TCS/ TDS from 1st Oct: Compliance Would Be a Big Challenge amidst Confusing Clarification from CBDT

The central board of direct taxes (CBDT) has issued a circular (No. 17) clarifying the tax deduction at source (TDS) and tax collection at source (TCS) provisions which will come into force from 1st October. However, tax practitioners from across the country are not happy with the clarification. They feel that the clarifications have given rise to more doubts and serious disappointment. Especially, the clarification says TCS would be applied on all sales receipt after 1 October 2020 even in respect of sales carried out earlier, but how will companies comply with this, one of them asks.
 

A well-known chartered accountant (CA) from Mumbai feels instead of providing clarification, the CBDT circular has raised more doubts. "Just read the second last item in the circular and see if you can make sense out of it. Even very senior CAs are divided on the interpretation of this clarification," he says.

The last two clarifications are on adjustment for sale return, discount or indirect taxes and fuel supplied to non-resident airlines. CBDT's clarification says, "It is requested to clarify that whether adjustment is required to be made for sales return, discount or indirect taxes including goods and service tax (GST) for the purpose of collection of tax under sub-section (lH) of section 206C of the Act. It is hereby clarified that no adjustment on account of sale return or discount or indirect taxes including GST is required to be made for collection of tax under sub-section (IH) of section 206C of the Act since the collection is made with reference to receipt of amount of sale consideration."

Talking about fuel supplied to non-resident airlines, the circular states, "It is requested to clarify if the provisions of sub-section (IH) of section 206C of the Act shall apply on fuel supplied to non-resident airlines at airports in India. To remove difficulties, it is provided that the provisions of sub-section (1 H) of section 206C of the Act shall not apply on the sale consideration received for fuel supplied to non-resident airlines at airports in India."

 

"The clarifications issued with respect to the manner in which the thresholds are to be computed and the time period to be considered have made it very difficult to implement," says Ajay Rotti, partner at Dhruva Advisors, adding, "The industry has very little time to put systems in place to determine the cases where the provisions apply to consider sales date for a period before 1st October. This would be administratively difficult and the CBDT could have done better by making these provisions applicable only after 1st October in all respects."

 

Tax expert Ved Jain said that TCS is to be collected and paid on all payment received on or after 1st October, including the amount of goods and service tax (GST) and also sales made prior to 1 October 2020.
 
The threshold of Rs50 lakh is year based and, hence, payments received before 1st October are to be considered. However, applicability shall be on payment received on or after this date.
 
"Compliance of this new provision is going to be a big challenge for all the taxpayers whose sales in the previous year has exceeded Rs10 crore," Mr Jain said.
 
The CBDT made some clarifications citing the practical difficulties in implementing the provisions of TDS and TCS. The Finance Bill 2020 has introduced a new provision to mandate electronic commerce operators (ECOs) for deducting TDS in respect of the amount payable to the seller on any sale of goods and services. An ECO is liable to deduct TDS at 1%.
 
The CBDT says on e-commerce transaction there may be applicability of section 194-0 twice, once on main commerce operator, who is facilitating sale of goods or provision of services or both and once on payment gateway, who also happen to qualify as e-commerce operator for facilitating service.

"In order to remove this difficulty, it is provided that the payment gateway will not be required to deduct tax under Section 194-0 of the Act on a transaction, if the tax has been deducted by the ecommerce operator under Section 194-0 of the Act, on the same transaction," it says.
 
Since the threshold of Rs50 lakh is with respect to the previous year, calculation of receipt of sale consideration for triggering TCS under sub-section (1 H) of Section 206C shall be computed from 1 April 2020, the income-tax (I-T) department said.
 
In the case of sale of a motor vehicle to a consumer, receipt of sale consideration for sale of motor vehicle of the value of Rs10 lakh or less to a buyer would be subjected to TCS under sub-section (1 H) of Section 206C of the Act, if the receipt of sale consideration for such vehicle during the previous year exceeds Rs50 lakh. The provisions of sub-section (1F) of Section 206C of the Act apply to sale of motor vehicle of the value exceeding Rs10 lakh.
 
