TCS/TDS From Oct 1: Compliance Going To Be A Big Challenge
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New Delhi: 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 October 1.
Tax expert Ved Jain said that TCS is to be collected and paid on all payment received on or after October 1, including the amount of GST and also sales made prior to October 1.
The threshold of Rs 50 lakh is year based and hence payments received before October 1 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 Rs 10 crore,” 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 per cent.
The CBDT clarified that on e-commerce transaction, “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 e-commerce operator under Section 194-0 of the Act, on the same transaction.”
Since the threshold of Rs 50 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 April 1, 2020, the Income Tax 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 Rs 10 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 Rs 50 lakh. The provisions of sub-section (1 F) of Section 206C of the Act apply to sale of motor vehicle of the value exceeding Rs 10 lakh.
It added that since the threshold of Rs 5 lakh for an individual/Hindu undivided family (being e-commerce participant who has furnished his PAN/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 September 30, 2020) in relation to such an individual or Hindu undivided family exceeds Rs 5 lakh, the provision of Section 194-0 shall apply on any sum credited or paid on or after October 1, 2020, it added.