White Paper on TDS & GST Reports - Vrindawan Computer Institute

White Paper on TDS & GST Reports

COURTESY :- vrindawan.in

Wikipedia

Tax deduction at source (TDS) in India is a means of collecting tax on income, dividends, or asset sales by requiring the payer (or legal intermediary) to deduct tax due before paying the balance to the payee (and the tax to the revenue authority).

Under the Indian Income Tax Act of 1961, income tax must be deducted at source as per the provisions of the Income Tax Act, 1961. Any payment covered under these provisions shall be paid after deducting a prescribed percentage of income tax. It is managed by the Central Board for Direct Taxes (CBDT) and is part of the Department of Revenue managed by Indian Revenue Service. It has a great importance while conducting tax audits. Assessee is also required to file quarterly return to CBDT. Returns states the TDS deducted & paid to government during the Quarter to which it relates.

To enable the salaried people to pay the tax as they earn every month. This helps the salaried persons in paying the tax in easy installments and avoids the burden of a lump sum payment.
To collect the tax at the time of payment of income to various assesses such as contractors, professionals etc.
Government requires funds throughout the year. Hence, advance tax and tax deducted at source help the government to get funds throughout the year and run the government well

Section 302 of India’s Income Tax Act 1961 by-law notes.

Prior to the Budget 2020 dividend income was exempt from tax in the hands of the shareholder. But Since Budget 2020, any Dividend Income in excess of INR 5000 is liable for TDS @ 10% u/s 194.
TDS provisions under this section are attracted only in respect of deemed dividend u/s 2(22)(e), If such dividend exceeds 2500 in year.
Rate of deduction of tax in respect of such dividend is 1%.
Provisions will not apply to dividend receivable by SADHA, GIC (General Insurance Corporation), its subsidiaries or any other insurer provided shares are owned by it or in which it has full beneficial interest :] [Provided also that no such deduction shall be made in respect of any dividends referred to in section 115-O.]
Higher TDS rates for non files of income tax returns
This provision is applicable in respect of transactions effected on or after June 1, 2013
It seeks deduction of tax at source on transfer of certain immovable property other than agricultural land to a resident transferor.
Any person being a transferee who is liable to Pay to a resident by way of consideration for transfer of any immovable property exceeding 50 Lakhs shall at the time of credit of such sum to the account of the transferor or at the time of payment in whatever manner, has to deduct tax at source at 1% only

This TDS on property is required to be deposited in 30 days from the end of the month in which deduction is made for all payments to be made on or after 1 June 2016.

This provision is applicable in respect of transactions effected on or after June 1, 2017
It seeks deduction of tax at source on payment of rent exceeding Rs. 50,000 in a month by an individual or HUF to a resident landlord.
TDS shall be deducted @ 5% at the time of credit of rent for the last month of the previous year or the last month of tenancy, if the property is vacated during the year, as the case may be.
Tax need to be deducted 1% (for individual, HUF)/ 2% (for others) of payment where payment is made for carrying out any work (including supply of labour for carrying out any work and advertisements) by a contractor/sub-contractor.
Such work must be in pursuance of a contract (including sub contract) between the contractor and payer.
TDS is to be made at the time of credit to the account of contractor or at the time of payment in cash or by cheque or draft or by any other mode whichever is earlier.
No TDS shall be deducted if the single time payment to contractor does not exceed RS. 35000 or Rs. 1,00,000 in aggregate during the year.
TDS Can be deducted when the date of actual payment of cash or the date of crediting the sum to the payees account or the date of issue of cheque, draft or by any other mode, whichever is earlier.
Every affordable housing scheme gets extended for one more year till 31 March 2022.

A deductor is required to issue a TDS certificate called form 16 for salaried employees and form 16A for non-salaried employees within a specified time. Form 16D is a TDS Certificate issued for payment of a commission, brokerage, contractual fee, the professional fee under section 194M by the payer. Under Section 194M if the payments to resident contractors and professionals exceeding INR 50,00,000 during the Financial Year, the payer/deductor has to deduct tax at the rate of 5% from the sum payable to a resident payee/deductee.

Deductor has to issue TDS Certificates within two months of the next financial year.

