Taxation experts have welcomed the measures announced by the government, saying these steps will add up to 2-3 per cent of GDP but will go a long way in addressing the issue of liquidity and deferment of payment obligations.
The government on Tuesday came out with a slew of relaxation in tax and payment compliances by reducing the quantum of penalties, extending the deadline to make clear the dues among others to help the public and corporates. Some of the key measures include extension of tax filing/returns and accordingly all tax due arising between March 20, 2020 and June 29, 2020 now stand extended to June 30, 2020.
This is across income tax and GST and would apply to all return filings, replies/appeal filings, and other compliance documents. For delayed payments, interest rates have been reduced to 9 per cent under both income tax and GST. Welcoming the measures, Deloitte said these measures will help ease the compliance pressure on businesses and individuals and provide necessary relief to critical sectors in view of the Covid outbreak.
Many analysts have said the lockdowns will shave off as much as ?9 lakh crore of the GDP. Gokul Chaudhri of Deloitte India said, "These steps will certainly give a lot of confidence to corporates and different sectors of the economy.
The relief measures and easing of compliance deadlines will enable businesses to sustain themselves in the current atmosphere and is likely to have a positive impact on economic activities and more importantly remove uncertainty in the system. "From the tax point of view, the reliefs like tax breaks, accelerated depreciation, reliefs on payrolls, payments-weighted deduction, relief on contribution to PF will add up to 2-3 per cent of GDP, which is much needed to help address the issue of liquidity and deferment of payment obligations," he said.
The move to ensure 24/7 trade facilitation at ports through the customs will not only promote ease of doing business but also ensure smooth flow of trade, he added. Jiger Saiya, partner and leader for tax and regulatory services at BDO India, said the extension to the Vivad Se Vishwas scheme will go a long way in making the entire scheme a success as in the original form it was an impossibility to attain the objective. "With the extension, taxmen will now have time to clarify more aspects and taxpayers will have reasonable time to evaluate and seek settlement of tax disputes, under the scheme," Saiya said. Veena Sivaramakrishnan of Shardul Amarchand Mangaldas & Co said the tax measures are a step in the right direction and indicate more such practical measures to come in the future.
KPMG India's Rajeev Dimri said the various tax reliefs announced by the finance minister would provide the much-needed succour to all in these unprecedented times. Naveen Aggarwal of KPMG said an extension of the deadline under Vivad Se Vishwas from March 31 to June 30 without paying additional tax of 10 per cent is a welcome move and is in line with the representations made by taxpayers and industry forums.
This would help companies save for possible financial difficulties faced by companies in this crises. On the IBC changes, Manish Aggarwal of KPMG said changing the operative sections of the IBC will help avoid large scale insolvencies. The government also needs to consider sector-specific measures to address the cash flow & liquidity enhancement measures to help businesses withstand this period.
Stopping the process towards insolvency is necessary but not a sufficient condition to address fundamental issues facing the businesses now. Rajesh Narain Gupta, managing partner of SNG & Partners the measures announced will lead to a positive direction and will give a boost to trade and commerce.