MUMBAI: The new provisions relating to tax collection at source (TCS) kick in from October 1. The dire economic situation arising out of the pandemic and certain ambiguities in these provisions has led several CA associations to make a joint representation to the finance minister.
When a seller has an annual turnover exceeding Rs 10 crore and receives a consideration on sale of goods exceeding Rs 50 lakh (in value or in aggregate during a fiscal year), the new TCS provisions prescribed under section 206C(1H) come into effect. At the time of receipt from this buyer, a sum equal to 0.1% of the sale consideration exceeding Rs. 50 lakh has to be collected at source. In other words, the onus for collection of tax is cast on the seller of the goods.
In a letter to finance minister, Nirmala Sitharaman, the CA associations point out that taxpayers who are incurring huge losses cannot apply to the tax officer for nil or lower TCS. The tax that has been collected at source on their purchase, results in blockage of funds, which is subsequently required to be claimed as a refund from the I-T department.
The representation also points out to certain other challenges and/or ambiguities in the tax provision. For instance, recovery of amounts outstanding as on September 30, 2020 would also come within the ambit of this section, even though the sale would have taken place before the effective date of October 1.
The joint representation made by Bombay Chartered Accountants’ Society (BCAS), Chartered Accountants Association of Ahmedabad, Chartered Accountants Association of Surat, Karnataka State Chartered Accountants’ Association and Lucknow Chartered Accountants’ Society also points out that collection of tax at source in B2B transactions leads to multilevel tax collection from persons already covered in the tax net. It adds that B2B transactions should be carved out from the ambit of section 206C(1H).
It asks the Central Board of Direct Taxes (CBDT) to clarify that GST (and cess, if any), which is levied on sale of goods should not be included in the ‘sale consideration’ for determining the thresholds under TCS provisions.
In another representation, these CA bodies have represented that due date for filing of returns for financial year 2019-20 be extended to March 31, 2021 (from November 30, 2020) and the due date for filing the tax audit report be extended to February 28, 2021 (from October 31, 2020).
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