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TDS, TCS for GST kick-in from October 1

TDS, TCS for GST kick-in from October 1

The GST law requires TDS to be deducted by certain specified Government bodies/ PSUs, where the total value of supply, under a contract, exceeds Rs. 2,50,000.

After the GST regime gained momentum, the government decided to introduce TDS and TCS provisions. The GST law requires TDS to be deducted by certain specified government bodies/ PSUs, where the total value of supply, under a contract, exceeds Rs 2,50,000.

The recipient of supply i.e. the TDS Deductor is obligated to deduct 2% (1% CGST + 1% SGST) from the payment made or credited for taxable goods or services or both. The aim to bring this provision is to keep a watch on tax evasion and leakages to the extent possible.

The sudden but delayed implementation of TDS provisions from 1 st October 2018 has presented certain challenges amongst the industry. The challenges would range from initial hiccups to long-lasting impact on the business of companies. Some noticeable challenges with this implementation are outlined below.

Transitioning to TDS:

The priority for the deductors at this stage is smooth transition considering the additional compliance and legal requirements to deduct tax. This has resulted in businesses analyzing the trigger point for deduction of tax. One key issue is whether TDS provisions apply to supplies made prior to 1 st October but where payments are received after this date. In order to answer this question, the interpretation of legal provisions becomes critical.

TDS on inter-State supplies:

The GST Law excludes TDS where the supplier registration and the place of supply registration of the TDS deductor are in different states. The provisions do not say that TDS is not applicable to inter-State supplies. However, the FAQ
released by Karnataka Government seems to indicate TDS is not to be deducted on inter-State supplies (irrespective of the location of supplier/ place of supply/ location of recipient).

Although the understanding in the FAQ seems to be incorrect, the Department is yet to clarify this position or make the relevant changes to the law. Till then, it remains unclear whether TDS is to be deducted on inter-State supplies.

TDS on inter-unit transactions:

The transactions between two registrations of a same company (even without any consideration) are taxable under GST. As per the provision under TDS, deduction is to be made on payment made or credited to the supplier.

Different companies follow different practices with respect to the compensation mechanisms between its units. In such cases, TDS provisions may pose significant accounting and legal challenges.

Contract value or supply value?

The TDS provision specifies that the tax is to be deducted where the total value of such supply, under a contract, exceeds 2.5 lakh. The question that arises is whether the tax is to be deducted for all supplies under one contract, where the contract value exceeds 2.5 lakh, or the value qua each supply is to be considered irrespective of the contract value. In absence of clarification, the provision could have serious ramifications.

Deduction of exempt supplies?

As per the legal provisions, TDS is to be deducted from payments made or credited for taxable goods or services or both. Taxable supplies have been defined as “supply of good or services or both leviable to tax under the Act”. Therefore, the supplies which have been made exempt by virtue of exemption notifications would also be considered as taxable supplies.

This brings us to the question, whether TDS is to be deducted on payments pertaining to supplies which have been made exempt? Under the Income Tax Law, various Circulars have clarified the non-requirement of deduction in
situations where the income is unconditionally exempt. Under GST laws, similar clarifications have not been issued and have been a concern for companies.

Compulsory registration for deductors:

Persons who are required to deduct tax are required to obtain registration (whether or not registered separately). The provision does not address the situation where a person is operating through multiple places of business in one State. It remains unanswered whether such a person would require separate registration for each place of business to comply with the compulsory registration provision or a single registration for the entire State would be enough.

Additional compliance burden:

In addition to legal issues, the business would be required to prepare themselves for certain compliance requirements. Over and above the existing returns, the person deducting the tax would also be required to file GSTR-7 for furnishing the details of tax deducted.

The Deductor would also be required to furnish to the Deductee (supplier of goods or services) a TDS certificate mentioning the contract value, rate of deduction, amount deducted, and amount paid to the government within 5 days from the date the TDS is deposited.

