In which cases surcharge on TDS rates is NOT applicable ?
•On all payment to residents
•On all payment to non-corporate non-residents
•On all payments to foreign corporate if total payment is less than 1 Crore
In which cases surcharge on TDS rates is applicable ?
•On all payments to foreign corporate if total payment is more than 1 Crore
In which cases Education Cess, Secondary and Higher Education Cess is NOT applicable ?
•On all payments to residents except salaries payment
In which cases Education Cess, Secondary and Higher Education Cess is applicable ?
•On salaries
•On all payment to non-residents and foreign companies
What is the effective date for above changes in applicability of surcharge and education cess?
•These changes are applicable on the passing of Finance Bill . This date is 19-08-2009. However there are different views on applicability date. One view is that since these changes are for the full financial year, one can take benefit of Section 294 of the income tax Act and start applying this rate from the date of presentation of finance bill.(in my view its applicable from 01.04.2009 , same view is given in The Chartered Accountant Journal released by ICAI)
•Please ask your tax consultant for more clarifications.
Status
Payment
Surcharge
Cess
Resident
Corporate
Other than Salaries
N
N
Resident
Non-corporate
Other than Salaries
N
N
Resident
Non- Corporate
Salaries
N
Y
Non-Resident
Corporate
<= 1 crore
N
Y
Non-Resident
Corporate
> 1 crore
Y
Y
Non-Resident
Non- Corporate
N
Y
There has been change in TDS Rates for 94C- Contractual Payments and 94I- rental payments. What is the effective date for the same ?
•These changes are applicable from 01-10-2009.
Apart from the above , is there any other change in the TDS Rates ?
•Yes. The maximum rate of TDS is normalised to 10% in most cases. Please refer to the TDS Rate Chart for FY 2009-10 (check TDS Rate & downlaod Chart)
What about penal rate of 20% where valid PAN is not given ?
•This provision is applicable from 01-04-2010. Till such time even if valid PAN is not given , normal rate will be applied.
What is your source of above information.
•Applicability of surcharge is mentioned in Clause (5), (6), (7) and (8) in Chapter II of the Finance ( No 2) Act , 2009.
•Applicability of Education Cess : Clause (11). Applicability of Secondary and Higher Education Cess : Clause (12).
Thursday, November 12, 2009
TDS ON JOB WORK U/S 194C AMENDED FROM 01.10.2009
As per amendment through Finance Act(2) ,2009,new Section 194C has been substituted for old section 194C .New Section is applicable from the 01.10.2009.The main changes in the new section is given as under
1.Separate rates for contractor and subcontractor has been removed.Now the tax rate has been categorised according the status of deductee and new TDS rates for contractors are as under
◦For payment made to Individual & Hindu undivided family=1 %
◦For payment to others =2%
2. Concessional rate of 1 % for advertisement Contracts has been removed and now rates as defined under (1) above is applicable on all type of contractor including Advertisement contracts.
3.No TDS on payment to transport operator (i.e in the business of playing,hiring or leasing goods carriage),if he/it furnishes his PAN to payer.
4.No surcharge and cess applicable on basic TDS rate in FY 2009-10 on payments made to resident except salary
5.Basic limit of 20000 and 50000 per annum remains unchanged.
6.No tds in case of payment of Job work ,if raw material has not been supplied by the payer.
TDS in case of JOB work according to specification(brief):In case of work contract being manufacturing or supplying product according to specification(by using material from such customer),tds shall be deducted on the invoice value excluding the value of material purchased from such customer,if such value is mentioned separately in the invoice.where the material component has not been separately mentioned in the invoice,tds shall be deducted on the whole value of the invoice.
Relevant clause of new section :is reproduced hereunder
EXPLANATION TO SECTION 194 C
(iv) work shall include
(a).......
(b).......
(e) manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from such customer,but does not include manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from a person, other than such customer.
subsection (3) Where any sum is paid or credited for carrying out any work mentioned in sub-clause (e) of clause (iv) of the Explanation, tax shall be deducted at source
(i) on the invoice value excluding the value of material, if such value is mentioned separately in the invoice; or
(ii) on the whole of the invoice value, if the value of material is not mentioned separately in the invoice.
•There is ongoing litigation as to whether TDS is deductible under section 194C on outsourcing contracts and whether outsourcing constitutes work or not. To bring clarity on this issue, it is proposed to provide that “work” shall not include manufacturing or supplying a product according to the requirement or specification of a customer by using raw material purchased from a person other than such customer as such a contract is a contract for ‘sale’.
•This will however not apply to a contract which does not entail manufacture or supply of an article or thing (e.g. a construction contract).
•It is also proposed to include manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from such customer, within the definition of ‘work’.
•It is further proposed to provide that in such a case TDS shall be deducted on the invoice value excluding the value of material purchased from such customer if such value is mentioned separately in the invoice. Where the material component has not been separately mentioned in the invoice, TDS shall be deducted on the whole of the invoice value.
amendments will apply to credits or payment effected on or after 1st October, 2009.
•So Explanation to new section clearly ruled out the TDS on payment to contractor on manufacturing or supply material according to specification of a customer ,if raw material used has not been purchased from the Customer(PAYER)
•Further subsection (3)clarifies that in case contractor has used the raw material supplied by the customer (payer ) then tds is deductible on invoice value excluding material value ,if shown separately .If material valud has not been mentioned in the Bill then TDS is required to be deducted on FULL invoice value.
•Further notes to this clause also clarifies that the above rule is applicable on contract for manufacturing and not on on construction contract
Example:1:
Bata shoe company has issued purchase cum work order of boxes according to company specification for packing of shoes to ABC Ltd. ABC ltd purchased the required raw material from market to manufacture such boxes and supplied the boxes to Bata shoe company.
In above situation Bata shoes company is not liable to deduct TDS on payment to ABC company .As per note (iv) to explanation of section 194C ,contract to manufacture the product according to customer specification ,but where material is not supplied by the customer ,is not covered under work contract definition as per section 194 C .
Example :2
Suppose in above contract Bata shoes Company has supplied all the raw material to ABC LTD for 100000/- Rs and total contract value of contract is 200000/- Rs.
(a) ABC billed Bata for 2 lakh and in invoice material value has been shown as one lakh.
(b) ABC LtD ,billed Bata for 2 lakh sum sum and no detail has been mentioned about the material.
In case (a) above BATA shoes co is required to deduct tax on one lakh rupees .(gross bill minus material value)(as per subsection (3) section 194C)
In Case (b) above Bata shoe co is required to deduct tax on Two lakh rupees (Gross bill,as nothing mentioned about material cost)(as per subsection (3) section 194C
SIMPLETAXINDIA:First Discussion Paper on GST (Goods and Services Tax) released
The Empowered Committee Of State Finance Ministers has released First discussion Paper on the GST (Goods and service tax).The GST as name suggests is a combined tax at a Uniform rate in lieu of Indirect tax like VAT,CST ,excise etc.except few exception here and there.According to discussion paper ,the main feature of the New GST system is given under.
1.There will two system one id for Inter State sale that will be Call Centeral GST(CGST) and second is State GST(SGST)
2.For CGST the following taxes will be subsumed (merged into GST rate)
◦Central Excise Duty
◦Additional Excise Duties
◦ The Excise Duty levied under the Medicinal and Toiletries Preparation Act
◦Service Tax
◦Additional Customs Duty, commonly known as Countervailing Duty (CVD)
◦Special Additional Duty of Customs - 4% (SAD)
◦ Surcharges, and
◦ Cesses.
3.
For State GST following taxes is planned to be subsumed (merged into GST rate)
◦VAT / Sales tax
◦Entertainment tax (unless it is levied by the local bodies).
◦Luxury tax
◦Taxes on lottery, betting and gambling.
◦State Cesses and Surcharges in so far as they relate to supply of goods and services.
◦Entry tax not in lieu of Octroi.
4.Committee has not agreed to merge Purchase tax ,tax on alcohol, tobacco, petroleum products with in GST.
5.There will be Inter State GST(IGST) rate which is a sum of CGST and SGST and applicable on all interstate transactions (goods or services) and input tax credit will be available to both importing and exporting states dealers.so that tax remain applicable only on value additions.advantage of IGST given in the paper are
◦Maintenance of uninterrupted ITC chain on inter-State transactions.
◦No upfront payment of tax or substantial blockage of funds for the inter-State seller or buyer.
◦ No refund claim in exporting State, as ITC is used up while paying the tax.
◦ Self monitoring model.
