India goes into 21-day lockdown, FM announces tax compliance relief

While Prime Minister Narendra Modi has called for a complete shutdown across the country to contain Covid-19, Finance Minister Nirmala Sitharaman offered businesses regulatory relief. Experts welcome the moves but seek more clarity on measures

By Salil Panchal Forbes India Staff

Published: Mar 24, 2020 10:12:40 PM IST

Updated: Mar 24, 2020 10:30:36 PM IST

Full Bio

Finance Minister Nirmala Sitharaman; Image: Sanjeev Verma/Hindustan Times via Getty Images

Indian corporates and small business houses, reeling under the impact of the deadly coronavirus, have got some relief in the form of extensions in the filing of their regulatory compliances.

India’s Finance Minister, Nirmala Sitharaman, announced these measures on Tuesday, which are now being seen as a precursor to a massive economic stimulus, which the economy and businesses urgently require to stay afloat. Sitharaman—and possibly even the Reserve Bank of India—are expected to announce measures to improve liquidity in the system and stimulus for key sectors that have been the hardest hit.

On Tuesday, some of the measures Sitharaman announced included an extension to file income tax returns for the fiscal year 2018-19, to June 30, 2020. Further, for companies with turnover over Rs 5 crore, there will be no late fees, penalties and interest on deferred payment.

The deadline for the filing of the Goods and Services Tax (GST) returns (GSTR-3B+) for March, April and May has been extended to June 30. For delayed payments, interest rates have been reduced to half—9 percent—under both income tax and GST.

Sitharaman also said no fee will be levied for not having minimum balance in savings accounts; debit card holders can withdraw cash from any bank ATM and bank charges will be reduced for digital transactions for trade and finance consumers.

Consultants and business houses have welcomed these moves but insist that clarity related to the filing of income is still required.

Deloitte India’s partner Monish Shah says, “The measures related to waiver of minimum monthly balance, ATM charges, increasing the threshold for default under Insolvency and Bankruptcy Code will provide relief to several sections of the economy and indicate Government’s intent to ease the financial implications of the pandemic.”

These measures will help in ‘flattening the curve’ with respect to immediate impact with respect to statutory deadlines and help businesses to be better geared to meet their commitments, he added.

Quantum Mutual Fund’s managing director and CEO Jimmy Patel, however, argued that Sitharaman’s statement is ambiguous, “subject to multiple interpretations, which will result into future dispute. Instead, just one line stating that provisions pertaining to financial year 31st March 2020 are extended to 30th June 2020, should have been put forward. This one line would have made life simpler for everybody. Clarity on filing return of income is missing,” Patel added.

Rajeev Dimri, partner and co-head of tax, KPMG in India, said that the income tax reliefs would provide much needed succour to all. “With working capital issues and sudden low profit setting, interest rate of 9 percent should certainly help in mitigating the cash crush,” he said.

Another respite is in the deferment of dates for Vivad Se Vishwas Scheme under direct taxes, and extension in payment due date for Sabka Vishwas Scheme for indirect tax litigation. “Deferring payments to government under these schemes would help companies save for possible financial difficulties faced by companies in these crises,” Dimri added.

Prime Minister Narendra Modi later on Tuesday announced a complete lockdown of the entire country, in a bid to ensure social distancing and help curb the spread of the coronavirus. The number of reported coronavirus cases in India has risen to 519, with 10 reported deaths, as of Tuesday.

Technology changes creating new avenues in risk management

Indian IT and ITES companies to continue working through lockdown