With fresh challenges under the GST, all the stakeholders must be ready for implementation of the TDS provisions before 1 st October 2018. There is a dire need to clarify the open issues to avoid confusion.

It will be interesting to see whether the issues relevant for TDS implementation are discussed and clarified during the 30th GST Council Meeting scheduled on 28.09.2018.


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Source: Financial Express
Challenges Loom Over Applicability Of New GST Provision For E-Marketplaces

Challenges Loom Over Applicability Of New GST Provision For E-Marketplaces

Reporting norms and information technology system preparedness for managing high-volume transactions are some of the challenges that e-commerce marketplaces will face as the government introduces (GST) tax provisions for the sector.

The provisions, which will come into effect from Oct. 1, require e-commerce companies to collect 1 percent tax collectible at source while making payments to suppliers under the Goods and Services Tax regime.

The provisions are expected to improve compliance and will help compare turnover reported by suppliers through their tax returns, thereby checking evasion. Suppliers can claim credit for the tax deducted.

Queries emailed to Amazon India, Flipkart, Snapdeal, and Paytm didn’t elicit a response.

TCS provisions were kept in abeyance till June 30 and later deferred till Sept. 30, 2018. Finance ministry officials met with stakeholders this week to discuss the challenges that the industry is facing to comply with the norms.
Multiple Registrations

One of the challenges discussed at the meeting, according to a person privy to the discussions, is the need for e-commerce operators to obtain registration as a tax collector at source in every state their merchants are located.

“The multiple state-wise registrations required for an ecommerce operator to comply with the TCS  provision will increase compliance burden substantially,” said Bipin Sapra, an indirect tax partner at EY India.

The current law requires businesses seeking GST registration in a state to have a physical presence or an office in that state.

Sumit Lunker, an indirect tax partner at PwC India, favoured a tweak to the law. “The government could consider allowing registration without having a place of business in every state, similar to non-resident taxable person provisions.”

The Current Law Also States

Merchants selling goods on any e-commerce portal will have to mandatorily register under the GST irrespective of their annual turnover.
Businesses are otherwise allowed not to obtain a registration under GST if their annual turnover is up to Rs 20 lakh.
Suppliers providing a service on ecommerce platforms are exempt from registering under GST.

Preparedness Of IT Systems

E-commerce marketplaces will need information technology systems to deduct tax on every payment to suppliers, for which they’re not ready, said the person cited earlier. This is bound to create chaos as systems won’t be geared up to take up the high-volume reporting that the sector requires, the person said.

Volume of transactions involved in large e-commerce operators need robust systems that are tested thoroughly before implementation, the person said, adding that even a small glitch will significantly impact the business models of the sellers.

Sapra from EY India agreed. “Since TCS will require a robust IT system both at the operator end and at GSTN end, the government should test the systems before initiating the TCS provisions.”

Ambiguity In Reporting Procedures

The stakeholders also pointed out that the current TCS guidelines don’t prescribe the procedure for adjustments where returns of suppliers exceed their actual sales, the same person said.

The information filed by an e-commerce company would be sent to merchants for acceptance or rejection, and there’s a possibility that the details may be rejected. There may also be cases where TCS is deducted in a month, but the order is cancelled by the customer in the next month. The current procedure doesn’t specify how the differences can be reconciled, the same person said.

There’s still ambiguity on the applicability of TCS in a case where two e-commerce operators are involved in one transaction—such as those involving aggregators.

Foreign e-commerce companies selling in India won’t be required to register under GST or deduct TCS, said the person cited earlier.

The industry has also asked the government to defer the TCS provisions till the end of the festive season citing enhanced sales, said a second person privy to the discussions. The government is insistent on introducing TCS provisions from Oct. 1 and has communicated that e-commerce marketplaces will get more time to file returns.

