These companies have served legal responses to the tax department stating that none of the executives would be able to meet the revenue officials due to COVID-19 scare.
The legal responses — or notices — filed by the companies claim that most of the senior officials are already working from home and to expect them to travel would put their lives in risk.
“It should be noted that to comply with the summons proceedings, our personnel will be required to travel.. COVID-19 is an imminent life-threatening disease and travel of company personnel, unless absolutely unavoidable, is discouraged,” one of the notices served to indirect tax officials by an automobile major reads.
In last few days the indirect tax officials have issued several summonses—an order to appear before the tax official—to companies and banks asking them to clear their position on certain tax disputes including mismatch in input tax credit to taxability of certain goods and services.
Many fear that the tax department could trigger action against companies that are not complying. “In such an unprecedented time, it is hoped that there is no additional layer of litigation for a tussle for appearance between the taxpayer and the revenue authorities. As the courts are only addressing the urgent matters, these issues may burden both the taxpayers and courts”, said Abhishek A Rastogi, partner at Khaitan & Co.
Tax experts say that this is a dicey situation even for the tax officials who have to meet steep revenue targets for Goods and Services Tax (GST) collections.
“There is definitely a pressure on tax officials to meet revenue targets by March end but we hope that coercive measures like attaching bank accounts or blocking input credits are now taken in exceptional situations only. Most of the companies are now implementing ‘work from home’ policy and discouraging their staff to travel and even courts are not hearing non urgent cases and in many countries the government has provided extension for payment of VAT and filing of returns,” said Pratik Jain, National Leader, Indirect Tax, PwC India.
GST collections for February were Rs 1.05 lakh crore, falling short of the Rs 1.15 lakh crore target set by the government. The revenue department had reset GST collection target to Rs 1.15 lakh crore for February and Rs 1.25 lakh crore March.
Issuing summons is one of the ways the revenue department puts pressure on companies where senior executives are expected to explain their position personally to the tax officials. The legal notices could flare up in a full-fledged battle, fear insiders.
The tax department on its end can arrest company officials or attach their bank accounts if they fail to appear and explain the position. “We are willing to provide all information through email or any other way,” one of the responses given to the tax department by an automobile company reads.
People in the know say that if the tax officials use cohesive measures some of the companies could approach the high courts going ahead and this could result in long drawn legal battle.
“We have appropriate legal remedies to address this issue but would use such remedies only as a last resort,” said Rastogi who is representing several companies and NBFCs in such disputes.
Tax experts say that globally revenue authorities have postponed the returns filing date or given extensions to companies to comply with certain regulations. While such demand has still not been made several companies are looking to make a representation to the government in this regard.