◦ Level of computerization is limited to inter-State dealers and Central and State Governments should be able to computerize their processes expeditiously.
6.There will be 10 lakh basic exemption under SGST and 1.5 Crore in CGST
7.ALL dealers will be issued a unique pan based registration number .
8.All inter state dealers will be e regsitered.
9.GST rate structure is yet not finalised .however small dealer(sale+service from 10 lakh to 50 lakks) may opt for flat compound rate of 0.5% of the sale or service.(same as under VAT named as TOT dealer)
10.GST is proposed to be implemented from 01.04.2010.
There are few Frequently asked question appended in the white paper which are reproduced hereunder.
Question 1 : What is the justification of GST ?
Answer : There was a burden of “tax on tax” in the pre-existing Central excise duty of the Government of India and sales tax system of the State Governments. The introduction of Central VAT (CENVAT) has removed the cascading burden of “tax on tax” to a good extent by providing a mechanism of “set off” for tax paid on inputs and services upto the stage of production, and has been an improvement over the pre-existing Central excise duty. Similarly, the introduction of VAT in the States has removed the cascading effect by giving set-off for tax paid on inputs as well as tax paid on previous purchases and has again been an improvement over the previous sales tax regime.
But both the CENVAT and the State VAT have certain incompleteness. The incompleteness in CENVAT is that it has yet not been extended to include chain of value addition in the distributive trade below the stage of production. It has also not included several Central taxes, such as Additional Excise Duties, Additional Customs Duty, Surcharges etc. in the overall framework of CENVAT, and thus kept the benefits of comprehensive input tax and service tax set-off out of the reach of manufacturers/ dealers. The introduction of GST will not only include comprehensively more indirect Central taxes and integrate goods and services taxes for set-off relief, but also capture certain value addition in the distributive trade.
Similarly, in the present State-level VAT scheme, CENVAT load on the goods has not yet been removed and the cascading effect of that part of tax burden has remained unrelieved. Moreover, there are several taxes in the States, such as, Luxury Tax, Entertainment Tax, etc. which have still not been subsumed in the VAT. Further, there has also not been any integration of VAT on goods with tax on services at the State level with removal of cascading effect of service tax. In addition, although the burden of Central Sales Tax (CST) on inter-State movement of goods has been lessened with reduction of CST rate from 4% to 2%, this burden has also not been fully phased out. With the introduction of GST at the State level, the additional burden of CENVAT and services tax would be comprehensively removed,and a continuous chain of set-off from the original producer’s point and service provider’s point upto the retailer’s level would be established which would eliminate the burden of all cascading effects, including the burden of CENVAT and service tax. This is the essence of GST. Also, major Central and State taxes will get subsumed into GST which will reduce the multiplicity of taxes, and thus bring down the compliance cost. With GST, the burden of CST will also be phased out.
Thus GST is not simply VAT plus service tax, but a major improvement over the previous system of VAT and disjointed services tax – a justified step forward.
Question 2. What is GST? How does it work ?
Answer : As already mentioned in answer to Question 1, GST is a tax on goods and services with comprehensive and continuous chain of set-off benefits from the producer’s point and service provider’s point upto the retailer’s level. It is essentially a tax only on value addition at each stage, and a supplier at each stage is permitted to set-off, through a tax credit mechanism, the GST paid on the purchase of goods and services as available for set-off on the GST to be paid on the supply of goods and services. The final consumer will thus bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages.
The illustration shown below indicates, in terms of a hypothetical example with a manufacturer, one wholeseller and one retailer, how GST will work. Let us suppose that GST rate is 10%, with the manufacturer making value addition of Rs.30 on his purchases worth Rs.100 of input of goods and services used in the manufacturing process. The manufacturer will then pay net GST of Rs. 3 after setting-off Rs. 10 as GST paid on his inputs (i.e. Input Tax Credit) from gross GST of Rs. 13. The manufacturer sells the goods to the wholeseller. When the wholeseller sells the same goods after making value addition of (say), Rs. 20, he pays net GST of only Rs. 2, after setting-off of Input Tax Credit of Rs. 13 from the gross GST of Rs. 15 to the manufacturer. Similarly, when a retailer sells the same goods after a value addition of (say) Rs. 10, he pays net GST of only Re.1, after setting-off Rs.15 from his gross GST of Rs. 16 paid to wholeseller. Thus, the manufacturer, wholeseller and retailer have to pay only Rs. 6 (= Rs. 3+Rs. 2+Re. 1) as GST on the value addition along the entire value chain from the producer to the retailer, after setting-off GST paid at the earlier stages. The overall burden of GST on the goods is thus much less. This is shown in the table below. The same illustration will hold in the case of final service provider as well.
Question 3 : How can the burden of tax, in general, fall under GST ?
Answer : As already mentioned in Answer to Question 1, the present forms of CENVAT and State VAT have remained incomplete in removing fully the cascading burden of taxes already paid at earlier stages. Besides, there are several other taxes, which both the Central Government and the State Government levy on production, manufacture and distributive trade, where no set-off is available in the form of input tax credit. These taxes add to the cost of goods and services through “tax on tax” which the final consumer has to bear. Since, with the introduction of GST, all the cascading effects of CENVAT and service tax would be removed with a continuous chain of set-off from the producer’s point to the retailer’s point, other major Central and State taxes would be subsumed in GST and CST will also be phased out, the final net burden of tax on goods, under GST would, in general, fall. Since there would be a transparent and complete chain of set-offs, this will help widening the coverage of tax base and improve tax compliance. This may lead to higher generation of revenues which may in turn lead to the possibility of lowering of average tax burden.
Question 4 : How will GST benefit industry, trade and agriculture ?
Answer : As mentioned in Answer to Question 3, the GST will give more relief to industry, trade and agriculture through a more comprehensive and wider coverage of input tax set-off and service tax set-off, subsuming of several Central and State taxes in the GST and phasing out of CST. The transparent and complete chain of set-offs which will result in widening of tax base and better tax compliance may also lead to lowering of tax burden on an average dealer in industry, trade and agriculture.
Question 5 : How will GST benefit the exporters?
Answer : The subsuming of major Central and State taxes in GST, complete and comprehensive setoff of input goods and services and phasing out of Central Sales Tax (CST) would reduce the cost of locally manufactured goods and services. This will increase the competitiveness of Indian goods and services in the international market and give boost to Indian exports. The uniformity in tax rates and procedures across the country will also go a long way in reducing the compliance cost.
Question 6 : How will GST benefit the small entrepreneurs and small traders?
Answer : The present threshold prescribed in different State VAT Acts below which VAT is not applicable varies from State to State. The existing threshold of goods under State VAT is Rs. 5 lakhs for a majority of bigger States and a lower threshold for North Eastern States and Special Category States. A uniform State GST threshold across States is desirable and, therefore, the Empowered Committee has recommended that a threshold of gross annual turnover of Rs. 10 lakh both for goods and services for all the States and Union Territories may be adopted with adequate compensation for the States (particularly, the States in North-Eastern Region and Special Category States) where lower threshold had prevailed in the VAT regime. Keeping in view the interest of small traders and small scale industries and to avoid dual control, the States considered that the threshold for Central GST for goods may be kept at Rs.1.5 crore and the threshold for services should also be appropriately high. This raising of threshold will protect the interest of small traders. A Composition scheme for small traders and businesses has also been envisaged under GST as will be detailed in Answer to Question 14. Both these features of GST will adequately protect the interests of small traders and small scale industries.
Question 7 : How will GST benefit the common consumers?
Answer : As already mentioned in Answer to Question 3, with the introduction of GST, all the cascading effects of CENVAT and service tax will be more comprehensively removed with a continuous chain of set-off from the producer’s point to the retailer’s point than what was possible under the prevailing CENVAT and VAT regime. Certain major Central and State taxes will also be subsumed in GST and CST will be phased out. Other things remaining the same, the burden of tax on goods would, in general, fall under GST and that would benefit the consumers.
Question 8 : What are the salient features of the proposed GST model?
Answer : The salient features of the proposed model are as follows:
(i)Consistent with the federal structure of the country, the GST will have two components: one levied by the Centre (hereinafter referred to as Central GST), and the other levied by the States (hereinafter referred to as State GST). This dual GST model would be implemented through multiple statutes (one for CGST and SGST statute for every State). However, the basic features of law such as chargeability, definition of taxable event and taxable person, measure of levy including valuation provisions, basis of classification etc. would be uniform across these statutes as far as practicable.