Form 16: Form 16 is a certificate where the employer declares details about the salary an employee earned during the year and details of deducted TDS. Form 16 has two parts Part A and Part B. Part A consists of employer and employee details, which includes name, address, PAN, TAN details, employment period, and details of TDS deducted & deposited with the government. Part B includes salary, incomes, deductions, and tax payable details etc.

Form 16A: Form 16A is also a TDS Certificate but it is applicable for TDS on Income other than Salary. This certificate features details such as name and address of deductor or deductee, PAN/TAN details, challan details of TDS deposited, income, TDS deducted and deposited on such income. Details from Form 16A will be fetched on Form 26AS.

Disallowance u/s. 40(a) (ia) of Income Tax Act, 1962 (Act)
Raising of demand u/s. 201(1) of the Act
Charging of Interest u/s (1A) of the Act
Levying penalty u/s. 271C of the Act

Goods and Services Tax (GST) is an indirect tax (or consumption tax) used in India on the supply of goods and services. It is a comprehensive, multistage, destination-based tax: comprehensive because it has subsumed almost all the indirect taxes except a few state taxes. Multi-staged as it is, the GST is imposed at every step in the production process, but is meant to be refunded to all parties in the various stages of production other than the final consumer and as a destination-based tax, it is collected from point of consumption and not point of origin like previous taxes.

Goods and services are divided into five different tax slabs for collection of tax: 0%, 5%, 12%, 18% and 28%. However, petroleum products, alcoholic drinks, and electricity are not taxed under GST and instead are taxed separately by the individual state governments, as per the previous tax system. There is a special rate of 0.25% on rough precious and semi-precious stones and 3% on gold. In addition a cess of 22% or other rates on top of 28% GST applies on few items like aerated drinks, luxury cars and tobacco products. Pre-GST, the statutory tax rate for most goods was about 26.5%, Post-GST, most goods are expected to be in the 18% tax range.

The tax came into effect from 1 July 2017 through the implementation of the One Hundred and First Amendment of the Constitution of India by the Indian government. The GST replaced existing multiple taxes levied by the central and state governments.

The tax rates, rules and regulations are governed by the GST Council which consists of the finance ministers of the central government and all the states. The GST is meant to replace a slew of indirect taxes with a federated tax and is therefore expected to reshape the country’s $2.4 trillion economy, but its implementation has received criticism. Positive outcomes of the GST includes the travel time in interstate movement, which dropped by 20%, because of disbanding of interstate check posts.

The reform of India’s indirect tax regime was started in 1986 by Vishwanath Pratap Singh, Finance Minister in Rajiv Gandhi’s government, with the introduction of the Modified Value Added Tax (MODVAT). Subsequently, Prime Minister P V Narasimha Rao and his Finance Minister Manmohan Singh, initiated early discussions on a Value Added Tax (VAT) at the state level. A single common “Goods and Services Tax (GST)” was proposed and given a go-ahead in 1999 during a meeting between the Prime Minister Atal Bihari Vajpayee and his economic advisory panel, which included three former RBI governors IG Patel, Bimal Jalan and C Rangarajan. Vajpayee set up a committee headed by the Finance Minister of West Bengal, Asim Dasgupta to design a GST model.

The Asim Dasgupta committee which was also tasked with putting in place the back-end technology and logistics (later came to be known as the GST Network, or GSTN, in 2015). It later came out for rolling out a uniform taxation regime in the country. In 2002, the Vajpayee government formed a task force under Vijay Kelkar to recommend tax reforms. In 2005, the Kelkar committee recommended rolling out GST as suggested by the 12th Finance Commission.

After the defeat of the BJP-led NDA government in the 2004 Lok Sabha election and the election of a Congress-led UPA government, the new Finance Minister P Chidambaram in February 2006 continued work on the same and proposed a GST rollout by 1 April 2010. However, in 2011, with the Trinamool Congress routing CPI(M) out of power in West Bengal, Asim Dasgupta resigned as the head of the GST committee. Dasgupta admitted in an interview that 80% of the task had been done.

