As goods and services tax (GST) Council meet is round the corner, experts feel that the focus of the government should be to give relief to both industry and consumers.

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Experts also say that the government should quickly do an analysis of COVID-19 impact on the indirect taxes when it comes to both payment of taxes and tax realisation to ease processes and come up with some concrete relief measures to help industry with working capital requirements and for consumers with reduced GST rates.

The Council meet will be taking place for the first time post-COVID-19 lockdown on June 12 via video conferencing. The agenda of the meet is yet to be circulated with the members, sources told CNBCTV18.

Stimulating demand and simultaneously understanding the industry concerns should be the way forward for the government, say experts.

Pratik Jain, PwC India Partner National Leader (Indirect Tax), tells CNBCTV18 that, the GST Council “should take stock of business impact in view of COVID crisis, including collections of April and May 2020. Industry has requested the government for immediate relief by measures such as reduction of GST rates for select sectors such as Real Estate, Hospitality, Airlines etc and providing working capital relief by deferring the liability of pay GST for a few months.”

“Till now, relief has been either procedural or for MSMEs by deferment of GST payouts and something needs to be done urgently. The key is to provide liquidity in the hands of businesses and world over, the governments have taken measures around that.”

“Some other relief measures may entail legislative changes such as liberalising the input credit provisions as currently various employee and construction-related expenses are not eligible and doubts have been raised on CSR spend as well or bringing in input services for refund under inverted duty structure, as of now only inputs are allowed.”

MS Mani, partner at Deloitte India, too feels that, “The GST Council should focus on the areas where further relief can be given to businesses on tax payments and filings to overcome working capital challenges that all businesses are confronted with. In addition, there is a need to remove restrictions on ITC availing for a temporary period of time for all businesses with a proper system of reconciliations.”

Abhishek Jain of EY pointed out that this is the right time for the government to consider to shift “focus on measures to help boost demand like rate reduction, compensation cess holiday on certain goods, amongst the first to deal with.”

Rajat Mohan, senior partner at AMRG & ASSOCIATES, a tax consultancy firm, too feels that his clients and consumers are looking “for relaxation from the government to bring up the demand and assistance to survive in such situation is a major ask by both consumers and the industry. Rate cuts will go a long way in reducing prices thus boosting demands of consumers in an economy where demand is low."

"The compliance burden though deferred till 30th June 2020 needs simplification and easement in long term as the pandemic situation is here to stay and its impact on economy will also be long term. The interest rates and late filing fees need further extension to support the ailing companies.”

Grappling with the adverse impact of COVID-19 lockdown on the economy, GST collections have been showing declining trends and the government has been conscious of this fact.

But not just the government, even industry is not in a healthy position.

Experts say that sectors like FMCG and consumer goods saw some initial uptick and the drive since people were hoarding essentials, but industry sees a decline for them coming soon too, due to reducing incomes. Thus experts feel the government should focus on such issues as well while charting the future strategy.

Pratik Jain says, “The initial response looked encouraging particularly in FMCG and other consumer segments. However, industry is cautious as the cases of infections are on a rise and a lot of companies have opted not to open their offices as of now. There is, however, a general optimism that demand would pick up substantially in the next couple of months.”

“The foremost need for the industry is 'liquidity'. If the GST council could come up with a mechanism where GST collected is allowed to be deposited in installments over next 6 months or so, it would provide great relief. Also, industry wants GST payout to happen on a 'collection' basis and not on 'invoicing'.”

“The reason is that in a lot of cases the customer may not eventually pay the amount invoiced and there is no way for the industry to recoup the GST which has been deposited. Industry has also strongly pitched for immediate refund of GST stuck for exporters and have some mechanism to liquidate the input credits that have accumulated for many companies. One idea is to allow off-set of input credit accumulated in one State against GST payout in another State, at least for the Central GST component.”

Mohan added that the government should also find ways to reduce pre-COVID litigation, which might unlock some relief for the industry.

“The cash flows of MSME have been impacted the worst. They are clinging on to the taxes received till the last day for payment to the government or may even consider not paying owing to the difficulties arisen in working capital. Few are also entering into tax evasion practices to survive the current situation. While the large scale industries are utmost careful with their compliances and leaving no stone unturned to ensure full compliance of the law. They have even initiated to work on pending pre-covid litigation.”

Adding to this Abhishek Jain says, “While most services industry were operating during lockdown, upliftment of lockdown would culminate to increased GST collections from manufacturing set ups; stalled production in which had entailed a significant dip in GST collections. Companies expect rate reductions to foster demand and relexations to reduce tax costs like GST on philanthropic activities, reversal on writing off of goods (especially perishable stock), etc.”

Industry is looking at GST council for support at this time. “Many industries are reeling with the worst ever period of their existence. They seek rate cuts to shore up consumer demands. Deferment in payment of taxes will give necessary oxygen to the working capital which may already be on life support due to impact of payments from customers. Ease of compliance, waiving or reduction of late fees and interest should go a long way as there will be many companies genuinely facing hardships in complying with the GST law,” Mohan added.

Meanwhile, when asked about whether the government do to help consumers given the current scenario to boost consumption with respect to GST, experts said if prices are reduced then consumers would be incentivised to buy more.

“If the government can consider a scheme, where say GST rates in general are reduced by say 50% and then brought back gradually to current level by say first quarter of next year, it could really spur the demand. While admittedly the government is constrained of resources but then desperate times call for desperate measures,” Pratik Jain added.

Mohan pointed out that a rate reduction can pep-up the consumer confidence and re-generate the demand cycle.

“All the essential items like fruits, vegetables, packed food items, cold storage and warehousing of food products, bakery, dairy, tea, coffee, health supplements and medical equipment shall be made Zero rated and brought at par with exports. The industry should be allowed refund which will assist in bringing the prices of these essential items down and make them affordable to public. Further, all pending litigations in anti-profiteering shall be fast tracked which will make sure that industry is passing on the benefits to the end consumer. This will also go a long way in reducing prices,” Rajat Mohan said.

With the steps taken in the right direction, experts feel that the economic activities can soon come back to normal. MS Mani says, “Looking at the recent increases in e-way bill generation, it appears that business activities are now picking up, however, there should be a significant improvement in June once the lockdown is further eased.”

Let’s see what comes up as the final agenda points and whether government looks at the huge ask list pointed out by experts.

First Published:Jun 5, 2020 7:14 PM IST