Corona Scare: What government should do to give relief to taxpayers

March 23, 2020 6:59 PM

Considering the closure of offices and/or disruption of normal life, SEBI has extended the time limit for disclosure of Annual accounts to June 30.

Coronavirus outbreak, Novel Coronavirus COVID-19, lock down, SEBI, ESI, due dates extended, GST, income tax, tax saving, tax-saving investments, PPF, LIC, advance tax, TDSTime has come for Finance Ministry to provide relief in case of Income tax and GST.

By Sandeep Shah, Partner, NA Shah Associates LLP

With many state governments announcing complete lockdown till March 31, 2020 to contain spreading of highly-infectious Novel Coronavirus COVID-19, various industries / professions whether be it small or large, take a hit. The impact is from loss of business to non-fulfillment of commitments to non-collection of receivables and all of this has put a severe drain on the cash flows.

Considering the closure of offices and/or disruption of normal life, SEBI has extended the time limit for disclosure of Annual accounts to June 30 and similarly, the ESI department has extended the due date for payment of contribution for the month of February to April 15 and for the month of March to May 15, 2020.

Now time has come for Finance Ministry to provide relief in case of Income tax and GST particularly for those taxpayers who are following cash method of accounting as also for salaried class.

Many income taxpayers whether be it business or professionals are following cash method of accounting and hence unless the payments are made before March 31 of each year, the expenses are not treated as allowable expenditure for that year. However, such expenses will be allowed in the subsequent year when actually paid. The expenses can be in the nature of salary, taxes and many other expenses which are connected with business or profession. The closure of business establishment till March 31, coupled with severely impacted cash flows resulting in inability to pay for the expenses before March 31 will cause undue hardship to the taxpayers as their tax liability will increase to the extent of tax on such expenses.

The Central Government as a special measure may take appropriate steps so that all payments in respect of goods and services which are relating to the period ending March 31, 2020 if paid by May 31, 2020 will be considered as allowable expenses while computing the taxable income for the financial year 2019-20. It is pertinent to note that the taxpayers would have calculated their liability towards advance tax as on March 15 by considering the payments before March 31 as allowable expenses. But for such relief they will be liable to pay interest for shortfall in payment of advance tax. Similar relief should also be granted by extending the time limit for the payment of shortfall in advance tax which can be deposited by March 31 be extended to April 15, 2020. Further, the time limit for payment of tax deducted at source should also be extended from April 7 to June 7 in respect of payments made during the month of April and May 2020 but relating to March 2020 period.

Similar relief should also be made in respect of payments to GST registered vendors where the time limit of 180 days from the date of taking input credit expires in March 2020. Unless the payment to vendor is made within 180 days, the earlier input tax credit to the extent of non-payment of vendor bill will have to be reversed and tax payer will have to pay the GST along with interest. The government should in respect of all those bills where the 180 days is expiring from 10th March to 15th April 2020 should treated as having been paid within 180 days provided such payments is made on or before May 15, 2020.

There are many salaried employees who would have to invest money in eligible instruments (PPF, LIC, specified bonds etc) to claim deductions against the salary income for the year 2019-20. Due to closure of establishments, they will face genuine difficulty in not being able to invest before March 31 resulting in increased tax liability. Considering the closure, the time limit for such payments/ investments should also be extended to April 30, 2020.

Such timely relief will immensely help the taxpayers and partially alleviate the sufferings which today is not only taking a toll on health but on financial well-being as well!

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