It added that since the threshold of Rs5 lakh for an individual or Hindu undivided family (being e-commerce participant who has furnished his PAN or Aadhaar) is with respect to the previous year, calculation of the amount of sale or services or both for triggering deduction under Section 194-0 of the Act shall be counted from 1 April 2020.
 
If the gross amount of sale or services or both facilitated during the previous year 2020-21 (including the period up to 30 September 2020) in relation to such an individual or Hindu undivided family exceeds Rs5 lakh, the provision of Section 194-0 shall apply on any sum credited or paid on or after 1 October 2020, it added.

The CBDT also clarified that if an insurance agent or aggregator is not involved in transactions between the insurer and buyer, he would not be liable to deduct tax under Section 194-O for those subsequent years. However, it says, the insurance company is required to deduct tax on commission payment, if any, made to the insurance agent of aggregator for those subsequent years.

Here is the clarification issued by CBDT...

  • Like this story? Get our top stories by email.

    User 

    COMMENTS

    prateekgundecha1230

    4 weeks ago

    Please edit the article as there is a press release covering the above mentioned points. Link- https://www.incometaxindia.gov.in/Lists/Press%20Releases/Attachments/858/Press-Release-Clarification-on-doubts-arising-on-account-of-new-TCS-provisions-dated-30-09-2020.pdf

    Winning amount in horse race, game of chance will not attract GST
    The winner of a horse race or any game of chance will not penalised by way of extra taxes as GST levy with the Appellate Authority of Advance Ruling, Maharashtra ruling that winner of a game is not rendering any service or making any supply and the prize money is outcome of an event where results are not universal.
     
    In general parlance, the order means that prize money from winning a derby or any other game where outcome is not known, will not be subject to Goods and Service Tax (GST). This is expected to give a big boost to the operation of such games.
     
    The AAAR said that in a horse race, there are two separate transactions: participation in races organised by horse racing clubs against entry fee payable by the horse race owner, which is supply of service by the race conducting entity to such aspiring horse race owners and thereby, attracts GST.
     
    But the second element, where a race participant is supplying horses for the event, delineates in detail how there is no element of service when the respondent's horse wins the race and gets the prize.
     
    Thus, there is no direct nexus between the activities carried out by the horse owners viz. by providing thoroughbred horses to race clubs for organising horse race events, and the prize money received by such horse owners.
     
    The clause of direct and immediate link between the supply and consideration is absolutely absent in the present situation and participation and winning are two separate events/transactions, the AAAR said.
     
    Earlier, the AAR (Authority for Advance Rulings) had ruled that the amount of prize money received from the events conducting entities would be covered under supply category of the GST law and would be liable to be taxed at 18 per cent.
     
    The implication of the AAAR order is that in all games of chance, including various online games that are getting popular now, the winning amount would not attract GST.
     
    "This order by Maharashtra AAAR is a fair and equitable order for all the horse owners. AAAR held that prize money received by horse owners is not exigible under GST laws as there is no direct nexus between the activities carried out by the horse owners i.e. by providing horses to race clubs for organising horse race events, and the prize money received by such horse owners," said Rajat Mohan Senior Partner, AMRG & Associates.
     
    "It would give relief not only to winners of horse races but also any winner of a game of chance, whereby such a person is not providing any supply for the said financial benefit," he added.
     
    While the AAAR has given relief to the winner of a derby, it said that since there is no taxable supply (by the participant), the assessee will not be eligible to avail ITC (input tax credit) in respect of any input supply including the entry fee, the training charges paid to the horse trainers and the charges paid to the jockeys etc.
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
  • Like this story? Get our top stories by email.

    User 

    How To Verify Your Income-tax Return
    After you have uploaded or submitted your ITR (income tax return) on the income-tax (I-T) e-filing portal, you get 120 days to verify your return. If you fail to verify your tax return within this stipulated time, then it is considered invalid as per current I-T laws. A return may be verified either by sending a signed copy of ITR-V to CPC (centralised processing centre), Bengaluru through speed post/ordinary post or by e-verification through online modes. 
     