(ii)The Central GST and the State GST would be applicable to all transactions of goods and services except the exempted goods and services, goods which are outside the purview of GST and the transactions which are below the prescribed threshold limits.
(iii) The Central GST and State GST are to be paid to the accounts of the Centre and the States separately.
(iv)Since the Central GST and State GST are to be treated separately, in general, taxes paid against the Central GST shall be allowed to be taken as input tax credit (ITC) for the Central GST and could be utilized only against the payment of Central GST. The same principle will be applicable for the State GST.
(v) Cross utilisation of ITC between the Central GST and the State GST would, in general, not be allowed.
(vi) To the extent feasible, uniform procedure for collection of both Central GST and State GST would be prescribed in the respective legislation for Central GST and State GST.
(vii) The administration of the Central GST would be with the Centre and for State GST with the States.
(viii) The taxpayer would need to submit periodical returns to both the Central GST authority and to the concerned State GST authorities.
(ix)Each taxpayer would be allotted a PAN-linked taxpayer identification number with a total of 13/15 digits. This would bring the GST PAN-linked system in line with the prevailing PAN-based system for Income tax facilitating data exchange and taxpayer compliance. The exact design would be worked out in consultation with the Income-Tax Department.
(x)Keeping in mind the need of tax payers convenience, functions such as assessment, enforcement, scrutiny and audit would be undertaken by the authority which is collecting the tax, with information sharing between the Centre and the States.
Question 9 : Why is Dual GST required ?
Answer : India is a federal country where both the Centre and the States have been assigned the powers to levy and collect taxes through appropriate legislation. Both the levels of Government have distinct responsibilities to perform according to the division of powers prescribed in the Constitution for which they need to raise resources. A dual GST will, therefore, be in keeping with the Constitutional requirement of fiscal federalism.
Question 10 : How would a particular transaction of goods and services be taxed simultaneously under Central GST (CGST) and State GST (SGST)?
Answer : The Central GST and the State GST would be levied simultaneously on every transaction of supply of goods and services except the exempted goods and services, goods which are outside the purview of GST and the transactions which are below the prescribed threshold limits. Further, both would be levied on the same price or value unlike State VAT which is levied on the value of the goods inclusive of CENVAT. While the location of the supplier and the recipient within the country is immaterial for the purpose of CGST, SGST would be chargeable only when the supplier and the recipient are both located within the State.
Illustration I : Suppose hypothetically that the rate of CGST is 10% and that of SGST is 10%. When a wholesale dealer of steel in Uttar Pradesh supplies steel bars and rods to a construction company which is also located within the same State for , say Rs. 100, the dealer would charge CGST of Rs. 10 and SGST of Rs. 10 in addition to the basic price of the goods. He would be required to deposit the CGST component into a Central Government account while the SGST portion into the account of the concerned State Government. Of course, he need not actually pay Rs. 20 (Rs. 10 + Rs. 10 ) in cash as he would be entitled to set-off this liability against the CGST or SGST paid on his purchases (say, inputs). But for paying CGST he would be allowed to use only the credit of CGST paid on his purchases while for SGST he can utilize the credit of SGST alone. In other words, CGST credit cannot, in general, be used for payment of SGST. Nor can SGST credit be used for payment of CGST.
Illustration II: Suppose, again hypothetically, that the rate of CGST is 10% and that of SGST is 10%. When an advertising company located in Mumbai supplies advertising services to a company manufacturing soap also located within the State of Maharashtra for, let us say Rs. 100, the ad company would charge CGST of Rs. 10 as well as SGST of Rs. 10 to the basic value of the service. He would be required to deposit the CGST component into a Central Government account while the SGST portion into the account of the concerned State Government. Of course, he need not again actually pay Rs. 20 (Rs. 10+Rs. 10) in cash as it would be entitled to set-off this liability against the CGST or SGST paid on his purchase (say, of inputs such as stationery, office equipment, services of an artist etc). But for paying CGST he would be allowed to use only the credit of CGST paid on its purchase while for SGST he can utilise the credit of SGST alone. In other words, CGST credit cannot, in general, be used for payment of SGST. Nor can SGST credit be used for payment of CGST.
Question 11 : Which Central and State taxes are proposed to be subsumed under GST ?
Answer : The various Central, State and Local levies were examined to identify their possibility of being subsumed under GST. While identifying, the following principles were kept in mind:
(i)Taxes or levies to be subsumed should be primarily in the nature of indirect taxes, either on the supply of goods or on the supply of services.
(ii)Taxes or levies to be subsumed should be part of the transaction chain which commences with import/ manufacture/ production of goods or provision of services at one end and the consumption of goods and services at the other.
(iii) The subsumation should result in free flow of tax credit in intra and inter-State levels.
(iv)The taxes, levies and fees that are not specifically related to supply of goods & services should not be subsumed under GST.
(v)Revenue fairness for both the Union and the States individually would need to be attempted.
On application of the above principles, the Empowered Committee has recommended that the following Central Taxes should be, to begin with, subsumed under the Goods and Services Tax:
(i) Central Excise Duty
(ii)Additional Excise Duties
(iii) The Excise Duty levied under the Medicinal and Toiletries Preparation Act
(iv)Service Tax
(v)Additional Customs Duty, commonly known as Countervailing Duty (CVD)
(vi)Special Additional Duty of Customs - 4% (SAD)
(vii) Surcharges, and
(viii) Cesses.
The following State taxes and levies would be, to begin with, subsumed under GST:
(i)VAT / Sales tax
(ii)Entertainment tax (unless it is levied by the local bodies).
(iii)Luxury tax
(iv)Taxes on lottery, betting and gambling.
(v)State Cesses and Surcharges in so far as they relate to supply of goods and services.
(vi) Entry tax not in lieu of Octroi.
Purchase tax: Some of the States felt that they are getting substantial revenue from Purchase Tax and, therefore, it should not be subsumed under GST while majority of the States were of the view that no such exemptions should be given. The difficulties of the foodgrain producing States was appreciated as substantial revenue is being earned by them from Purchase Tax and it was, therefore, felt that in case Purchase Tax has to be subsumed then adequate and continuing compensation has to be provided to such States. This issue is being discussed in consultation with the Government of India.
Tax on items containing Alcohol: Alcoholic beverages would be kept out of the purview of GST. Sales Tax/VAT could be continued to be levied on alcoholic beverages as per the existing practice. In case it has been made Vatable by some States, there is no objection to that. Excise Duty, which is presently levied by the States may not also be affected.
Tax on Tobacco products: Tobacco products would be subjected to GST with ITC. Centre may be allowed to levy excise duty on tobacco products over and above GST with ITC.
Tax on Petroleum Products: As far as petroleum products are concerned, it was decided that the basket of petroleum products, i.e. crude, motor spirit (including ATF) and HSD would be kept outside GST as is the prevailing practice in India. Sales Tax could continue to be levied by the States on these products with prevailing floor rate. Similarly, Centre could also continue its levies. A final view whether Natural Gas should be kept outside the GST will be taken after further deliberations.
Taxation of Services : As indicated earlier, both the Centre and the States will have concurrent power to levy tax on goods and services. In the case of States, the principle for taxation of intra-State and inter State has already been formulated by the Working Group of Principal Secretaries /Secretaries of Finance / Taxation and Commissioners of Trade Taxes with senior representatives of Department of Revenue, Government of India. For inter-State transactions an innovative model of Integrated GST will be adopted by appropriately aligning and integrating CGST and IGST.
Question 12 : What is the rate structure proposed under GST ?
Answer : The Empowered Committee has decided to adopt a two-rate structure –a lower rate for necessary items and items of basic importance and a standard rate for goods in general. There will also be a special rate for precious metals and a list of exempted items. For upholding of special needs of each State as well as a balanced approach to federal flexibility, it is being discussed whether the exempted list under VAT regime including Goods of Local Importance may be retained in the exempted list under State GST in the initial years. It is also being discussed whether the Government of India may adopt, to begin with, a similar approach towards exempted list under the CGST.
For CGST relating to goods, the States considered that the Government of India might also have a two-rate structure, with conformity in the levels of rate with the SGST. For taxation of services, there may be a single rate for both CGST and SGST.
The exact value of the SGST and CGST rates, including the rate for services, will be made known duly in course of appropriate legislative actions.
Question 13: What is the concept of providing threshold exemption for GST?
Answer : Threshold exemption is built into a tax regime to keep small traders out of tax net. This has
three-fold objectives:
a)It is difficult to administer small traders and cost of administering of such traders is very high in comparison to the tax paid by them.
b)The compliance cost and compliance effort would be saved for such small traders.
c)Small traders get relative advantage over large enterprises on account of lower tax incidence.
