Tax Concept’s Representation for Deferment of Section 16(2) of the CGST Act, 2017 due to COVID-19 Pandemic

Date : 05.09.2020

Ref.: TC/GST/20-21/2


Smt. Nirmala Sitharaman

Hon’ble Union Minister of Finance, Govt. of India &

Chairperson – GST Council

134, North Block, New Delhi – 110 001

The Office of GST Council Secretariat,

5th Floor, Tower II, Jeevan Bharat Building, Janpath Road,

Connaught Place, New Delhi – 110 001

Sub.: Request for deferment of Section 16(2) of the CGST Act, 2017 due to COVID-19 Pandemic.

Hon’ble Madam/ Sir,

Tax Concept is a well known platform formed for the professionals. The platform has over 500 members across India (such as CAs, CSs, CMAs and tax practitioners.)

The aim of the platform is to educate and serve professionals in a better way.

Representation Started…

Due to COVID-19 lockdown throughout the country, all businesses have affected badly. Income source of businesses has been affected accordingly and now, some of businesses are not able to pay even for their fixed expenses.

Highlights of various reports projecting India’s economic situation due to COVID-19 :

In a report, Economic Times said that : “India has been hit hard due to COVID-19. Global rating agency slashed India’s GDP projection for F.Y. 21 to 0.8 percent. The COVID-19 pandemic has been a huge blow to India, especially since many sectors were already facing a crisis when the virus storm hit.”

As per the Annual Report of TVS Motors Company for 2019-20 : “TVS Motors Company expects environment to remain challenging for most part of the current financial year due to the COVID-19 pandemic with chances of some revival only in the later part of the year.”

Many economists reported that : “Today, almost all MSMEs are out of action due to the COVID-19 lockdown, chocking all production activities at major firms across sectors. There are several reports that indicate how MSMEs are reeling under crisis and have no money to pay their employees.”

We further have the honour to state the provisions of Second Proviso to Section 16(2) of the CGST Act, 2017 which prescribes that :

“Provided further that where a recipient fails to pay to the supplier of goods or services or both, other than the supplies on which tax is payable on reverse charge basis, the amount towards the value of supply along with tax payable thereon within a period of one hundred and eighty days from the date of issue of invoice by the supplier, an amount equal to the input tax credit availed by the recipient shall be added to his output tax liability, along with interest thereon, in such manner as may be prescribed”

According to this section, a buyer/ service receiver has to pay the supplier/ service provider, within 180 days from the date of purchase/ service, unless he has to reverse the ITC with applicable interest.

Hon’ble Madam/ Sir, when the businesses are not able to pay even to their employees, how they can make payments for all purchases/ service received by them. The provisions of this section will also result in bad financial position of business houses.

Therefore, your good self are kindly requested to defer the provisions of Section 16(2) of the CGST Act, 2017 for the period till this exceptional situation is not in control.

Yours Faithfully,

Team Tax Concept

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