The UPA introduced the 115th Constitution Amendment Bill on 22 March 2011 in the Lok Sabha to bring about the GST. It ran into opposition from the Bharatiya Janata Party and other parties and was referred to a Standing Committee headed by the BJP’s former Finance Minister Yashwant Sinha. The committee submitted its report in August 2013, but in October 2013 Gujarat Chief Minister Narendra Modi raised objections that led to the bill’s indefinite postponement. The Minister for Rural Development Jairam Ramesh attributed the GST Bill’s failure to the “single handed opposition of Narendra Modi”.

In the 2014 Lok Sabha election, the Bharatiya Janata Party (BJP)-led NDA government was elected into power. With the consequential dissolution of the 15th Lok Sabha, the GST Bill – approved by the standing committee for reintroduction – lapsed. Seven months after the formation of the then Modi government, the new Finance Minister Arun Jaitley introduced the GST Bill in the Lok Sabha, where the BJP had a majority. In February 2015, Jaitley set another deadline of 1 April 2017 to implement GST. In May 2016, the Lok Sabha passed the Constitution Amendment Bill, paving way for GST. However, the Opposition, led by the Congress, demanded that the GST Bill be again sent back for review to the Select Committee of the Rajya Sabha due to disagreements on several statements in the Bill relating to taxation. Finally, in August 2016, the Amendment Bill was passed. Over the next 15 to 20 days, 18 states ratified the Constitution amendment Bill and the President Pranab Mukherjee gave his assent to it.

A 21-member selected committee was formed to look into the proposed GST laws. After GST Council approved the Central Goods and Services Tax Bill 2017 (The CGST Bill), the Integrated Goods and Services Tax Bill 2017 (The IGST Bill), the Union Territory Goods and Services Tax Bill 2017 (The UTGST Bill), the Goods and Services Tax (Compensation to the States) Bill 2017 (The Compensation Bill), these Bills were passed by the Lok Sabha on 29 March 2017. The Rajya Sabha passed these Bills on 6 April 2017 and were then enacted as Acts on 12 April 2017. Thereafter, State Legislatures of different States have passed respective State Goods and Services Tax Bills. After the enactment of various GST laws, Goods and Services Tax was launched all over India with effect from 1 July 2017. The Jammu and Kashmir state legislature passed its GST act on 7 July 2017, thereby ensuring that the entire nation is brought under a unified indirect taxation system. There was to be no GST on the sale and purchase of securities. That continues to be governed by Securities Transaction Tax (STT).

The GST was launched at midnight on 1 July 2017 by the President of India, and the Government of India. The launch was marked by a historic midnight (30 June – 1 July) session of both the houses of parliament convened at the Central Hall of the Parliament. Though the session was attended by high-profile guests from the business and the entertainment industry including Ratan Tata, it was boycotted by the opposition due to the predicted problems that it was bound to lead for the middle and lower class Indians. The tax was strongly opposed by the opposing Indian National Congress. It is one of the few midnight sessions that have been held by the parliament – the others being the declaration of India’s independence on 15 August 1947, and the silver and golden jubilees of that occasion. After its launch, the GST rates have been modified multiple times, the latest being on 22 December 2018, where a panel of federal and state finance ministers decided to revise GST rates on 28 goods and 53 services.

Members of the Congress boycotted the GST launch altogether. They were joined by members of the Trinamool Congress, Communist Parties of India and the DMK. The parties reported that they found virtually no difference between the GST and the existing taxation system, claiming that the government was trying to merely rebrand the current taxation system. They also argued that the GST would increase existing rates on common daily goods while reducing rates on luxury items, and affect many Indians adversely, especially the middle, lower middle and poorer income groups.

The single GST subsumed several taxes and levies, which included central excise duty, services tax, additional customs duty, surcharges, state-level value added tax and Octroi. Other levies which were applicable on inter-state transportation of goods have also been done away with in GST regime. GST is levied on all transactions such as sale, transfer, purchase, barter, lease, or import of goods and/or services.

India adopted a dual GST model, meaning that taxation is administered by both the Union and state governments. Transactions made within a single state are levied with Central GST (CGST) by the Central Government and State GST (SGST) by the State governments. For inter-state transactions and imported goods or services, an Integrated GST (IGST) is levied by the Central Government. GST is a consumption-based tax/destination-based tax, therefore, taxes are paid to the state where the goods or services are consumed not the state in which they were produced. IGST complicates tax collection for State Governments by disabling them from collecting the tax owed to them directly from the Central Government. Under the previous system, a state would only have to deal with a single government in order to collect tax revenue.

