GST Compliance Relaxations and Clarifications During the COVID-19 Pandemic

The Union Finance Minister introduced various relief measures to assist taxpayers impacted by the national lockdown during the pandemic. In response, the Central Board of Indirect Taxes and Customs (CBIC) issued multiple notifications regarding extended due dates, e-way bills, and provisional Input Tax Credit (ITC). Despite these initial announcements, taxpayers encountered further challenges. To address these, CBIC released detailed circulars providing clarity on Goods and Services Tax (GST) compliance relief. This article outlines the key relief measures and clarifications from these circulars.

Clarifications from Circular No. 141/11/2020 (June 24, 2020)

This circular offers details on CGST notifications 51/2020 and 52/2020.

Staggered Interest Calculation for Taxpayers with Turnover Exceeding Rs 5 Crore

Large taxpayers filing GSTR-3B for February, March, and April 2020 could initially pay taxes without interest if done by April 4, May 5, and June 4, 2020, respectively.

If these dates were missed but tax dues were paid and GSTR-3B returns filed on or before June 24, 2020, then no interest was charged until the initial fifteen days from the original due date of each GSTR-3B. After this period, interest was levied at 9% per annum until the actual payment and filing date.

Should taxpayers miss the June 24, 2020, extended deadline for tax payment and GSTR-3B submission, an 18% per annum interest rate would apply from June 24, 2020, onwards, in addition to the 9% rate calculated up to June 24, 2020.

Interest Calculation for Taxpayers with Turnover Equal to or Below Rs 5 Crore

For small taxpayers, this circular clarified that no interest would be charged until the specific GSTR-3B filing dates listed below.

For filings completed after these specific dates, a reduced interest rate of 9% per annum was applied until September 30, 2020. However, if GSTR-3B for these months was filed after September 30, 2020, the standard 18% per annum interest rate applied for the remaining delay period up to the actual filing date.

Late Fee Calculation

The conditional waiver for GSTR-3B late fees was prolonged for tax periods up to July 2020 for small taxpayers, with new deadlines. If returns were not submitted by the dates specified in CGST notification 52/2020 (as detailed in the tables above), late fees became applicable from the original due date until the return was filed.

Clarifications from Circular No. 138/08/2020 (May 6, 2020)

CBIC issued this circular to provide further clarity on the extension of the ITC-04 due date, extended timelines for merchant exports, and procedures relating to the Insolvency and Bankruptcy Code (IBC).

• ITC-04 Due Date Extension: The ITC-04 form, which principal manufacturers file quarterly for goods sent to or received from job workers, had its January-March 2020 quarter due date extended to June 30, 2020, by CGST notification 35/2020. This circular confirmed the extension.
• Timeline Extension for Merchant Exports: Typically, merchant exporters must export goods within 90 days of the tax invoice date from a registered supplier. The circular granted an additional extension until June 30, 2020, if the 90-day period concluded between March 20, 2020, and June 29, 2020. This benefit aided suppliers charging a concessional GST rate of 0.1% on merchant exporter transactions.
• Procedures for Insolvency and Bankruptcy Code (IBC): CBIC previously detailed procedures for Interim Resolution Professionals (IRPs) during the Corporate Insolvency Resolution Process (CIRP). This circular clarified aspects of GST registration and return filing for IRPs/RPs:
  • Fresh GST Registration: IRPs are generally required to obtain new GST registration for the entity under CIRP within 30 days of their appointment. Due to lockdown difficulties, the circular clarified that IRPs could obtain this registration within 30 days of appointment or by June 30, 2020, whichever was later.
  • No New Registration Required: An IRP was exempt from obtaining a fresh GST registration if the corporate debtor consistently filed GSTR-1 or GSTR-3B for all tax periods before the IRP's appointment.
  • Single Registration: Only one GST registration by the IRP was necessary, regardless of subsequent changes to the appointment of an IRP or Resolution Professional (RP). If an IRP was replaced by a separate RP, the RP only needed to amend the authorized signatory details under the existing GSTIN. If the previous IRP failed to provide credentials for amendments, the RP could approach the jurisdictional authority as the primary signatory.

Clarifications from Circular No. 137/07/2020 (April 13, 2020)

1. Advance Payments for Cancelled Services: This section addresses GST implications for advance payments made for services that were subsequently cancelled due to the lockdown or other reasons. * Tax Invoice Issued: If the service provider had issued a tax invoice for the full transaction value and deposited the GST before cancellation, they must now issue a credit note to the recipient. This credit note should be declared in the GSTR-1 of the issuance month and adjusted in GSTR-3B. If insufficient outward tax liability exists for adjustment in GSTR-3B, a refund of the GST can be claimed by filing Form RFD-01 under the "Excess payment of tax if any" category. * Receipt Voucher Issued: If the service provider issued a receipt voucher for the advance and deposited the GST without a tax invoice, upon contract cancellation, they must issue a refund voucher. The GST refund can then be claimed by filing Form RFD-01 under the "Refund of Excess Payment of Tax" category.

