Impact of COVID-19 on GST

The outbreak has presented new roadblocks for the Indian economy now, causing a disruptive impact on the world of work. Virtual lockdown and closure of offices across states will have an impact on GST collections in March and April.

Businesses across the board would operate at a minimal level. Primarily, sectors such as travel, hotel, and food will see a sharp fall in the business. According to a research report, the inoperability analysis for three sectors namely Transport, Tourism, and Hotels shows a significant impact on demand and hence output.

On average 25 million and 300 million people use airplanes and trains, respectively each month. "A 10 percent reduction will lead to loss of revenue of Rs. 3,500 crores on a monthly basis."

The government had a GST collection target of Rs 1.25 lakh crore in March. That looks unlikely now. In February, the monthly GST collection was Rs 1.06 lakh crore against the revenue department's target of Rs 1.10 lakh crore.

Similar to the country's approval and support for a decision on lockdown to counter this pandemic, businesses as well applauded the various relief measures announced by the Government. The Government has endeavored to ease the burden of reconciliation and mapping of credits for the tax period of February 2020 to August 2020 by deferring the applicability of Rule 36(4) and therefore, the requirement of credit reconciliation, between the purchase register and the Form GSTR 2A, to the tax period of September 2020.

In other words, the taxpayer need not undertake the pain of a monthly reconciliation for seven months i.e. February 2020 to August 2020 and are required to undertake a cumulative reconciliation for the above-mentioned tax periods in the month of September 2020 itself.

It is a welcome relief and will provide an interim breather to the taxpayers in their working capital position.

Another aspect which most businesses were seeking clarity/ relaxation was on the compliances with the vehicles stranded on road due to lockdown. With E-Way Bills having expired for the movements initiated by these stranded vehicles and a reissuance/ updation not being procedurally possible. Also, there remained an ambiguity on the modus-operandi for such movements post upliftment of the lockdown. The Government has notified extension of validity for E-Way Bills expiring between 20 March and 15 April 2020 till 30 April 2020.

A concern which still remains to be addressed is on the filing of GSTR-3B, essentially because of a sudden lockdown being announced with digital signature certificates (DSCs) not being available with them for filing of returns currently, taxes can be paid through adjustments made in the GSTR-3B return filed by businesses; the said taxes being paid either through the utilization of input tax credit or in cash.

Various companies who wish to pay taxes on time/ extended time to avoid interest liabilities have been facing a concern on adjusting the said taxes deposited - as they are unable to file the returns without DSC.

India's policymakers have undoubtedly understood and addressed concerns of businesses historically and in the current situation as well; with proactive steps to ease the burden of businesses to a large extent. Given this, businesses, in general believe and expect that the above genuine hardships would also be soon considered by the Government and appropriate reliefs/ clarifications to be issued.