However, a delay in filing of returns by e-commerce players during the festive season will lead to blockage of capital for sellers as they’ll not be able to claim credit for the tax that will be deducted by e-commerce operators


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Source : bloombergquint
Govt notifies rate at which tax is to be collected by E-Commerce operators under GST

Govt notifies rate at which tax is to be collected by E-Commerce operators under GST

Central Board of Indirect Taxes & Customs (CBIC) has issued a Notification No. 52/2018- Central Tax dated 20th September, 2018 to notify that every electronic commerce operator shall collect tax @ 0.5% (each under Central tax and State tax – to be notified separately by each State) of the net value on intra-state taxable supplies of goods and/or services.

Similarly, Notification No. 02/2018-Integrated Tax has been issued to notify that the electronic commerce operators shall collect tax at the rate of 1% as an integrated tax of the net value on inter-State taxable supplies.

Source: Central Board of Indirect Taxes & Customs
Alert! TDS, TCS under GST next month; Know what is the difference

Alert! TDS, TCS under GST next month; Know what is the difference

Surprising industries, the government has now taken one step ahead in its Goods and Services Tax (GST) drive. It has brought in section 51, which is about tax deducted at source (TDS) and section 52 about tax collection at source (TCS) under the regime. The government has kept October 01, to implement this new provision under the GST law. This new development is expected to make it mandatory for e-commerce companies in collecting taxes at the source and also to help in tracking down sellers on platforms like Amazon and Flipkart. Further, it will also give a boost to government companies in deducting GST at a specified rate. Both TDS and TCS were kept in abeyance as the government wanted their newly GST which was launched on July 01, 2017, to settle down.

Now that less than two weeks are left, let us understand about what is TDS and TCS.

TDS

Who is required to deduct TDS? 

  • a department or establishment of the Central Government or State Government
  • local authority
  • Governmental agencies
  • such persons or category of persons as may be notified, by the Central or a State Government on the recommendations of the Council

When is it required to be deducted? 

Where the total value of supply under a contract exceeds Rs 2,50,000 then a supplier of taxable goods or services is liable to deduct TDS. The rate at which TDS can be deducted is set at 2% under GST.

It needs to be noted that, TDS deductors, whether or not separately registered, are required to compulsorily register in GST irrespective of threshold limits.

TDS certificate

A deductor must furnish to the deductee a certificate in Form GSTR-7A (made electronically available), within 5 days of crediting the amount so deducted to Government, mentioning details like contract value, the rate of deduction, the amount deducted and an amount paid to the Government.

Amount of TDS shall be paid to the Government by the deductor within 10 days after the end of the month in which such deduction is made.

As for the deductee can claim credit, in his electronic cash ledger, of the tax deducted and reflected in the return of the deductor furnished under Section 39(3).

The due date for filing GSTR-7 is on 10th of the following month.

TCS

Who is required to collect? 

Every electronic commerce operator (“operator”), who is not an agent, is eligible to collect TCS at the prescribed rate when taxable supplies are made through it by other suppliers and the consideration with respect to such supplies is to be collected by the operator.

Companies like Amazon, Flipkart, Jabong, Snapdeal, Shopclues, etc. are the ones operating in India. As per the law, it is compulsory for every e-commerce operator register in GST irrespective of threshold limits. Further, it is mandatory for every person who supplies goods/services through an e-commerce operator to get registered under GST.

The rate of TCS is levied at 1% under CSGT, 1% under SGST and 2% under IGST.

An operator must pay the amount of TCS to the government within 10 days after the end of the month in which such collection is made.

Furthermore, the operator is required to furnish a monthly statement in Form GSTR-8 by the 10th of the following month. Not only this, they are also required to file an Annual statement in Form GSTR-9B by the 31st of December following the end of every financial year.

Every tax collected by the operator must be credited to the cash ledger of the supplier who has supplied the goods/services through the operator. Later the supplier can claim credit of the tax collected and reflected in the return by the Operator in his [supplier’s] electronic cash ledger.


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Source: Zee Business
TDS, TCS Provisions Under GST To Come Into Effect From Oct. 1

TDS, TCS Provisions Under GST To Come Into Effect From Oct. 1

The government has notified October 1 as the date for implementing the tax deducted at source and tax collected at source provisions under Goods and Services Tax  (GST) law.

