Tax relief in times of Covid-19 – A review of the Indirect Tax measures

Given the disruptions in domestic and international supply chains due to the Covid-19 pandemic, the Government announced a slew of indirect tax measures to protect the interests of taxpayers. With the extension of the lockdown, it is important to take a look at the steps, which have been undertaken and the next steps required to reinforce the Government’s commitment towards economic regeneration.

Extensions in dates for compliances

The due date for filing of annual returns under the GST legislations for Financial Year (“FY”) 2018-19 has been extended to June 30, 2020. The due dates for filing of monthly returns under the CGST Act for the months of February, March and April 2020 have also been extended to the last week of June/ first week of July for taxpayers, basis their aggregate turnovers in the last FY.

Taxpayers with a turnover of up to INR 5 crore are also eligible for a waiver of late fees, interest and penalty on delayed payment of tax and filing of returns. Those with a turnover of above INR 5 crore would have to pay interest @ 9% per annum (against the prevalent 18%) on late payments, beyond the extended due dates.

The approach of offering graded relief to taxpayers, basis their turnover appears to stem from the desire to maintain the equilibrium between the Government’s obligations as a welfare state and protecting its treasury. This approach leaves a lot to be desired in comparison to global responses, which have offered indirect taxes deferment and determinative reliefs across the board for ensuring that relief reaches the right quarters.

The Government has also extended the validity and benefits under the Foreign Trade Policy   up to March 31, 2021. Further, the expiry periods of import or export authorisations, ending between February 01, 2020 to July 31, 2020, have also been extended for a period of six months. This would maintain the status quo and mitigate any potential pitfalls of the lockdown.

Extension of limitation periods

The Government has simultaneously issued the Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 (“Ordinance”) on March 31, 2020, to give itself power to extend timelines for undertaking any actions required under the GST legislations on account of force majeure situations, including epidemics. It also extended the timelines for completion of proceedings, filing of applications and furnishing any documents under the Customs Act, 1962 and the erstwhile indirect tax legislations, expiring between March 20, 2020 and June 29, 2020 up to June 30, 2020. It has also extended the payment date for availing benefits under the S­­abka Vishwas (Legacy Dispute Resolution) Scheme, 2019 till June 30, 2020, without the levy of any additional interest.

This Ordinance gives the Government necessary power to extend statutory timelines further, should the need arise. Such extension would invariably reduce the statutory burden on taxpayers during the lockdown.


The Government has also notified tariff changes, keeping in mind the health infrastructure of the country and the pressing domestic need. Taking a cue from other jurisdictions, the Government has waived off the customs duty and health cess imposed on imports of ventilators, personal protection equipment, etc., up to September 30, 2020.

Procedurally, the following changes have been implemented to ensure that a constant flow of goods is maintained while minimising human contact:

a. 24×7 customs clearance functionality up to June 30, 2020.

b. imports to be allowed on a provisional basis by accepting digitally signed certificates of origin or unsigned physical certificates.

c. automation of customs clearance process.

Future steps to be considered during Covid-19

While the broad based and definitive tax reliefs announced by the Government are in line with the trends seen across the globe, there is much to be desired.

Firstly, the Government has been irresolute in its export policy on health-related equipment/ drugs. The export of hydroxychloroquine was prohibited in the last week of March 2020, subject to a few exceptions.[1] A week later, exports under such exceptional scenarios were also prohibited.[2] A similar trend is seen with respect to export policies on active pharmaceutical ingredients, protective gear, etc. The Government needs to implement a stable export policy, centric to the Covid-19 pandemic instead of vacillating.

Secondly, while the Government decided to expedite issuance of pending GST and Customs refunds by April 30, 2020, it seems to have lost sight of refund claims pending under erstwhile service tax and central excise legislations. Extending this initiative to claims pending under erstwhile indirect tax legislations would further ease liquidity.

Thirdly, the facility of deferred payment of customs duty is presently available to a limited class of importers, i.e. Authorised Economic Operators. The Government should examine the feasibility of expanding the class of importers allowed benefit of this facility during the lockdown period.

It is also imperative for the Government to focus on formulation of long-term strategies, specifically focusing on protecting liquidity of corporates for encouraging business continuity. This unprecedented crisis is perhaps the perfect launchpad for implementation of GST 2.0, premised on lower GST rates, a rationalised median rate slab and widening of the tax base by including goods such as petroleum, Aviation Turbine Fuel, Natural Gas, etc.

Another aspect requiring significant improvement is blockage of ITC. Since January 2020, ITC claims of taxpayers have been restricted to 10% of their eligible credit, if corresponding invoices are not uploaded by their suppliers. While the Government has temporarily lifted such restriction from February 2020 to August 2020, taxpayers would be required to reconcile the ITC availed while filing returns for September 2020. The blockage of ITC of purchasers who have made applicable payments to their suppliers definitely needs to be re-examined.

Separately, the Government must also evaluate the feasibility of moving to a cash basis discharge of GST on supply of services as opposed to accrual basis to provide relief in case of delayed receipt of payments/bad debts.

The Government should also assess alternate tax payment mechanisms or incentive schemes, involving GST payments in instalments or their deferral, subject to conditions such as diversion of revenue towards hospitals, undertaking programmes aimed at mitigation of the pandemic as part of the CSR activity, contribution to Government funds, aimed at fighting Covid-19, etc. As the Government contemplates its second stimulus package, redefining the contours of indirect taxation would definitely play a crucial role in aiding taxpayers recalibrate their position.


The due date for furnishing the annual returns under the GST legislations for FY 2018-19 has been further extended till September 30, 2020 vide Notification No. G.S.R. 275(E).No. 41/2020-Central Tax F. No. CBEC-20/06/04/2020-GST Dated 5th May, 2020. The Government has also extended the validity of e-way bills till May 31, 2020 if such e-way bills were generated on or before March 24, 2020 and expired between March 20, 2020 to April 15, 2020 vide Notification No. G.S.R. 274(E).No. 40/2020-Central Tax F. No. CBEC-20/06/04/2020-GST Dated 5th May, 2020.

[1] Notification No. 54/2015-2020 dated March 25, 2020

[2] Notification No. 01/2015-2020 dated April 04, 2020