An estimate is the Centre could net Rs 1 lakh crore (post-devolution to states) via the scheme, which could have reduced the estimated net tax revenue shortfall of Rs 2.15 lakh crore in the current fiscal.
As India Inc struggles to cope with the Covid-19 pandemic, the government on Tuesday stepped in with the first set of economic measures to ease compliance burden on companies and promised to consider suspending the invocation of insolvency proceedings against new defaulters for six months if the situation doesn’t improve by April 30.
Announcing the raft of decisions, which contain relief to both companies and individuals, finance minister Nirmala Sitharaman also pledged a broader economic relief package soon. “No move to impose financial emergency, as was claimed by some reports,” the minister said, asserting the government’s ability as well as willingness to deal the situation appropriately.
Sitharaman also extended the due dates for income-tax and GST compliance and waived penalty and late fee, and cut interest payable on late tax payments. The window for direct tax dispute resolution scheme – Vivad Se Vishwas – has been extended to June 30.
The upcoming economic package is widely expected to include a direct cash transfer to workers in the unorganised sector and farmers, regulatory forbearance on NPA classification for companies, moratorium on repayment of MSME loans and housing loans, and a succour for sectors like tourism and aviation that have been hit hard by the pandemic.
Meanwhile, Container Corporation of India under the ministry of railways on Tuesday decided to scrap freight charges for the movement of empty containers from various export-import terminals up to April 30.
As the prospect of a spike in bad loans looms large, the default threshold for triggering insolvency will be raised to Rs one crore from just Rs one lakh now, mainly to insulate small businesses from being dragged to the NCLT.
The government is in talks with various stakeholders, including regulators like RBI and Sebi, and will come out with another set of succour soon, the minister said. Sitharaman heads a taskforce — comprising various sub-groups of stakeholders, including government departments, experts and industry executives — to firm up economic response to the coronavirus pandemic.
The government hasn’t yet decided on raising its market borrowing to fund the growing need for elevated spending, she said.
“If the current situation continues beyond April 30, we may consider suspending section 7, 9 and 10 of the IBC (Insolvency and Bankruptcy Code), 2016 for a period of six months so as to stop companies at large from being forced into insolvency proceedings in such force majeure causes of default,” Sitharaman said. The sections 7,9 and 10 of the IBC deal with the initiation of corporate insolvency resolution process by financial and operational creditors and corporate applicants.
As part of the latest measures, tax filing dates have been extended, certain business procedures eased, cash withdrawal charges waived, as the government sought to soften the blow. Various trade-related compliance procedures, too, have been relaxed.
For three months, debit cardholders can now withdraw cash for free from any other banks’ ATM and there will be no minimum balance fee during this period. Similarly, bank charges will be reduced for digital transactions for trade finance customers.
Sitharaman also announced a broad range of compliance relaxations, including a moratorium on corporate filings for the MCA-21 registry, extension by 60 days of the mandatory requirement of holding company board meetings and relief to auditors on the applicability of Companies (Auditor’s Report) Order, 2020.
Commenting on the steps relating to fisheries, Sitharaman said all sanitary permits for the import of SPF shrimp broodstock and other farm inputs expiring between March 1 and April 15 will be extended by three months. Similarly, a delay of up to one month in the arrival of consignments will be condoned.
The verification of documents and the grant of no-objection certificate for quarantine will be done in three days, instead of seven days. Rebooking of quarantine cubicles for cancelled consignments in the Aquatic Quarantine Facility in Chennai will be done without additional charges.
Among other measures, the government extended the last date for filing income tax returns for FY 18-19 to June 30 from March 31. The same extension has been given to linking Aadhaar and PAN. Late fee and penalty has been waived off but an interest of 9% as opposed to 12%/18% in different cases would be applicable to delayed payment of advance tax, regular tax, TCS/TDS and equalisation levy among others.
In what could hit the government’s plan to boost revenue collections in FY20 – which is seen to be far below the revised estimate in the Budget, the minister also announced extension of Vivad Se Vishwas with full benefits to June 30, from March 31. Extra 10% would be charged on due principal tax payments only post-June. An estimate is the Centre could net Rs 1 lakh crore (post-devolution to states) via the scheme, which could have reduced the estimated net tax revenue shortfall of Rs 2.15 lakh crore in the current fiscal.
Similarly, for taxpayers under GST, the return-filing due date for GSTR-3B has be extended to last week of June. While penalty and late fee has been waived off for all taxpayers, those with less than Rs 5 crore annual turnover are also exempted from interest payment. However, the bigger taxpayers would pay interest on delayed tax payment at 9% compared with 18% currently. Normally, the deadline for filing GSTR-3B is the 20th of the month after which transactions have occurred. Also, date for filing GST annual returns for FY19, which was due on March 31, has been extended till last week of June.
Ritesh Kanodia, partner at Dhruva Advisors, said: “The extension of timelines for filing GST returns for March, April and May and the reduction in interest rate to 9% will provide a significant cash flow relief to the industry considering that payments for supplies made have considerably slowed down. It will also take away pressure of spending time on such compliances, enable people to stay away from office and enable businesses to focus on key aspects of the business rather than on meeting compliance timelines”.
Pratik Jain, partner and leader of indirect tax at PwC, India said; “Besides relaxation in terms of compliances, need of the hour is to leave more cash with businesses. Temporary deferral of customs duty payment, time bound disposal of all refund claims in next few days, releasing the GST credits which have been blocked for many large companies in last couple of months and off set of tax dues under one law against tax refund claim against another are few additional measures that government may want to look at.”