The present thresholds prescribed in different State VAT Acts below which VAT is not applicable varies from State to State. A uniform State GST threshold across States is desirable and, therefore, as already mentioned in Answer to Question 6, it has been considered that a threshold of gross annual turnover of Rs. 10 lakh both for goods and services for all the States and Union Territories might be adopted with adequate compensation for the States (particularly, the States in North-Eastern Region and Special Category States) where lower threshold had prevailed in the VAT regime. Keeping in view the interest of small traders and small scale industries and to avoid dual control, the States also considered that the threshold for Central GST for goods may be kept Rs.1.5 Crore and the threshold for services should also be appropriately high.
Question 14 : What is the scope of composition and compounding scheme under GST?
Answer : As already mentioned in Answer to Question 6, a Composition/Compounding Scheme will be an important feature of GST to protect the interests of small traders and small scale industries. The Composition/Compounding scheme for the purpose of GST should have an upper ceiling on gross annual turnover and a floor tax rate with respect to gross annual turnover. In particular there will be a compounding cut-off at Rs. 50 lakhs of the gross annual turnover and the floor rate of 0.5% across the States. The scheme would allow option for GST registration for dealers with turnover below the compounding cut-off.
Question 15 : How will imports be taxed under GST ?
Answer : With Constitutional Amendments, both CGST and SGST will be levied on import of goods and services into the country. The incidence of tax will follow the destination principle and the tax revenue in case of SGST will accrue to the State where the imported goods and services are consumed. Full and complete set-off will be available on the GST paid on import on goods and services.
Question 16 : Will cross utilization of credits between goods and services be allowed under GST regime?
Answer : Cross utilization of credit of CGST between goods and services would be allowed. Similarly, the facility of cross utilization of credit will be available in case of SGST. However, the cross utilization of CGST and SGST would generally not be allowed except in the case of inter-State supply of goods and services under the IGST model which is explained in answer to the next question.
Question 17 : How will be Inter-State Transactions of Goods and Services be taxed under GST in terms of IGST method ?
Answer : The Empowered Committee has accepted the recommendation for adoption of IGST model for taxation of inter-State transaction of Goods and Services. The scope of IGST Model is that Centre would levy IGST which would be CGST plus SGST on all inter-State transactions of taxable goods and services. The inter-State seller will pay IGST on value addition after adjusting available credit of IGST, CGST, and SGST on his purchases. The Exporting State will transfer to the Centre the credit of SGST used in payment of IGST. The Importing dealer will claim credit of IGST while discharging his output tax liability in his own State. The Centre will transfer to the importing State the credit of IGST used in payment of SGST. The relevant information is also submitted to the Central Agency which will act as a clearing house mechanism, verify the claims and inform the respective governments to transfer the funds.
The major advantages of IGST Model are:
a) Maintenance of uninterrupted ITC chain on inter-State transactions.
b) No upfront payment of tax or substantial blockage of funds for the inter-State seller or buyer.
c) No refund claim in exporting State, as ITC is used up while paying the tax.
d) Self monitoring model.
e) Level of computerisation is limited to inter-State dealers and Central and State Governments should be able to computerise their processes expeditiously.
f) As all inter-State dealers will be e-registered and correspondence with them will be by e-mail, the compliance level will improve substantially.
g) Model can take ‘Business to Business’ as well as ‘Business to Consumer’ transactions into account.
Question 18 : Why does introduction of GST require a Constitutional Amendment?
Answer : The Constitution provides for delineation of power to tax between the Centre and States. While the Centre is empowered to tax services.and goods upto the production stage, the States have the power to tax sale of goods. The States do not have the powers to levy a tax on supply of services while the Centre does not have power to levy tax on the sale of goods. Thus, the Constitution does not vest express power either in the Central or State Government to levy a tax on the ‘supply of goods and services’. Moreover, the Constitution also does not empower the States to impose tax on imports. Therefore, it is essential to have Constitutional Amendments for empowering the Centre to levy tax on sale of goods and States for levy of service tax and tax on imports and other consequential issues.As part of the exercise on Constitutional Amendment, there would be a special attention to the formulation of a mechanism for upholding the need for a harmonious structure for GST along with the concern for the powers of the Centre and the States in a federal structure.
Question 19: How are the legislative steps being taken for CGST and SGST ?
Answer : A Joint Working Group has recently been constituted (September 30, 2009) comprising of the
officials of the Central and State Governments to prepare, in a time-bound manner a draft legislation
for Constitutional Amendment.
Question 20: How will the rules for administration of CGST and SGST be framed?
javascript:void(0)
Answer : The Joint Working Group, as mentioned above, has also been entrusted the task of preparing draft legislation for CGST, a suitable Model Legislation for SGST and rules and procedures for CGST and SGST. Simultaneous steps have also been initiated for drafting of legislation for IGST and rules and procedures. As a part of this exercise, the Working Group will also address to the issues of dispute resolution and advance ruling.
1.There will two system one id for Inter State sale that will be Call Centeral GST(CGST) and second is State GST(SGST)
2.For CGST the following taxes will be subsumed (merged into GST rate)
◦Central Excise Duty
◦Additional Excise Duties
◦ The Excise Duty levied under the Medicinal and Toiletries Preparation Act
◦Service Tax
◦Additional Customs Duty, commonly known as Countervailing Duty (CVD)
◦Special Additional Duty of Customs - 4% (SAD)
◦ Surcharges, and
◦ Cesses.
3.
For State GST following taxes is planned to be subsumed (merged into GST rate)
◦VAT / Sales tax
◦Entertainment tax (unless it is levied by the local bodies).
◦Luxury tax
◦Taxes on lottery, betting and gambling.
◦State Cesses and Surcharges in so far as they relate to supply of goods and services.
◦Entry tax not in lieu of Octroi.
4.Committee has not agreed to merge Purchase tax ,tax on alcohol, tobacco, petroleum products with in GST.
5.There will be Inter State GST(IGST) rate which is a sum of CGST and SGST and applicable on all interstate transactions (goods or services) and input tax credit will be available to both importing and exporting states dealers.so that tax remain applicable only on value additions.advantage of IGST given in the paper are
◦Maintenance of uninterrupted ITC chain on inter-State transactions.
◦No upfront payment of tax or substantial blockage of funds for the inter-State seller or buyer.
◦ No refund claim in exporting State, as ITC is used up while paying the tax.
◦ Self monitoring model.
◦ Level of computerization is limited to inter-State dealers and Central and State Governments should be able to computerize their processes expeditiously.
6.There will be 10 lakh basic exemption under SGST and 1.5 Crore in CGST
7.ALL dealers will be issued a unique pan based registration number .
8.All inter state dealers will be e regsitered.
9.GST rate structure is yet not finalised .however small dealer(sale+service from 10 lakh to 50 lakks) may opt for flat compound rate of 0.5% of the sale or service.(same as under VAT named as TOT dealer)
10.GST is proposed to be implemented from 01.04.2010.
There are few Frequently asked question appended in the white paper which are reproduced hereunder.
Question 1 : What is the justification of GST ?
Answer : There was a burden of “tax on tax” in the pre-existing Central excise duty of the Government of India and sales tax system of the State Governments. The introduction of Central VAT (CENVAT) has removed the cascading burden of “tax on tax” to a good extent by providing a mechanism of “set off” for tax paid on inputs and services upto the stage of production, and has been an improvement over the pre-existing Central excise duty. Similarly, the introduction of VAT in the States has removed the cascading effect by giving set-off for tax paid on inputs as well as tax paid on previous purchases and has again been an improvement over the previous sales tax regime.
But both the CENVAT and the State VAT have certain incompleteness. The incompleteness in CENVAT is that it has yet not been extended to include chain of value addition in the distributive trade below the stage of production. It has also not included several Central taxes, such as Additional Excise Duties, Additional Customs Duty, Surcharges etc. in the overall framework of CENVAT, and thus kept the benefits of comprehensive input tax and service tax set-off out of the reach of manufacturers/ dealers. The introduction of GST will not only include comprehensively more indirect Central taxes and integrate goods and services taxes for set-off relief, but also capture certain value addition in the distributive trade.
