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ICSI sent a letter to Ms. Nirmala Sitharaman requesting amendment in GST law to charge GST on cash receipt basis and also to avail ITC on cash payment basis instead of current accrual method. 

Sub.: Request for amendment in GST law due to COVID 19

We wish to submit that COVID-19 has brought unprecedented economic crisis before the business entities of India including the professionals like Company Secretaries. The coming months may witness huge liquidity problems in the market. There will be a situation that customers/clients will ask for more credit period as a condition of sales. Thus, business will experience shortage of money for fulfilling its monthly obligation and outflows.

We wish to further submit that as per the present provisions under the GST Law, the payment of GST is required to be made on accrual basis whether the supplier of goods or services realises the amount of supply of goods or services is immaterial. Even if no amount towards supply of goods or services for a particular month is realised, there remains the liability to pay GST on 20th of the next month. In the event of non-compliance or delay in payment of GST by the due date, the supplier is liable for payment of interest @18% p.a. along with attraction of other penal provisions stated therein the law.

We wish to mention here that when the service tax was first introduced in 1994, the liability to pay service tax (point of supply of service) was on receipt basis, in as much as liability to pay service tax was attracting only on receipt of value of taxable service. This provision in the statute book was in existence for more than a decade and it worked very well in administration of tax law.

The present developments arising due to the spread of the COVID-19 virus has warranted the need for temporary relaxation in compliance requirements under various laws. It is humbly requested that this method (receipt basis) of determining time of supply be introduced for limited period till the industry and business does not come out of crisis arising out of COVID-19.

It is further requested that time of supply of goods or services or both be defined as receipt of money or money equivalent towards supply of goods or services or both and the supplier discharges tax liability on receipt basis proportionate to amount received, inclusive tax. Similarly, a supplier shall avail Input Tax Credit (ITC) proportionate to the payments made within the period of time specified of and reverse credit on non payment of supplies received. This interim measure will not only ensure tax compliance from supplier side, but put a simultaneous check on availment of ITC on payment basis and maintain smooth cash flow of taxes to the exchequer. 

We hope that these amendments will help the trade, industry and professionals to great extent and will also help them on focusing on nation building post COVID-19. We shall be pleased to provide any further information in this regard on hearing from your goodself. 

The suggestion from switching over from mercantile to cash is very laudable. Rather it should be made permanently.

My views are as under:

Earlier method of liability was on services only but not for goods. Now the system covers both goods and services.

GST is by and large aconsolidation of Central Excise, Service tax and State VAT and CST. While consolidating so, the most Tax-favourable provisons are considered to form part.

I am not sure whether Government will change the GST tax system because of Covid 19.


It is also difficult for department to check when and whether payment of a particular bill is realised or not.

However, I suggest to waive penalty fully and relax interest to some extent (example 9% waiver and 9% charging) without fully changing tax structure.

Additionally, the nature of business may be considered. Example. Super markets and e-commerce will not give credit and hence no waiver of penalty., No reduction of interest.

But in case works contracts particularly Government works, the service provider can not be sure as to how much of his claim will be admitted and also when he will get payment.

So advisable is to consider the payment terms associated with nature of business and accordingly to take a decision.

Thanks and best wishes

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