Coronavirus: MSMEs will need stimulus package, cut in GST to recover

The coronavirus outbreak has brought the world to a grinding halt. India too is fighting a life and death battle to flatten the curve. On April 14, Prime Minister Narendra Modi announced the extension of the lockdown across the nation till May 3, albeit with some relaxations.

The coronavirus pandemic is a unique situation. Governments across the world are grappling with the crisis and struggling to understand how to stop the global economy from falling into vicious economic traps. India is one such place where businesses are suffering and the spread of the virus has spelt doom for the entire ecosystem. The World Bank recently forecast India’s growth estimates between 1.5 percent and 2.8 percent whereas the International Monetary Fund (IMF) announced the growth estimate to stand at 1.9 percent for India following the impact of the pandemic and the lockdown.

More than 65 million micro, small, and medium enterprises (MSMEs) in the country form the backbone of the economy. The segment is in dire need of relief packages, support in working capital loans, and strengthening or fixing of supply chains which have been disrupted, among other needs. MSMEs in India are not only important for their contribution to the Gross Domestic Product (GDP) which is around 30 percent but also for mass employment they create.

Govt. plans income tax, GST refunds for large companies to ensure liquidity:

The government may soon provide refunds on income tax and goods and services tax (GST) to large companies, The Economic Times reported. The move is intended to ensure that large companies have adequate liquidity during the nationwide lockdown to contain the spread of COVID-19. The refunds will be higher than the Rs 18,000 crore given to small taxpayers, the report said. Moneycontrol could not independently verify the story. “Large cases (of refunds) will be dealt with after a week or 10 days, by which we will have issued refunds to small taxpayers,” an official told The Economic Times.

Though about 93 percent of all refund cases involved small taxpayers, where the amount is small, in the case of large companies it will be higher, the official said. The official added that the government is trying to process the refunds soon. On April 8, the finance ministry said it will immediately release pending income tax refunds of up to Rs 5 lakh. The total amount on such refunds was estimated at roughly Rs 18,000 crore, benefitting 14 lakh taxpayers. On April 15, the Central Board of Direct Taxes (CBDT) said over 10.2 lakh refunds worth Rs 4,250 crore had been issued within the week.

Income Tax Dept issued over 10.2 lakh refunds worth Rs. 4,250 Cr by Apr 14, 2020

As per the recent tweet of CNBC-TV18, sources say that the Government after giving directions to fast-track refunds, the Income Tax India Department says it issued over 10.2 lakh refunds worth Rs. 4,250 Cr by April 14, 2020.

• IT Dept Had Earlier Issued 2.50 Cr Refunds In F.Y19-20 Till March 31, 2020, Worth Rs 1.84 Lakh Cr
• IT Dept Aims To Issue 1.75 Lakh More Refunds This Week
• Refunds Processed Get Credited Directly To The Taxpayer Bank Account In 5-7 Business Days
• IT Dept Sent Emails To 1.74 Lakh Cases, Seeking Reconciliation Details Alert: Govt Had Issued Instructions To Fast-Track Refunds

Claim Refund (RFD-01) of GST paid on Advance received but Services not rendered due to Covid-19

The CBIC vide Circular No.137/07/2020 – GST, dated April 13, 2020, which clarified the challenges faced by the registered persons in adhering to the provisions of the Central Goods & Services Act, 2017 (“CGST Act”) on account of measures taken to prevent the spread of COVID-19. The following are the appended clarification made by the department are as under:-

Issue No. 01:-

An advance is received by a supplier for a Service contract which subsequently got cancelled. The supplier has issued the invoice before the supply of service and paid the GST thereon. Whether the supplier can claim a refund of tax paid or he is required to adjust his tax liability in his returns?

Clarification No. 01:-

In case GST is paid by the supplier on advances received for a future event which got cancelled subsequently and for which invoice is issued before the supply of service, the supplier is required to issue a “credit note” in terms of section 34 of the CGST Act. The supplier shall declare the details of such credit notes in the return for the month during which such credit note has been issued. The tax liability shall be adjusted in the return subject to conditions of section 34 of the CGST Act. There is no need to file a separate refund claim. However, in cases where there is no output liability against which a credit note can be adjusted, registered persons may proceed to file a claim under “Excess payment of tax, if any” through FORM GST RFD-01.

Issue No. 02:-

An advance is received by a supplier for a Service contract which got cancelled subsequently. The supplier has issued receipt voucher and paid the GST on such advance received. Whether the supplier can claim a refund of tax paid on advance or he is required to adjust his tax liability in his returns?

Clarification No. 02:-

In case GST is paid by the supplier on advances received for an event which got cancelled subsequently and for which no invoice has been issued in terms of section 31 (2) of the CGST Act, the supplier is required to issue a “refund voucher” in terms of section 31(3)(e) of the CGST Act read with rule 51 of the CGST Rules, 2017. The taxpayer can apply for a refund of GST paid on such advances by filing FORM GST RFD-01 under the category “Refund of excess payment of tax”.