Similarly, in the present State-level VAT scheme, CENVAT load on the goods has not yet been removed and the cascading effect of that part of tax burden has remained unrelieved. Moreover, there are several taxes in the States, such as, Luxury Tax, Entertainment Tax, etc. which have still not been subsumed in the VAT. Further, there has also not been any integration of VAT on goods with tax on services at the State level with removal of cascading effect of service tax. In addition, although the burden of Central Sales Tax (CST) on inter-State movement of goods has been lessened with reduction of CST rate from 4% to 2%, this burden has also not been fully phased out. With the introduction of GST at the State level, the additional burden of CENVAT and services tax would be comprehensively removed,and a continuous chain of set-off from the original producer’s point and service provider’s point upto the retailer’s level would be established which would eliminate the burden of all cascading effects, including the burden of CENVAT and service tax. This is the essence of GST. Also, major Central and State taxes will get subsumed into GST which will reduce the multiplicity of taxes, and thus bring down the compliance cost. With GST, the burden of CST will also be phased out.
Thus GST is not simply VAT plus service tax, but a major improvement over the previous system of VAT and disjointed services tax – a justified step forward.
Question 2. What is GST? How does it work ?
Answer : As already mentioned in answer to Question 1, GST is a tax on goods and services with comprehensive and continuous chain of set-off benefits from the producer’s point and service provider’s point upto the retailer’s level. It is essentially a tax only on value addition at each stage, and a supplier at each stage is permitted to set-off, through a tax credit mechanism, the GST paid on the purchase of goods and services as available for set-off on the GST to be paid on the supply of goods and services. The final consumer will thus bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages.
The illustration shown below indicates, in terms of a hypothetical example with a manufacturer, one wholeseller and one retailer, how GST will work. Let us suppose that GST rate is 10%, with the manufacturer making value addition of Rs.30 on his purchases worth Rs.100 of input of goods and services used in the manufacturing process. The manufacturer will then pay net GST of Rs. 3 after setting-off Rs. 10 as GST paid on his inputs (i.e. Input Tax Credit) from gross GST of Rs. 13. The manufacturer sells the goods to the wholeseller. When the wholeseller sells the same goods after making value addition of (say), Rs. 20, he pays net GST of only Rs. 2, after setting-off of Input Tax Credit of Rs. 13 from the gross GST of Rs. 15 to the manufacturer. Similarly, when a retailer sells the same goods after a value addition of (say) Rs. 10, he pays net GST of only Re.1, after setting-off Rs.15 from his gross GST of Rs. 16 paid to wholeseller. Thus, the manufacturer, wholeseller and retailer have to pay only Rs. 6 (= Rs. 3+Rs. 2+Re. 1) as GST on the value addition along the entire value chain from the producer to the retailer, after setting-off GST paid at the earlier stages. The overall burden of GST on the goods is thus much less. This is shown in the table below. The same illustration will hold in the case of final service provider as well.
Question 3 : How can the burden of tax, in general, fall under GST ?
Answer : As already mentioned in Answer to Question 1, the present forms of CENVAT and State VAT have remained incomplete in removing fully the cascading burden of taxes already paid at earlier stages. Besides, there are several other taxes, which both the Central Government and the State Government levy on production, manufacture and distributive trade, where no set-off is available in the form of input tax credit. These taxes add to the cost of goods and services through “tax on tax” which the final consumer has to bear. Since, with the introduction of GST, all the cascading effects of CENVAT and service tax would be removed with a continuous chain of set-off from the producer’s point to the retailer’s point, other major Central and State taxes would be subsumed in GST and CST will also be phased out, the final net burden of tax on goods, under GST would, in general, fall. Since there would be a transparent and complete chain of set-offs, this will help widening the coverage of tax base and improve tax compliance. This may lead to higher generation of revenues which may in turn lead to the possibility of lowering of average tax burden.
Question 4 : How will GST benefit industry, trade and agriculture ?
Answer : As mentioned in Answer to Question 3, the GST will give more relief to industry, trade and agriculture through a more comprehensive and wider coverage of input tax set-off and service tax set-off, subsuming of several Central and State taxes in the GST and phasing out of CST. The transparent and complete chain of set-offs which will result in widening of tax base and better tax compliance may also lead to lowering of tax burden on an average dealer in industry, trade and agriculture.
Question 5 : How will GST benefit the exporters?
Answer : The subsuming of major Central and State taxes in GST, complete and comprehensive setoff of input goods and services and phasing out of Central Sales Tax (CST) would reduce the cost of locally manufactured goods and services. This will increase the competitiveness of Indian goods and services in the international market and give boost to Indian exports. The uniformity in tax rates and procedures across the country will also go a long way in reducing the compliance cost.
Question 6 : How will GST benefit the small entrepreneurs and small traders?
Answer : The present threshold prescribed in different State VAT Acts below which VAT is not applicable varies from State to State. The existing threshold of goods under State VAT is Rs. 5 lakhs for a majority of bigger States and a lower threshold for North Eastern States and Special Category States. A uniform State GST threshold across States is desirable and, therefore, the Empowered Committee has recommended that a threshold of gross annual turnover of Rs. 10 lakh both for goods and services for all the States and Union Territories may be adopted with adequate compensation for the States (particularly, the States in North-Eastern Region and Special Category States) where lower threshold had prevailed in the VAT regime. Keeping in view the interest of small traders and small scale industries and to avoid dual control, the States considered that the threshold for Central GST for goods may be kept at Rs.1.5 crore and the threshold for services should also be appropriately high. This raising of threshold will protect the interest of small traders. A Composition scheme for small traders and businesses has also been envisaged under GST as will be detailed in Answer to Question 14. Both these features of GST will adequately protect the interests of small traders and small scale industries.
Question 7 : How will GST benefit the common consumers?
Answer : As already mentioned in Answer to Question 3, with the introduction of GST, all the cascading effects of CENVAT and service tax will be more comprehensively removed with a continuous chain of set-off from the producer’s point to the retailer’s point than what was possible under the prevailing CENVAT and VAT regime. Certain major Central and State taxes will also be subsumed in GST and CST will be phased out. Other things remaining the same, the burden of tax on goods would, in general, fall under GST and that would benefit the consumers.
Question 8 : What are the salient features of the proposed GST model?
Answer : The salient features of the proposed model are as follows:
(i)Consistent with the federal structure of the country, the GST will have two components: one levied by the Centre (hereinafter referred to as Central GST), and the other levied by the States (hereinafter referred to as State GST). This dual GST model would be implemented through multiple statutes (one for CGST and SGST statute for every State). However, the basic features of law such as chargeability, definition of taxable event and taxable person, measure of levy including valuation provisions, basis of classification etc. would be uniform across these statutes as far as practicable.
(ii)The Central GST and the State GST would be applicable to all transactions of goods and services except the exempted goods and services, goods which are outside the purview of GST and the transactions which are below the prescribed threshold limits.
(iii) The Central GST and State GST are to be paid to the accounts of the Centre and the States separately.
(iv)Since the Central GST and State GST are to be treated separately, in general, taxes paid against the Central GST shall be allowed to be taken as input tax credit (ITC) for the Central GST and could be utilized only against the payment of Central GST. The same principle will be applicable for the State GST.
(v) Cross utilisation of ITC between the Central GST and the State GST would, in general, not be allowed.
(vi) To the extent feasible, uniform procedure for collection of both Central GST and State GST would be prescribed in the respective legislation for Central GST and State GST.
(vii) The administration of the Central GST would be with the Centre and for State GST with the States.
(viii) The taxpayer would need to submit periodical returns to both the Central GST authority and to the concerned State GST authorities.
(ix)Each taxpayer would be allotted a PAN-linked taxpayer identification number with a total of 13/15 digits. This would bring the GST PAN-linked system in line with the prevailing PAN-based system for Income tax facilitating data exchange and taxpayer compliance. The exact design would be worked out in consultation with the Income-Tax Department.
(x)Keeping in mind the need of tax payers convenience, functions such as assessment, enforcement, scrutiny and audit would be undertaken by the authority which is collecting the tax, with information sharing between the Centre and the States.
Question 9 : Why is Dual GST required ?
Answer : India is a federal country where both the Centre and the States have been assigned the powers to levy and collect taxes through appropriate legislation. Both the levels of Government have distinct responsibilities to perform according to the division of powers prescribed in the Constitution for which they need to raise resources. A dual GST will, therefore, be in keeping with the Constitutional requirement of fiscal federalism.
Question 10 : How would a particular transaction of goods and services be taxed simultaneously under Central GST (CGST) and State GST (SGST)?
