Starting October 1, several key changes to direct and indirect taxes will take effect that businesses and individual taxpayers need to be aware of. These are provisions intended to collect data on transactions, spending patterns, and the flow of funds across borders as the tax administration becomes increasingly data- and technology-driven. Mint takes a look at the changes.
Foreign remittances
A 5% tax collected at source (TCS) will be applied on funds sent abroad, subject to additional clauses. This will cover any amount sent abroad to purchase foreign tour packages, as well as any other amounts above ₹7 lakh sent abroad unless it is from income that is already tax deducted at source (TDS). Bankers would be required to collect TCS and remit them to the government; therefore, the incidence of TCS is on the sender, said Sandeep Jhunjhunwala, a partner at Nangia Andersen LLP, a tax advisory firm. The TCS is available as a credit at the time of filing the tax return. The idea of TCS is to identify cases where people’s remittance patterns do not match the income reported on tax returns, Jhunjhunwala said. Banks can start taxing at the source, even on international credit card transactions made in foreign currency, said Vikram Doshi, tax partner at PwC India.
GST electronic invoicing
Electronic invoicing has been made applicable since October 1 to companies with at least ₹Sales of Rs 500 million. Businesses must submit sales invoices on a portal designated by GSTN, the company that processes tax returns. This is expected to automate a large amount of data entry work, as well as reduce errors and mismatches. This is also expected to improve the confidence of tax officials in business compliance and reduce the chances of audits or surveys. The provision is applicable to business-to-business transactions, said Pratik Jain, indirect tax leader at PwC India.
Import duty on the TV part
A key component used in making televisions, open cell panels, will attract a 5% import duty, and the government will reject requests to extend the tariff exemption. The relief was given for a year.
TCS for sale of goods
Sellers who have ₹Revenue of Rs 10 crore in the previous year must collect income tax at source at the rate of 0.1% upon receiving prior sale consideration ₹50 lakh. The tax is applicable to the above amount. ₹50 lakh.
TDS on electronic commerce
Since Wednesday, e-commerce platforms such as Amazon are required to deduct income tax at source (TDS) at a rate of 1% of the gross amount paid to sellers using the platform for sales. The idea is to attract small e-commerce participants to the tax network. The deduction will be made at the time of payment to the e-commerce participant. “The problem regarding the treatment of post-sale returns, discount codes and gift vouchers requires immediate attention,” Jhunjhunwala said.
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