2. GST Treatment of Sales Returns: For sales returns where a tax invoice was already issued, the supplier must issue a credit note, declare it in GSTR-1 and GSTR-3B of the relevant month. Any unadjusted tax amount in GSTR-3B can be claimed as a refund via Form RFD-01, selecting "Excess Payment of Tax if any."

3. Extended Validity of Letter of Undertaking (LUT): The validity of LUTs for FY 2019-20 was extended until a new LUT for FY 2020-21 was filed. This allowed exporters to continue exporting without paying Integrated GST (IGST) by quoting their FY 2019-20 LUT reference number. The deadline for filing the FY 2020-21 LUT, originally March 31, 2020, was deferred to June 30, 2020.

4. Extended Due Dates for TDS and TCS Deposits: The due date for depositing Tax Deducted at Source (TDS) under Section 51 of the CGST Act, if due between March 20, 2020, and June 29, 2020, was extended to June 30, 2020. No interest was charged if TDS was deposited and Form GSTR-7 filed by this date. The same extension applied to Tax Collected at Source (TCS) under Section 52 of the CGST Act, benefiting e-commerce operators.

5. Extended Time Limit for Claiming GST Refund: The two-year time limit for claiming GST refunds that expired on March 31, 2020, was extended. Taxpayers could apply using Form RFD-01 by June 30, 2020.

These clarifications, while often reiterated aspects of GST Law, provided essential guidance during the crisis, especially for MSMEs, enabling quicker decision-making with minimal professional assistance. Further clarifications from CBIC were anticipated.

Clarifications from Circular No. 136/06/2020 (April 3, 2020)

• e-Way Bill Validity: The validity of e-way bills expiring between March 20, 2020, and April 15, 2020, was extended to April 30, 2020.
• Composition Scheme Due Dates: The due date for filing Form CMP-08 by composition dealers for the January-March 2020 quarter was moved to July 7, 2020. Additionally, the annual return (GSTR-4) due date for FY 2019-20 was extended from April 30, 2020, to July 15, 2020.
• Option to Opt into Composition Scheme: Taxpayers wishing to opt into the composition scheme for FY 2020-21 had the Form CMP-02 filing deadline extended from March 31, 2020, to June 30, 2020. Consequently, Form ITC-03 could be filed by July 31, 2020.
• GSTR-3B Due Dates and Waivers: GSTR-3B due dates for February to April 2020 periods were shifted to June 2020. While due dates were extended, late fees were waived for small taxpayers (annual aggregate turnover less than Rs 5 crore). GSTR-3B filing was also staggered based on previous financial year's annual turnover.

Extended Due Dates for GSTR-3B

Interest must be paid for delays in GST payment; it was Nil for the first 15 days from the 20th of the relevant month, then calculated at 9% p.a. up to the actual payment date (if paid by June 24, 2020). Note that 18% p.a. interest applied if GST liability was not paid before June 24, 2020, for the entire period of delay.

Category X: Chhattisgarh, Madhya Pradesh, Gujarat, Maharashtra, Karnataka, Goa, Kerala, Tamil Nadu, Telangana, Andhra Pradesh, the Union Territories of Daman and Diu and Dadra and Nagar Haveli, Puducherry, Andaman and Nicobar Islands, and Lakshadweep.

Category Y: Himachal Pradesh, Punjab, Uttarakhand, Haryana, Rajasthan, Uttar Pradesh, Bihar, Sikkim, Arunachal Pradesh, Nagaland, Manipur, Mizoram, Tripura, Meghalaya, Assam, West Bengal, Jharkhand, Odisha, the Union Territories of Jammu and Kashmir, Ladakh, Chandigarh, and New Delhi.

• GSTR-1 Due Dates Extended: The GSTR-1 filing deadline for March, April, and May 2020 was extended to June 30, 2020. The GSTR-1 due date for the quarter ending March 31, 2020, also saw an extension to June 30, 2020.
• Provisional Input Tax Credit (ITC) Claims: Rule 36(4) of the CGST Rules, 2017, which limited provisional ITC claims to 10% of eligible credit in GSTR-2A, was relaxed. The government waived the month-to-month adjustment requirement until September 2020, allowing cumulative adjustment in the GSTR-3B return for September 2020, covering February to August 2020.
• Other GST Compliance Extensions: All other GST compliance tasks due between March 20, 2020, and June 29, 2020, were extended until June 30, 2020.