The Indian tax and regulatory space is changing at an unprecedented rate. We are witnessing policy announcements, legislative changes, judicial precedents and clarifications almost daily. This has made it challenging for corporate professionals to stay abreast of relevant developments. The aim of the TaxPod series is to keep you updated with key tax and regulatory developments of the past month, in around 5 minutes.
- Government announces various direct and indirect tax relief measures due to second wave of COVID-19
- Provisions related to significant economic presence operationalised
- The Ministry of Corporate Affairs issues clarification on corporate social responsibility (CSR) expenditure
Hello and welcome to the May 2021 edition of the TaxPod from Grant Thornton Bharat. We bring you the latest tax and regulatory developments that took place in the last month.
Let’s begin with the key direct tax developments.
In view of the COVID-19 pandemic and to provide relief to taxpayers, the government has extended various time limits under the Income-tax Act and the Vivad se Vishwas Act. Accordingly:
- time limit for, issuance of reassessment notice, processing of equalisation levy statement, payment of amount under Vivad se Vishwas Scheme without paying any additional amount etc, have been extended from the earlier 30 April to 30 June 2021.
- Further, where the last date of filing was on or after 1 April 2021, extended timeline of 31 May 2021 is now available for filing appeal before Commissioner (Appeals), for filing objections before the Dispute Resolution Panel or for filing income tax return in response to a reassessment notice.
Also, the time limit for filing of belated and revised return for assessment year 2020-21, which was required to be filed by 31 March 2021 has also been extended to 31 May 2021.
An important development on the digital taxation front is the notification of the thresholds for determining Significant Economic Presence (SEP) of a non-resident in India. The SEP in case of a non-resident will get triggered if the aggregate amount of payment for a specified transaction with any person in India exceeds INR 2 crores during a year or if the non-resident undertakes systematic and continuous soliciting of business activities or engages in interaction with 300,000 or more users in India.
By prescribing these thresholds, the government has now operationalised the provisions in the domestic tax law and significantly widened the scope of the term ‘business connection’. However, non-residents who are eligible to claim benefit under any tax treaty will not be impacted by this change. The non-residents who do not have any treaty protection would need to evaluate the impact of these provisions on their business operations. This analysis would also need to factor in the Equalization levy provisions as well.
Moving on, the Ministry of Corporate Affairs has issued further clarification on allowability of CSR expenditure. In March 2020, it was announced that the amount of Corporate Social Responsibility (CSR) funds spent towards COVID-19 would be an eligible CSR activity. In continuation to the same, it has now been clarified that expenditure incurred on creating health infrastructure, manufacturing and supply of oxygen including concentrators, ventilators, cylinders, establishment of oxygen storage plants or other similar activities are eligible CSR expenditure.
Let’s now look at the key indirect tax developments,
In view of the second wave of COVID-19 pandemic in the country, the government has announced various relief measures to ease the challenges faced by taxpayers in meeting the statutory compliances under the GST law. Some of the key announcements are:
- Reduction in rate of interest applicable for delayed payment of GST for the months of March and April 2021
- Waiver of late fees for delay in furnishing GST return in Form GSTR-3B for tax periods March and April 2021
- Extension of due dates for filing various GST returns such as GSTR-1, GSTR-4, etc.
- Restriction of 5% cap on Input Tax Credit in Form GSTR-3B made applicable on cumulative basis for period April and May 2021, to be applied in the return for tax period May 2021
- Extension in timelines for completion of various actions by any authority under GST law
In addition, the Central Board of Indirect Taxes and Customs (CBIC) has notified exemption from applicability of customs duty on import of various medicines, COVID-19 vaccine, medical essentials and oxygen-related equipment etc.
This is a welcome move by the Government and will provide sufficient time to the businesses to comply with the statutory requirements as also ensure uninterrupted supply of medical devices and essentials in the country in these trying times.
For detailed analysis of last month’s GST related developments, download our monthly GST compendium from our website www.grantthornton.in.
That’s all for this time.
We will see you next month.