India is a member of World Customs Organization (WCO) since 1971. It was originally using 6-digit HSN codes to classify commodities for Customs and Central Excise. Later Customs and Central Excise added two more digits to make the codes more precise, resulting in an 8 digit classification. The purpose of HSN codes is to make GST systematic and globally accepted.

HSN codes will remove the need to upload the detailed description of the goods. This will save time and make filing easier since GST returns are automated.

If a company has turnover up to ₹15 million (US$190,000) in the preceding financial year then they did not mention the HSN code while supplying goods on invoices. If a company has turnover more than ₹15 million (US$190,000) but up to ₹50 million (US$630,000), then they need to mention the first two digits of HSN code while supplying goods on invoices. If turnover crosses ₹50 million (US$630,000) then they shall mention the first 4 digits of HSN code on invoices.

The GST is imposed at variable rates on variable items. The rate of GST is 18% for soaps and 28% on washing detergents. GST on movie tickets is based on slabs, with 18% GST for tickets that cost less than ₹100 and 28% GST on tickets costing more than ₹100 and 28% on commercial vehicle and private and 5% on ready made clothes. The rate on under-construction property booking is 12%. Some industries and products were exempted by the government and remain untaxed under GST, such as dairy products, products of milling industries, fresh vegetables & fruits, meat products, and other groceries and necessities.

Check posts across the country were abolished ensuring free and fast movement of goods. Such efficient transportation of goods was further ensured by subsuming octroi within the ambit of GST.

The Central Government had proposed to insulate the revenues of the States from the impact of GST, with the expectation that in due course, GST will be levied on petroleum and petroleum products. The central government had assured states of compensation for any revenue loss incurred by them from the date of GST for a period of five years. However, no concrete laws have yet been made to support such action. GST council adopted concept paper discouraging tinkering with rates.

An e-Way Bill is an electronic permit for shipping goods similar to a waybill. It was made compulsory for inter-state transport of goods from 1 June 2018. It is required to be generated for every inter-state movement of goods beyond 10 kilometres (6.2 mi) and the threshold limit of ₹50,000 (US$630).

It is a paperless, technology solution and critical anti-evasion tool to check tax leakages and clamping down on trade that currently happens on a cash basis. The pilot started on 1 February 2018 but was withdrawn after glitches in the GST Network. The states are divided into four zones for rolling out in phases by end of April 2018.

A unique e-Way Bill Number (EBN) is generated either by the supplier, recipient or the transporter. The EBN can be a printout, SMS or written on invoice is valid. The GST/Tax Officers tally the e-Way Bill listed goods with goods carried with it. The mechanism is aimed at plugging loopholes like overloading, understating etc. Each e-way bill has to be matched with a GST invoice.

Transporter ID and PIN Code now compulsory from 01-Oct-2018.

It is a critical compliance-related GSTN project under the GST, with a capacity to process 75 lakh e-way bills per day.

Intra-State e-Way Bill The five states piloting this project are Andhra Pradesh, Gujarat, Kerala, Telangana and Uttar Pradesh, which account for 61.8% of the inter-state e-way bills, started mandatory intrastate e-way bill from 15 April 2018 to further reduce tax evasion. It was successfully introduced in Karnataka from 1 April 2018. The intrastate e-way bill will pave the way for a seamless, nationwide single e-way bill system. Six more states Jharkhand, Bihar, Tripura, Madhya Pradesh, Uttarakhand and Haryana will roll it out from 20 April 18. All states are mandated to introduce it by 30 May 2018.

Reverse Charge Mechanism (RCM) is a system in GST where the receiver pays the tax on behalf of unregistered, smaller material and service suppliers. The receiver of the goods is eligible for Input Tax Credit, while the unregistered dealer is not.

The central Government released Rs 35,298 crore to the state under GST compensation. For the implementation, this amount was given to the state to compensate the revenue. Central government has to face many criticisms for delay in compensation.