Answer : The Central GST and the State GST would be levied simultaneously on every transaction of supply of goods and services except the exempted goods and services, goods which are outside the purview of GST and the transactions which are below the prescribed threshold limits. Further, both would be levied on the same price or value unlike State VAT which is levied on the value of the goods inclusive of CENVAT. While the location of the supplier and the recipient within the country is immaterial for the purpose of CGST, SGST would be chargeable only when the supplier and the recipient are both located within the State.
Illustration I : Suppose hypothetically that the rate of CGST is 10% and that of SGST is 10%. When a wholesale dealer of steel in Uttar Pradesh supplies steel bars and rods to a construction company which is also located within the same State for , say Rs. 100, the dealer would charge CGST of Rs. 10 and SGST of Rs. 10 in addition to the basic price of the goods. He would be required to deposit the CGST component into a Central Government account while the SGST portion into the account of the concerned State Government. Of course, he need not actually pay Rs. 20 (Rs. 10 + Rs. 10 ) in cash as he would be entitled to set-off this liability against the CGST or SGST paid on his purchases (say, inputs). But for paying CGST he would be allowed to use only the credit of CGST paid on his purchases while for SGST he can utilize the credit of SGST alone. In other words, CGST credit cannot, in general, be used for payment of SGST. Nor can SGST credit be used for payment of CGST.
Illustration II: Suppose, again hypothetically, that the rate of CGST is 10% and that of SGST is 10%. When an advertising company located in Mumbai supplies advertising services to a company manufacturing soap also located within the State of Maharashtra for, let us say Rs. 100, the ad company would charge CGST of Rs. 10 as well as SGST of Rs. 10 to the basic value of the service. He would be required to deposit the CGST component into a Central Government account while the SGST portion into the account of the concerned State Government. Of course, he need not again actually pay Rs. 20 (Rs. 10+Rs. 10) in cash as it would be entitled to set-off this liability against the CGST or SGST paid on his purchase (say, of inputs such as stationery, office equipment, services of an artist etc). But for paying CGST he would be allowed to use only the credit of CGST paid on its purchase while for SGST he can utilise the credit of SGST alone. In other words, CGST credit cannot, in general, be used for payment of SGST. Nor can SGST credit be used for payment of CGST.
Question 11 : Which Central and State taxes are proposed to be subsumed under GST ?
Answer : The various Central, State and Local levies were examined to identify their possibility of being subsumed under GST. While identifying, the following principles were kept in mind:
(i)Taxes or levies to be subsumed should be primarily in the nature of indirect taxes, either on the supply of goods or on the supply of services.
(ii)Taxes or levies to be subsumed should be part of the transaction chain which commences with import/ manufacture/ production of goods or provision of services at one end and the consumption of goods and services at the other.
(iii) The subsumation should result in free flow of tax credit in intra and inter-State levels.
(iv)The taxes, levies and fees that are not specifically related to supply of goods & services should not be subsumed under GST.
(v)Revenue fairness for both the Union and the States individually would need to be attempted.
On application of the above principles, the Empowered Committee has recommended that the following Central Taxes should be, to begin with, subsumed under the Goods and Services Tax:
(i) Central Excise Duty
(ii)Additional Excise Duties
(iii) The Excise Duty levied under the Medicinal and Toiletries Preparation Act
(iv)Service Tax
(v)Additional Customs Duty, commonly known as Countervailing Duty (CVD)
(vi)Special Additional Duty of Customs - 4% (SAD)
(vii) Surcharges, and
(viii) Cesses.
The following State taxes and levies would be, to begin with, subsumed under GST:
(i)VAT / Sales tax
(ii)Entertainment tax (unless it is levied by the local bodies).
(iii)Luxury tax
(iv)Taxes on lottery, betting and gambling.
(v)State Cesses and Surcharges in so far as they relate to supply of goods and services.
(vi) Entry tax not in lieu of Octroi.
Purchase tax: Some of the States felt that they are getting substantial revenue from Purchase Tax and, therefore, it should not be subsumed under GST while majority of the States were of the view that no such exemptions should be given. The difficulties of the foodgrain producing States was appreciated as substantial revenue is being earned by them from Purchase Tax and it was, therefore, felt that in case Purchase Tax has to be subsumed then adequate and continuing compensation has to be provided to such States. This issue is being discussed in consultation with the Government of India.
Tax on items containing Alcohol: Alcoholic beverages would be kept out of the purview of GST. Sales Tax/VAT could be continued to be levied on alcoholic beverages as per the existing practice. In case it has been made Vatable by some States, there is no objection to that. Excise Duty, which is presently levied by the States may not also be affected.
Tax on Tobacco products: Tobacco products would be subjected to GST with ITC. Centre may be allowed to levy excise duty on tobacco products over and above GST with ITC.
Tax on Petroleum Products: As far as petroleum products are concerned, it was decided that the basket of petroleum products, i.e. crude, motor spirit (including ATF) and HSD would be kept outside GST as is the prevailing practice in India. Sales Tax could continue to be levied by the States on these products with prevailing floor rate. Similarly, Centre could also continue its levies. A final view whether Natural Gas should be kept outside the GST will be taken after further deliberations.
Taxation of Services : As indicated earlier, both the Centre and the States will have concurrent power to levy tax on goods and services. In the case of States, the principle for taxation of intra-State and inter State has already been formulated by the Working Group of Principal Secretaries /Secretaries of Finance / Taxation and Commissioners of Trade Taxes with senior representatives of Department of Revenue, Government of India. For inter-State transactions an innovative model of Integrated GST will be adopted by appropriately aligning and integrating CGST and IGST.
Question 12 : What is the rate structure proposed under GST ?
Answer : The Empowered Committee has decided to adopt a two-rate structure –a lower rate for necessary items and items of basic importance and a standard rate for goods in general. There will also be a special rate for precious metals and a list of exempted items. For upholding of special needs of each State as well as a balanced approach to federal flexibility, it is being discussed whether the exempted list under VAT regime including Goods of Local Importance may be retained in the exempted list under State GST in the initial years. It is also being discussed whether the Government of India may adopt, to begin with, a similar approach towards exempted list under the CGST.
For CGST relating to goods, the States considered that the Government of India might also have a two-rate structure, with conformity in the levels of rate with the SGST. For taxation of services, there may be a single rate for both CGST and SGST.
The exact value of the SGST and CGST rates, including the rate for services, will be made known duly in course of appropriate legislative actions.
Question 13: What is the concept of providing threshold exemption for GST?
Answer : Threshold exemption is built into a tax regime to keep small traders out of tax net. This has
three-fold objectives:
a)It is difficult to administer small traders and cost of administering of such traders is very high in comparison to the tax paid by them.
b)The compliance cost and compliance effort would be saved for such small traders.
c)Small traders get relative advantage over large enterprises on account of lower tax incidence.
The present thresholds prescribed in different State VAT Acts below which VAT is not applicable varies from State to State. A uniform State GST threshold across States is desirable and, therefore, as already mentioned in Answer to Question 6, it has been considered that a threshold of gross annual turnover of Rs. 10 lakh both for goods and services for all the States and Union Territories might be adopted with adequate compensation for the States (particularly, the States in North-Eastern Region and Special Category States) where lower threshold had prevailed in the VAT regime. Keeping in view the interest of small traders and small scale industries and to avoid dual control, the States also considered that the threshold for Central GST for goods may be kept Rs.1.5 Crore and the threshold for services should also be appropriately high.
Question 14 : What is the scope of composition and compounding scheme under GST?
Answer : As already mentioned in Answer to Question 6, a Composition/Compounding Scheme will be an important feature of GST to protect the interests of small traders and small scale industries. The Composition/Compounding scheme for the purpose of GST should have an upper ceiling on gross annual turnover and a floor tax rate with respect to gross annual turnover. In particular there will be a compounding cut-off at Rs. 50 lakhs of the gross annual turnover and the floor rate of 0.5% across the States. The scheme would allow option for GST registration for dealers with turnover below the compounding cut-off.
Question 15 : How will imports be taxed under GST ?
Answer : With Constitutional Amendments, both CGST and SGST will be levied on import of goods and services into the country. The incidence of tax will follow the destination principle and the tax revenue in case of SGST will accrue to the State where the imported goods and services are consumed. Full and complete set-off will be available on the GST paid on import on goods and services.
Question 16 : Will cross utilization of credits between goods and services be allowed under GST regime?
Answer : Cross utilization of credit of CGST between goods and services would be allowed. Similarly, the facility of cross utilization of credit will be available in case of SGST. However, the cross utilization of CGST and SGST would generally not be allowed except in the case of inter-State supply of goods and services under the IGST model which is explained in answer to the next question.
