GST Council Offers More Time, Cuts Interest On Returns Filed Late
A look at all the decisions that were taken at the 40th GST Council meeting today.
Small businesses won’t have to pay late fee and will be charged interest at half the rate for filing past returns after the extended deadline. And they also got more time to make the latest filings.
Businesses with a turnover of up to Rs 5 crore can file tax returns for May-July till September in a staggered manner, Finance Minister Nirmala Sitharaman told reporters after the GST Council meeting on Friday. No late fee or interest will be charged if the summary GSTR-3B returns are filed by September.
Earlier, the GST Council had allowed small businesses to file February-April returns by July 6. They won’t be charged a late fee and will have to pay interest at 9%, instead of 18%, if they file returns after the deadline and till Sept. 30.
The decisions of the GST Council are aimed at easing burden of businesses facing hurdles because of the Covid-19 crisis.
MS Mani, a partner at Deloitte India, however, said the government should provide compliance relief to businesses even beyond September. The primary focus now should be on business revival and working capital management, he said.
The GST Council also accepted the long-pending demand to waive late filing fee for returns not filed since July 2017 when the new indirect tax regime was rolled out.
Businesses having no tax liability between July 2017 and January 2020 won’t have to pay the late fee if they file returns till Sept. 30, Sitharaman said after the 40th meeting of the GST Council. The fee is capped at Rs 500 for every return for those who have a pending liability for this period, she said.
Many taxpayers hadn’t filed returns since July 2017 and that was a stumbling block for them to regularise their compliances, said Parag Mehta, partner at NA Shah Associates. But this will surely pinch those who have paid substantial late filing fees till date, Mehta said.
The GST Council also approved a one-time extension for businesses to revoke cancellation of their GST registration. They can apply up to Sept. 30 in cases where the registration was cancelled till June 12, 2020.
Low Tax Collections
The GST Council is looking to correct the inverted duty structure—tax levied on inputs is higher than the tax on finished product—on footwear and textiles, and a decision will be taken in subsequent meetings, Sitharaman said. Inverted duty structure is leading to higher amount of refunds, she said.
Tax collection for two months when lockdown was imposed—April and May—were in the range of 45% of the usual level, Sitharaman said answering a query.
Revenue Secretary Ajay Bhushan Pandey, however, said that these are not final figures. “As return filing due dates have been extended, we will get a correct picture of the total amount of tax collected in April, May and June only after the last day (for the payment of tax).”
The GST compensation to states—making up for the shortfall in subsumed taxes under GST at 14% annual growth rate—will be significantly high from March-May due to low tax collections during the nationwide lockdown. Last week, the central government released Rs 36,400 crore in compensation to states for the December-February period.
In July, there will be meeting held to exclusively discuss compensation to states, the Finance Minister said. The agenda will be to discuss borrowing of funds in order to compensate states, and who will pay it back.