TDS, TCS Provisions Under GST To Come Into Effect From Oct. 1

As per the Central GST Act, the notified entities are required to collect TDS at 1 percent on payments to goods or services suppliers in excess of Rs 2.5 lakh. Also, states will levy 1 percent TDS under state laws.

E-commerce companies will now be required to collect up to 1 percent TCS while making any payment to suppliers under the GST. States too can levy up to 1 percent TCS under State GST law.

“The e-commerce companies for TCS and various Government Companies for TDS would need to quickly gear up their ERP systems to comply with these provisions from 1st October,” said Abhishek Jain, Tax Partner at EY. “With audit reports as well being notified, the industry would now really need to buckle up, given the short time frame.”

Rajat Mohan, a partner at AMRG & Associates, said the government has notified operation of TDS provisions on payments made by government agencies and TCS provisions for specified e-commerce operators effective October 1, 2018.

“These twin provisions are expected to further deepen the penetration of tax authorities in the economy, and it is likely to carve out widespread tax evasion of not only indirect taxes but also direct taxes,” Mohan said.

The GST, which subsumed over a dozen local taxes, was rolled out on July 1, 2017. However, to make it simpler for businesses in the initial months of the rollout, TDS/TCS provisions of GST laws were kept in abeyance till June 30. Later on, it was deferred until Sept. 30, 2018.


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Source: Bloomberg Quint
TDS, TCS deductors can apply for GST registration from September 18

TDS, TCS deductors can apply for GST registration from September 18

TDS, TCS deductors can apply for GST registration from September 18

GST registrations for entities mandated to collect and deduct tax at source will start from September 18. However, the date from which tax deducted at source (TDS) or tax collected at source (TCS) will be done will be notified later. The Goods and Services Tax (GST) Council, at its 21st meeting in Hyderabad, decided to open registration of persons liable to deduct TDS and TCS from September 18. As per the Central GST (CGST) Act, the notified entities are required to collect TDS at 1 per cent on payments to suppliers of goods or services in excess of Rs 2.5 lakh.

Also, e-commerce companies are required to collect 1 per cent TCS while making payment to suppliers under GST, which kicked in from July 1. Following industry demands, the government in June had decided to defer the TDS and TCS provision for smooth rollout of GST. GST subsumed a host of levies including excise and service tax and transformed India into a single market for seamless movement of goods and services. Also, accommodating industry demands, the GST Council, chaired by Union Finance Minister Arun Jaitley and comprising state counterparts, on Saturday decided to extend the deadline for filing TRAN-1 form by a month to October 31. TRAN-1 is to be filed by those businesses that want to claim credit for taxes paid before the launch of GST. This form can now be revised once by businesses in the case of any discrepancy.


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According to states, the transitional credit claimed by businesses is huge running up to Rs 60,000 crore. In the maiden returns for July, as much as Rs 95,000 crore taxes have been earned from about 45 lakh assessees. With regard to people opting for the composition scheme, the GST Council has decided to give businesses time till September 30 to avail of it. “Such registered person shall be permitted to avail of the benefit of the composition scheme with effect from October 1,” an official statement said.

Besides, the over 10 lakh registered businesses who have already opted for the composition scheme will be required to file their returns for the July-September quarter by October 18 and pay their taxes. Under GST, as many as 72 lakh businesses have migrated from excise, service tax and VAT registration. The composition scheme is an alternative to the levy of tax designed for small taxpayers whose turnover is up to Rs 75 lakh — Rs 50 lakh in the case of eight north-eastern states and the hilly state of Himachal Pradesh. The objective is to bring simplicity and reduce the compliance cost for small taxpayers. The scheme is optional under which manufacturers other than those of ice cream, pan masala and tobacco products have to pay a 2 per cent tax on their annual turnover. The tax rate is 5 per cent for the rest.


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Source :  MillenniumPost