from April 1, 2020, to September 30, 2020. During this period, companies and LLPs were exempted from paying additional fees for the late filing of documents, returns, or statements, irrespective of their original due dates. This measure aimed to provide relief to existing entities and encourage non-compliant ones to regularize their status.
  • Board Meetings: The interval for conducting company board meetings, normally 120 days, was extended by an additional 60 days for the subsequent two quarters, effectively until September 30, 2020.
  • CARO 2020 Applicability: The Companies (Auditor’s Report) Order 2020 (CARO, 2020) was made effective from Financial Year 2020-21, rather than FY 2019-20, offering benefits to companies and their statutory auditors.
  • Independent Directors' Meetings: Non-compliance with Section 4 of the Companies Act, 2013, was waived if a company's independent directors were unable to hold their exclusive meeting during FY 2019-20.
  • Business Commencement Declaration: Newly incorporated companies received an extra six months to file the declaration form for business commencement.
  • Director Residency Status: A company director who had not resided in India for more than 182 days was still considered a resident in accordance with the law, ensuring compliance during travel restrictions.
  • Specific Compliance Postponements: Certain requirements, including the creation of a deposit reserve (at least 20% of deposits maturing in FY 2020-21) and the investment of 15% of debentures maturing in a specific year into designated instruments, were postponed from April 30, 2020, to June 20, 2020.

Insolvency and Bankruptcy Code (IBC) Adjustments

The COVID-19 pandemic severely impacted Indian businesses, particularly MSMEs, hindering their operational capacity. Consequently, sections of the IBC were re-evaluated to adjust its application for financially distressed companies as part of the relief efforts.

  • The minimum default threshold for initiating corporate debtor liquidation under Section 4 of the IBC 2016 was significantly increased from Rs 1 lakh to Rs 1 crore.
  • The Ministry indicated a potential six-month suspension of certain IBC 2016 sections if the critical economic situation persisted beyond April 30, 2020. This measure aimed to prevent creditors or corporate applicants from initiating the insolvency resolution process under Sections 7, 9, and 10.

Commerce Ministry Extensions

The Ministry of Commerce planned to issue notifications extending various compliance timelines and procedural requirements.

Fisheries Sector Adjustments

  • Sanitary Permits (SIPs) for importing SPF Shrimp Broodstock and other agricultural inputs expiring between March 1, 2020, and April 15, 2020, received a three-month extension.
  • Import consignments arriving up to one month late were not categorized as 'delayed receipts.'
  • Canceled consignments at the Aquatic Quarantine Facility (AQF) in Chennai could be rebooked for quarantine cubicles without incurring additional charges.
  • The timeframe for document verification and No-Objection Certificate (NOC) issuance was shortened from seven days to three days.

Businesses were expected to require substantial time to recover from the COVID-19 pandemic's effects. The extended deadlines offered an opportunity for companies to adopt more technology-driven approaches, streamline compliance digitally, and implement cloud-based solutions and robust systems for remote work. The Union Finance Minister also indicated upcoming announcements regarding an economic package aimed at mitigating the COVID-19 crisis and assisting businesses in recovering from anticipated revenue declines in the subsequent quarter.

Frequently Asked Questions

What is the current GST rate in India?
GST in India operates on a multi-tier structure with rates of 5%, 12%, 18%, and 28% for various goods and services, alongside specific rates for gold, precious stones, and other items. Essential goods and services typically fall into lower slabs, while luxury items attract higher rates.
How does the GST Composition Scheme benefit small businesses?
The GST Composition Scheme offers a simpler compliance mechanism for small businesses with an annual turnover up to a certain limit (currently Rs 1.5 crore, or Rs 75 lakh for special category states). It allows them to pay GST at a fixed, lower rate on their turnover, file quarterly returns instead of monthly, and avoid complex invoicing and Input Tax Credit procedures, thereby reducing their tax burden and administrative effort.
What is the penalty for late filing of GST returns?
For late filing of GST returns, a late fee is levied for each day of delay. For GSTR-3B, the late fee is Rs 50 per day (Rs 25 for CGST and Rs 25 for SGST) for regular taxpayers, capped at a certain amount. For NIL returns, the late fee is Rs 20 per day. Additionally, interest at 18% per annum may be charged on the net tax liability for delays in tax payment.
Can I claim input tax credit (ITC) on all business expenses under GST?
No, Input Tax Credit (ITC) cannot be claimed on all business expenses under GST. While ITC is generally available for goods and services used or intended to be used in the course or furtherance of business, there are specific 'blocked credits' under Section 17(5) of the CGST Act. These include, but are not limited to, motor vehicles (with some exceptions), food and beverages, club memberships, health and fitness services, and works contract services for immovable property.
What documents are required for GST registration?
For GST registration, key documents typically include a Permanent Account Number (PAN) of the applicant, proof of business registration (e.g., Certificate of Incorporation for companies, partnership deed for firms), identity and address proof of promoters/partners/directors, proof of address of the business premises, and bank account details (bank statement/passbook). Additional documents may be required depending on the business type and structure.