Question 17 : How will be Inter-State Transactions of Goods and Services be taxed under GST in terms of IGST method ?
Answer : The Empowered Committee has accepted the recommendation for adoption of IGST model for taxation of inter-State transaction of Goods and Services. The scope of IGST Model is that Centre would levy IGST which would be CGST plus SGST on all inter-State transactions of taxable goods and services. The inter-State seller will pay IGST on value addition after adjusting available credit of IGST, CGST, and SGST on his purchases. The Exporting State will transfer to the Centre the credit of SGST used in payment of IGST. The Importing dealer will claim credit of IGST while discharging his output tax liability in his own State. The Centre will transfer to the importing State the credit of IGST used in payment of SGST. The relevant information is also submitted to the Central Agency which will act as a clearing house mechanism, verify the claims and inform the respective governments to transfer the funds.
The major advantages of IGST Model are:
a) Maintenance of uninterrupted ITC chain on inter-State transactions.
b) No upfront payment of tax or substantial blockage of funds for the inter-State seller or buyer.
c) No refund claim in exporting State, as ITC is used up while paying the tax.
d) Self monitoring model.
e) Level of computerisation is limited to inter-State dealers and Central and State Governments should be able to computerise their processes expeditiously.
f) As all inter-State dealers will be e-registered and correspondence with them will be by e-mail, the compliance level will improve substantially.
g) Model can take ‘Business to Business’ as well as ‘Business to Consumer’ transactions into account.
Question 18 : Why does introduction of GST require a Constitutional Amendment?
Answer : The Constitution provides for delineation of power to tax between the Centre and States. While the Centre is empowered to tax services.and goods upto the production stage, the States have the power to tax sale of goods. The States do not have the powers to levy a tax on supply of services while the Centre does not have power to levy tax on the sale of goods. Thus, the Constitution does not vest express power either in the Central or State Government to levy a tax on the ‘supply of goods and services’. Moreover, the Constitution also does not empower the States to impose tax on imports. Therefore, it is essential to have Constitutional Amendments for empowering the Centre to levy tax on sale of goods and States for levy of service tax and tax on imports and other consequential issues.As part of the exercise on Constitutional Amendment, there would be a special attention to the formulation of a mechanism for upholding the need for a harmonious structure for GST along with the concern for the powers of the Centre and the States in a federal structure.
Question 19: How are the legislative steps being taken for CGST and SGST ?
Answer : A Joint Working Group has recently been constituted (September 30, 2009) comprising of the
officials of the Central and State Governments to prepare, in a time-bound manner a draft legislation
for Constitutional Amendment.
Question 20: How will the rules for administration of CGST and SGST be framed?
javascript:void(0)
Answer : The Joint Working Group, as mentioned above, has also been entrusted the task of preparing draft legislation for CGST, a suitable Model Legislation for SGST and rules and procedures for CGST and SGST. Simultaneous steps have also been initiated for drafting of legislation for IGST and rules and procedures. As a part of this exercise, the Working Group will also address to the issues of dispute resolution and advance ruling.
Wednesday, July 29, 2009
Tuesday, July 28, 2009
Sunday, July 26, 2009
Wednesday, July 22, 2009
New Form 15CA & 15CB relating to remittance of payments to a non-resident or to a foreign company & CA Certificate
Currently, remittances to non-residents are allowed by banks if the person making the remittance furnishes an undertaking, accompanied by a certificate from a Chartered Accountant (“CA”) certifying the rate for withholding tax as per section 195 of the Act. The banks then forward the certificates to the Reserve Bank of India (“RBI”), which in-turn forwards it to the Income tax department.
Finance Act, 2008 inserted a new sub section (6) to section 195 effective from April 1, 2008, which requires the person responsible for making payment to a non-resident to furnish information relating to such payments in forms to be prescribed. The Central Board of Direct Taxes (“CBDT”) has now, by notification No 30/2009 dated March 25, 2009, prescribed a new rule 37BB in the Income Tax Rules, 1962 (“the rules”) prescribing Form 15CA and Form 15CB to be filed in relation to remittances to non-residents under section 195(6) of the Income Tax Act, 1961 (“the Act”). This new rule is effective from July 1, 2009 and shall apply to all remittances being made after July 1, 2009. The process that will have to be followed, before any remittance can be made, is as under—
Step 1 : Obtain a certificate from a Chartered Accountant in Form No 15CB
Step 2:Furnish the information in Form No15CA
Step 3:Electronically upload Form 15CA on the designated website
Step 4:Take Print out of Form 15CA and file a signed copy
Step 5:Remit money to the Non Resident
Please note that all the above steps have to be undertaken before remittance of money to the non-resident.
Notification no. 30/2009 is as below:-
In exercise of the powers conferred by section 295 read with sub-section (6) of section 195 of the Income-tax Act, 1961, the Central Board of Direct Taxes hereby makes the following rules further to amend the Income-tax Rules, 1962, namely:-
1. (1) These rules may be called the Income-tax (Seventh Amendment) Rules, 2009.
(2) They shall come into force with effect from 1st July, 2009.
2. In the Income-tax Rules, 1962, after rule 37BA, the following rule shall be inserted, namely:-
“Furnishing of information under sub-section (6) of section 195.
37BB. (1) The information under sub-section (6) of section 195 shall be furnished by the person responsible for making the payment to a non-resident, not being a company, or to a foreign company, after obtaining a certificate from an accountant as defined in the Explanation to section 288 of the Income-tax Act, 1961.
(2) The information to be furnished under sub-section (6) of section 195 shall be in Form No. 15CA and shall be verified in the manner indicated therein and the certificate from an accountant referred to in sub-rule (1) shall be obtained in Form No. 15CB.
(3) The information in Form No. 15CA shall be furnished electronically to the website designated by the Income-tax Department and thereafter signed printout of the said form shall be submitted prior to remitting the payment.
(4) The Director-General of Income-tax (Systems) shall specify the procedures, formats and standards for ensuring secure capture, transmission of data and shall also be responsible for the day-to-day administration in relation to furnishing the information in the manner specified.
Finance Act, 2008 inserted a new sub section (6) to section 195 effective from April 1, 2008, which requires the person responsible for making payment to a non-resident to furnish information relating to such payments in forms to be prescribed. The Central Board of Direct Taxes (“CBDT”) has now, by notification No 30/2009 dated March 25, 2009, prescribed a new rule 37BB in the Income Tax Rules, 1962 (“the rules”) prescribing Form 15CA and Form 15CB to be filed in relation to remittances to non-residents under section 195(6) of the Income Tax Act, 1961 (“the Act”). This new rule is effective from July 1, 2009 and shall apply to all remittances being made after July 1, 2009. The process that will have to be followed, before any remittance can be made, is as under—
Step 1 : Obtain a certificate from a Chartered Accountant in Form No 15CB
Step 2:Furnish the information in Form No15CA
Step 3:Electronically upload Form 15CA on the designated website
Step 4:Take Print out of Form 15CA and file a signed copy
Step 5:Remit money to the Non Resident
Please note that all the above steps have to be undertaken before remittance of money to the non-resident.
Notification no. 30/2009 is as below:-
In exercise of the powers conferred by section 295 read with sub-section (6) of section 195 of the Income-tax Act, 1961, the Central Board of Direct Taxes hereby makes the following rules further to amend the Income-tax Rules, 1962, namely:-
1. (1) These rules may be called the Income-tax (Seventh Amendment) Rules, 2009.
(2) They shall come into force with effect from 1st July, 2009.
2. In the Income-tax Rules, 1962, after rule 37BA, the following rule shall be inserted, namely:-
“Furnishing of information under sub-section (6) of section 195.
37BB. (1) The information under sub-section (6) of section 195 shall be furnished by the person responsible for making the payment to a non-resident, not being a company, or to a foreign company, after obtaining a certificate from an accountant as defined in the Explanation to section 288 of the Income-tax Act, 1961.
(2) The information to be furnished under sub-section (6) of section 195 shall be in Form No. 15CA and shall be verified in the manner indicated therein and the certificate from an accountant referred to in sub-rule (1) shall be obtained in Form No. 15CB.
(3) The information in Form No. 15CA shall be furnished electronically to the website designated by the Income-tax Department and thereafter signed printout of the said form shall be submitted prior to remitting the payment.
(4) The Director-General of Income-tax (Systems) shall specify the procedures, formats and standards for ensuring secure capture, transmission of data and shall also be responsible for the day-to-day administration in relation to furnishing the information in the manner specified.