    The central board of Direct taxes (CBDT) has decided to provide a one-time relaxation for verification of e-filed ITRs for assessment years (AYs) 2015-16 to 2019-20, which may be done by sending a signed hard copy of ITR-V to CPC, Bengaluru or via online modes latest by 30 September 2020.
     
    There are six ways to verify your ITR. Out of these, five are electronic methods and one is a physical method. These methods can be used only if you are filing tax returns which are not required to be audited, i.e., usually ITR-1, ITR-2 and ITR-4 for FY19-20. However, if you are filing your tax returns which are required to be audited, then you have to verify it using the 'digital signature certificate’. 
     
    1. Aadhaar-based OTP (One Time Password)
     
    To verify your ITR using the Aadhaar-based one-time password (OTP), your mobile number must be linked to Aadhaar and registered as such in the Unique Identification Authority of India (UIDAI) database and your PAN must be linked with Aadhaar.
     
    Log in to the income tax e-filing portal and under the 'My Account' tab, click on 'e-verify return' and select the option, 'I would like to generate Aadhaar OTP to e-verify my return.' A text message with a six digit OTP will be sent to your registered mobile number. Enter the OTP (valid only for 30 minutes) received by you and click on submit and your ITR will be e-verified.
     
    In case your mobile number is not linked to your Aadhaar, then you could use other ways to electronically verify your ITR.
     
    2. Using Netbanking To E-verify
     
    You can e-verify your ITR if you have availed the netbanking facility of your bank account. Only select banks allow you to e-verify your ITR. Here is a list of banks which offer you this option to e-verify via netbanking. 
     
    To verify your ITR using netbanking facility, login to your bank account on the bank's portal. Choose the e-verify option which is commonly found under the 'tax' tab. You will be then redirected to the e-filing website of the income tax department. Hence, before logging in to your bank account, ensure that you are not already logged in on the e-filing portal.
     
    For example, for ICICI Bank, select 'Payments & Transfer' Menu, go to the 'Tax Center' tab and click on 'Income Tax e-Filing' option to login to I-T department portal. You will be re-directed to the e-filing portal of the I-T department where you can proceed to submit and e-verify your return.
     
    Click on ‘e-File’ tab and select ‘Income Tax Return’ from the drop down menu. Select the ‘Assessment Year’, ‘ITR For Name’ & ‘Submission Mode’ & click ‘Continue’. Submit your return/ upload the XML.  ITR Verification is complete. 
     
    3. Using Bank Account Number To Verify 
     
    For this process to work, your PAN has to be registered with the bank and you need to pre-validate your bank account on the I-T portal (in case you have not already done it) after you log in. Go to I-T e-filing portal and under profile settings, select pre-validate bank account and fill in all the details and submit to pre-validate bank account. 
     
    Log in to the I-T e-filing portal. Under the 'My Account' tab, choose the 'Generate EVC' option. Here you can choose either through netbanking or through bank account number options. A 10-digit alpha-numeric EVC (electronic verification code) will be sent to your email address and mobile number. This code is valid for 72 hours. Then, go to the 'e-verify' option under the 'My Account' tab to verify your return. Select the option 'I have EVC already' and enter the EVC that you have received on your mobile number registered with the bank. Click on 'Submit' and your ITR will be verified.
     
     
    4. Using Demat Aaccount Number To Verify
     
    If you are a demat account-holder, you can use your demat account to verify your ITR. This method is similar to the bank account based ITR validation. You must pre-validate your demat account to verify your tax return. Go to the profile settings tab and choose pre-validate demat account and enter the required details such as mobile number, email ID, and your depository name, i.e., NSDL or CDSL. You need to your enter mobile number and email ID which is linked to the demat account.
     
