Institute of Company Secretaries of India (ICSI) believes that In the upcoming months after lockdown market will face huge liquidity problems and in the view of the consequences due to Covid-19 Panadamic ICSI on Monday, May 18, requested Finance Minister Nirmala Sitharaman for some amendment in GST,
The requests have been represented in a letter and it states that in the upcoming months customers or clients will request for more credit periods as a condition of sales. Thus business houses may face problem to reach their monthly financial requirements/ target.
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ICSI through the letter suggested that “The present developments arising due to the spread of the COVID-19 virus has warranted the need for temporary relaxation in compliance requirements under various laws. It is humbly requested that this method (receipt basis) of determining the time of supply be introduced for a limited period till the industry and business do not come out of crisis arising out of COVID-19,”.
The letter clearly highlights that under the current GST system, the payment of GST is being paid as per accrual basis, which means that whether the supplier realizes the amount of supply or services is immaterial. Which means that even if the particular amount for supply for a particular month doesn’t realize, still it will be liable to pay the GST on or before 20th of next month. If the supplier failed to do that then an interest at 18% p.a rate will be applied with other penalties.
Meanwhile, The letter also included a reference of the Service tax which was introduced in 1994, in which the service tax was applied based on the receipt basis, and it was in action for more than a decade and it really worked well in the administration of taxation law.
The Institute of Company Secretaries of India (ICSI) in the letter requested that “A supplier shall avail Input Tax Credit (ITC) proportionate to the payments made within the period of time specified of and reverse credit on nonpayment of supplies received. This interim measure will not only ensure tax compliance from the supplier side but put a simultaneous check on availment of ITC on payment basis and maintain the smooth cash flow of taxes to the exchequer,”.
