...Kerala HC prescribes EMI shot for Covid-hit business

In a move that is likely to warm the cockles of taxpayers, the Kerala High Court has permitted a GST assessee to pay tax dues in EMIs as its business has been badly hit by Covid-19.

“(Tax Department) permit him to discharge the balance tax liability, inclusive of any interest and late fee thereon, in equal successive monthly instalments commencing from August 25, 2020 and culminating on March 25, 2021,” a Bench of Kerala High Court said in a recent ruling. Experts feel that such a ruling could lead to better compliance.

Harpreet Singh, Partner at KPMG. termed this a ‘sagacious’ ruling which showed the humaneness of the authorities who have taken due cognizance of the financial hardship of the petitioner on account of the pandemic. “Rulings like these encourage self-compliance and can go a long way in building trust between the taxpayer and the administrators,” he said.

There is a provision in the law for paying dues in instalments, but some conditions and interpretation of law make it very difficult for assessees to avail themselves of this facility.

According to Section 80 of the CGST Act, on an application filed by a taxable person, the Commissioner may permit payment of any amount due under the Act, other than the amount due as per the liability self-assessed in any return, in monthly instalments.

The maximum number of instalments would be 24 and this will include interest and late fees. However, if there is default in payment of any one instalment on its due date, the whole outstanding balance payable on such date “shall become due and payable forthwith and shall, without any further notice being served on the person, be liable for recovery.”

In a petition filed before the High Court, the petitioner Pazhayidom Food Ventures expressed its intention to pay the arrears of tax due for the assessment year 2018-19 (November 2018 to March 2019), without contesting the same but did not get approval from the tax department to pay the arrears of tax in instalments. The petitioner said that due to the Covid pandemic, he is not in a position to make a lumpsum payment.

‘Bonafides established’

The plea before the court was “to permit the petitioner to file the returns without paying the entire admitted tax, but ensuring that the payment of admitted tax, together with interest thereon and applicable late fees etc, is made on or before March 31, 2021.” The lawyer for the tax department pointed out that that the provisions of the Act do not provide for the payment of the admitted amount shown in the return in instalments. After hearing both the sides, the Bench noted that the assessee is not disputing the tax liability but seeking to pay the amount along with interest etc in instalments as its business has come to a standstill.

The Bench also acknowledged the fact that the assessee has established its bonafides by effecting a payment of ₹4 lakh towards the tax liability for 2018-19 and “as of today, there is no demand against the petitioner for the unpaid tax amount.” Keeping all these in mind, the Bench asked the tax department to accept delayed tax returns without insisting on payment of tax. The assessee was allowed to deposit admitted tax in instalments.