    The pre-validation process is automatic and usually takes about 1-2 hours and if there is any error then it is communicated to you via email. You can use your demat account to generate EVC only after your details are validated by your depository. Remember, you will be unable to change your mobile number or email ID without revalidating it with the depository.
     
    You need to pre-validate your demat account number and then you can choose the third option seen in the screenshot above ‘Generate EVC through demat account number’. A 10-digit alpha-numeric code will be sent to your email address and mobile number. This code is valid for 72 hours. Then, go to the 'e-verify' option under the 'My Account' tab to verify your return. Select the option 'I have EVC already' and enter the EVC that you have received on your mobile number registered with your demat account number. 
     
    5. Using Bank ATM To Verify:
     
    Swipe your debit card in the bank’s ATM machine. Enter your PIN and choose e-filing option. Opt for EVC (valid for 72 hours) to be sent to your registered mobile number. Log in to income tax e-filing portal and choose e-verify using EVC obtained via bank ATM. Enter the EVC in the space provided and submit. Your ITR is e-verified. 
     
    6. Send Hard Copy Signed Print Out to the Bengaluru CPC
     
    If you are unable to e-verify your ITR using any of these electronic methods mentioned above, then you can send a signed copy of ITR-V (income tax return verification/acknowledgement receipt) to the CPC. However, please note the following points: 
     
    1. ITR-V is a one-page document which must be signed in blue ink. It must be sent either via ordinary post or speed post. You cannot courier ITR-V and cannot use registered AD.
     
    2. Address of CPC Bangalore for speed post: CPC, Post Box No - 1, Electronic City Post Office, Bangalore - 560100, Karnataka, India'.
     
    3. You are not required to send any supporting document along with the ITR-V.
     
    4. You will receive a text message on your mobile phone and an email on your email ID once your ITR is received by the tax department. This intimation is only for receipt of ITR-V, the intimation for processing of tax return is separate.
     
    5. If you have verified your ITR using any of the electronic methods mentioned earlier, you are not required to send ITR-V to the I-T department.
  • Like this story? Get our top stories by email.

    User 

    COMMENTS

    madnisthm

    1 month ago

    More than a month has passed when I successfully e-verified my ITR for AY 2020-21 through Aahaar based mode. However, it has not been processed yet. What can be the reason. How much time IT Deptt. takes to process an ITR after its successful e-verification. Syed Tafazal Hussain Madni

    REPLY

    sudhindra.jorapur

    In Reply to madnisthm 1 month ago

    They will normally take 30 days if you don't have any refund. Otherwise another 15 days more. Don't worry, it will processed

    pkmuhammedhisan

    In Reply to madnisthm 1 month ago

    They are not processing Muslim ITR requests.

    mywopy

    1 month ago

    The option 1 , aadhar based tax return verification process seems to be the easiest and submission goes through successfully everytime on the first attempt without any errors or hiccups.

    REPLY

    s5rwav

    In Reply to mywopy 1 month ago

    What if Not have Aadhar Card? I am Babubhai Vaghela from Ahmedabad. Thanks.

    We are listening!

    Solve the equation and enter in the Captcha field.
      Loading...
    Close

    To continue


    Please
    Sign Up or Sign In
    with

    Email
    Close

    To continue


    Please
    Sign Up or Sign In
    with

    Email

    BUY NOW

    online financial advisory
    Pathbreakers
    Pathbreakers 1 & Pathbreakers 2 contain deep insights, unknown facts and captivating events in the life of 51 top achievers, in their own words.
    online financia advisory
    The Scam
    24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
    Moneylife Online Magazine
    Fiercely independent and pro-consumer information on personal finance
    financial magazines online
    Stockletters in 4 Flavours
    Outstanding research that beats mutual funds year after year
    financial magazines in india
    MAS: Complete Online Financial Advisory
    (Includes Moneylife Online Magazine)
    FREE: Your Complete Family Record Book
    Keep all the Personal and Financial Details of You & Your Family. In One Place So That`s Its Easy for Anyone to Find Anytime
    We promise not to share your email id with anyone