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May 24, 2024

Kerala HC Validates Extension of GST Assessment Orders’ Time Limit During Covid

The Kerala High Court has upheld the validity of the Indian government’s decision to extend the deadlines for issuing assessment orders related to Goods and Services Tax (GST) returns filed during the Covid-19 pandemic. This ruling came in response to a specific case involving Bharat Sanchar Nigam Limited (BSNL) and certain services provided to Southern Railways.

Case Background

A petitioner challenged the GST assessment orders, arguing that they were issued beyond the permissible time frame and that the relevant form did not auto-populate his output tax liability. Saurabh Agarwal, a tax partner at EY, commented on the case, noting that the petitioner contended the assessments were time-barred.

This case is not isolated; numerous businesses have filed similar petitions across various courts in India, challenging the government’s notifications that extended the assessment period. The Kerala High Court’s judgment could potentially set a legal precedent for these cases.

Government’s Decision and Legal Justification

In response to the Covid-19 crisis, the Indian government extended the assessment periods for GST returns filed for the fiscal years 2017-18, 2018-19, and 2019-20 by four to ten months. The original deadlines were February 5, 2020, February 7, 2020, December 31, 2020, and February 28, 2021. This extension followed the GST Council’s recommendations.

The Union government invoked the force majeure clause to justify the extensions through notifications. Force majeure clauses in contracts release parties from obligations when extraordinary events prevent them from fulfilling their contractual duties. The government argued that the Covid-19 pandemic constituted such an event, significantly disrupting economic activities and compliance capabilities.

Court’s Ruling

The petitioner argued that no force majeure conditions existed when the notifications were issued, thus challenging their legality. However, the Kerala High Court disagreed, emphasizing that the government is empowered to extend the limitation period for actions hindered by force majeure events. The court recognized Covid-19 as a force majeure event, given its unprecedented global impact and the extensive disruption it caused.

The court dismissed the petition, finding no merit in the challenge against the notifications. This decision reinforces the government’s stance on extending deadlines due to the pandemic’s extraordinary circumstances.

Implications for Businesses

Saurabh Agarwal advises businesses to review their tax filings and reconciliations, particularly for the fiscal years up to 2019-20, to avoid unexpected tax liabilities. This proactive approach can help businesses ensure compliance and mitigate potential risks stemming from extended assessment periods.

The Kerala High Court’s ruling provides clarity and legal backing to the government’s decision to extend GST assessment deadlines during the pandemic. It acknowledges the severe impact of Covid-19 on economic activities and supports the application of force majeure in this context.

As similar cases continue to be heard in other courts, this judgment may influence future rulings, offering a framework for addressing the challenges posed by the pandemic on tax compliance and assessment processes.

Jhumpa Lahiri

Jhumpa Lahiri

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