The novel coronavirus outbreak has posed huge challenges for public health and economic security of millions of people worldwide. As your Hon’ble kind self had acknowledged, the pandemic’s impact on nations is even more severe than that caused by World Wars I and II. In view of the gravity of the situation, the government has reached out to all stakeholders to fight against this menace on a war-footing basis.
Sir, for a heavily populated country like India where the healthcare / other essential infrastructure is currently not commensurate to the potential requirement, dealing with this crisis can be a daunting task. Recognising this, all stakeholders including businesses, have come forward to contribute in whatever way possible to minimise the risks to life and livelihood. Collaborative efforts of the government and the private players are essential to deal with the situation.
The industry deeply appreciates the swift relief measures announced by the government for the vulnerable and impacted sectors. Deferment of the statutory and regulatory compliances has also been a welcome respite for the taxpayers.
The industry and businesses, despite the challenges that they themselves are facing, have been actively complementing government’s endeavours in fighting the pandemic, by providing essential and life survival equipment such as ventilators, testing kits, masks, sanitisers and other essential facilities in the hospitals, for timely support to the needy. However, these companies are going through immense financial pressures in the current scenario of complete lockdown and slow economic growth. In view of this, the Government’s all-out support to the efforts being undertaken by the private sector towards this cause will be necessary.
In view of the above, we suggest that government may provide tax relief for expenditure incurred by taxpayers as measures for fighting COVID 19. In particular, we suggest the following:
Direct Tax measures :
a) Section 37 and Section 57 of the Income tax Act, 1961 may be amended or notification/s may be issued, allowing taxpayers full deduction, while computing taxable income for the year in which such expenditure is incurred, in respect of any direct expenditure incurred towards combating COVID 19 crisis.
b) 100% depreciation may be granted for machinery used to manufacture such items or any equipment used for combating Covid 19.
c) Weighted deduction of 200% may be given to taxpayers who have actually paid salaries during the months of March, April, May and June 2020 to their employees by honouring the Government’s advisories of not laying off the employees and treating absence from work due to lock down as paid leave.
d) The weighted deduction u/s. 35(2AB) @ 150% which expired on 31 March 2020 may be appropriately extended. In any case, as a short term relief comparable to benefits extended to Chapter VI-A deductions and capital gains roll over relief, the time limit for incurring R&D expenditure for weighted deduction benefit @ 150% u/s. 35(2AB) for F.Y. 2019-20 may be extended till 30 June 2020.
e) An extra deduction u/s. 80D may be granted for expenditure incurred towards testing for Covid-19 infection and/or medical treatment and/or self-quarantine or home isolation.
f) Following the precedent of amendments made to s.80-G for Gujarat Earthquake relief in 2001, similar amendment may be made to extend benefit of 100% deduction (without being subject to cap of 10% of Gross Total Income) for donations made to approved charities during the period from 1 April 2020 to 30 September 2020 subject to such charities maintaining separate accounts for such donations, applying it exclusively for Covid-19 relief work by 31 March 2022 and transferring any unspent amounts to PM CARES Fund by 31 March 2022. This deduction may be granted to corporates and non-corporates even if they have availed lower tax regime u/s. 115BAA or 115BAB or 115BAC or 115BAD.
Indirect tax measures :
g) Complete waiver on import duty or tax on supply of goods or services or both may be granted for contributions made towards COVID 19. Waiver on payment of cess or royalty payable to Government on any Licence paid for any software/ hardware that are imported for enabling the employees to work from home.
Further, to ease the liquidity problems for the industry, especially for MSME sector, it is requested that undisputed amounts of income tax and GST refunds may be released expeditiously to facilitate the industry to pay the salaries and wages of the employees during the current environment of liquidity stress.
A detailed note containing our suggestions is attached for your kind consideration. We would be grateful if the suggestions are accepted and necessary amendments or notifications, applicable for FY 2019–20 and 2020–21, are issued at the earliest.
Representation alongwith Annexure Note