Sunday, July 12, 2009
Professional Tax Slab Rates
Tax Slabs in India
The set of professional tax slabs in India are different for all the 28 states in India and some of the states have formulated different professional tax slabs for men, women, and the senior citizens of the respective states.
Maharashtra's Tax Slabs:
The professional tax slabs in India are applicable to those citizens of India who are either involved in any profession or trade. The state government of each state is empowered with the responsibility of structuring as well as formulating the respective professional tax criteria and they are also required to collect funds through professional tax. The professional taxes are charged on the incomes of individuals, profits of business or gains in vocations. The professional tax is charged as per the List II of the Indian Constitution. The professional taxes are classified under various tax slabs in India. Maharashtra, the commercial capital of India follows the following professional tax slab:
Income Monthly Professional Tax
Less than Rs. 2500 Nil
Between Rs. 2500-3500 Rs.60
Between Rs. 3500-5000 Rs.120
Between Rs. 5000-10000 Rs.175
Beyond Rs.10000 Rs.200
Tamil Nadu's Tax Slabs:
The professional tax slab structure followed in Tamil Nadu on a half yearly basis is formulated as follows:
Income Monthly Professional Tax
Less than Rs.21000 Nil
Between Rs.21001-Rs.30000 Rs.75
Between Rs.30001-Rs.45000 Rs.188
Between Rs.45001- Rs.60000 Rs.390
Between Rs.60001- Rs.75000 Rs.585
Beyond Rs.75001 Rs.810
West Bengal's Tax Slabs:
West Bengal has created its respective professional tax slab structure to keep the residents informed about the exact deductions from their incomes. The professional tax slab in West Bengal has been categorized as per the following criteria:
Income Monthly Professional Tax
Less than 1,500 Nil
Between Rs. 1501- Rs. 2001 Rs. 18
Between Rs. 2001 - Rs. 3001 Rs. 25
Between Rs. 3001- 5001 Rs 30
Rs. 5001 Rs. 40
Between Rs. 6001 -7001 Rs.45
Rs.7001 Rs.50
Rs.8001 Rs.90
Rs.9001 Rs.110
Rs.15001 Rs.130
Rs. 25001 Rs.150
Beyond Rs.40001 Rs.200
Delhi's Tax Slabs:
The Indian capital has its own professional tax structure has been categorized under various heads like professional tax for corporate professionals, non-corporate professionals, corporate contractors, non-corporate contractor. The professional tax rate of the corporate professionals has been declared as 11.33% whereas the corporate contractors are required are levied 2.26% of their income towards their professional tax. The deductions for the non-corporate professionals have been adjusted at 10.30% of their incomes but that of the non-corporate contractors have been decided at 2.06% of their incomes. The professional tax slabs in terms of various income groups in Delhi, have been structured as follows:
Income Percentage of Professional Tax
Less than Rs.1,10,000 Nil
Between Rs.1,10,000-Rs.1,45,000 Nil
Between Rs.1,45,000-Rs.1,50,000 10 %
Between Rs.1,50,000-Rs.1,95,000 20 %
Between Rs.1,95,000-Rs.2,50,000 20 %
Beyond Rs.2,50,000 30 %
Delhi has also formulated a different professional tax slab for people with income beyond Rs. 10,00,000. Such income groups are required to pay10 % of their income as surcharge also. The professional tax structure in Delhi has been formulated to include an education cess also. The education cess is calculated by aggregating the amount of tax as well as the amount of surcharge and then 2% of the aggregate is deducted as the education cess. The professional tax structure for partnership companies includes surcharge at the rate of 10% of the profits. Partnership companies are required to pay 2% of their profits as education cess. The calculation of education cess for the companies also requires the aggregation of the income tax and the surcharge initially and then deducting 2% of the aggregate for education cess. The professional tax rate for the partnership firms has been decided at 30% of the profit and the effective rate of tax of these firms is 33.66 %.
The set of professional tax slabs in India are different for all the 28 states in India and some of the states have formulated different professional tax slabs for men, women, and the senior citizens of the respective states.
Maharashtra's Tax Slabs:
The professional tax slabs in India are applicable to those citizens of India who are either involved in any profession or trade. The state government of each state is empowered with the responsibility of structuring as well as formulating the respective professional tax criteria and they are also required to collect funds through professional tax. The professional taxes are charged on the incomes of individuals, profits of business or gains in vocations. The professional tax is charged as per the List II of the Indian Constitution. The professional taxes are classified under various tax slabs in India. Maharashtra, the commercial capital of India follows the following professional tax slab:
Income Monthly Professional Tax
Less than Rs. 2500 Nil
Between Rs. 2500-3500 Rs.60
Between Rs. 3500-5000 Rs.120
Between Rs. 5000-10000 Rs.175
Beyond Rs.10000 Rs.200
Tamil Nadu's Tax Slabs:
The professional tax slab structure followed in Tamil Nadu on a half yearly basis is formulated as follows:
Income Monthly Professional Tax
Less than Rs.21000 Nil
Between Rs.21001-Rs.30000 Rs.75
Between Rs.30001-Rs.45000 Rs.188
Between Rs.45001- Rs.60000 Rs.390
Between Rs.60001- Rs.75000 Rs.585
Beyond Rs.75001 Rs.810
West Bengal's Tax Slabs:
West Bengal has created its respective professional tax slab structure to keep the residents informed about the exact deductions from their incomes. The professional tax slab in West Bengal has been categorized as per the following criteria:
Income Monthly Professional Tax
Less than 1,500 Nil
Between Rs. 1501- Rs. 2001 Rs. 18
Between Rs. 2001 - Rs. 3001 Rs. 25
Between Rs. 3001- 5001 Rs 30
Rs. 5001 Rs. 40
Between Rs. 6001 -7001 Rs.45
Rs.7001 Rs.50
Rs.8001 Rs.90
Rs.9001 Rs.110
Rs.15001 Rs.130
Rs. 25001 Rs.150
Beyond Rs.40001 Rs.200
Delhi's Tax Slabs:
The Indian capital has its own professional tax structure has been categorized under various heads like professional tax for corporate professionals, non-corporate professionals, corporate contractors, non-corporate contractor. The professional tax rate of the corporate professionals has been declared as 11.33% whereas the corporate contractors are required are levied 2.26% of their income towards their professional tax. The deductions for the non-corporate professionals have been adjusted at 10.30% of their incomes but that of the non-corporate contractors have been decided at 2.06% of their incomes. The professional tax slabs in terms of various income groups in Delhi, have been structured as follows:
Income Percentage of Professional Tax
Less than Rs.1,10,000 Nil
Between Rs.1,10,000-Rs.1,45,000 Nil
Between Rs.1,45,000-Rs.1,50,000 10 %
Between Rs.1,50,000-Rs.1,95,000 20 %
Between Rs.1,95,000-Rs.2,50,000 20 %
Beyond Rs.2,50,000 30 %
Delhi has also formulated a different professional tax slab for people with income beyond Rs. 10,00,000. Such income groups are required to pay10 % of their income as surcharge also. The professional tax structure in Delhi has been formulated to include an education cess also. The education cess is calculated by aggregating the amount of tax as well as the amount of surcharge and then 2% of the aggregate is deducted as the education cess. The professional tax structure for partnership companies includes surcharge at the rate of 10% of the profits. Partnership companies are required to pay 2% of their profits as education cess. The calculation of education cess for the companies also requires the aggregation of the income tax and the surcharge initially and then deducting 2% of the aggregate for education cess. The professional tax rate for the partnership firms has been decided at 30% of the profit and the effective rate of tax of these firms is 33.66 %.
Tax view on July 2009 Union Budget - TDS
TDS Rates
1.Applicable for AY 2010-11 (FY 2009-10).
2.194-I: Rental Payments
a.Earlier rates:
1.Plant and Machinery = 10%
2.Land or building or furniture or fittings to Individual/HUF = 15%
3.Land or building or furniture or fittings to Others = 20%
b.Revised Rates
1.Plant and Machinery = 2%
2.Land or building or furniture or fittings to anyone = 10%
3.194-C: Contracts
a.Earlier rates:
1.Contracts = 2%
2.Sub-Contracts = 1%
3.Advertisement Contracts = 1%
b.Revised Rates
1.Contracts to Individuals/HUF = 1%
2.Contracts to others = 2%
Surcharge and Cess
1.No surcharge or Cess is applicable for TDS. Only the specified TDS rates should be considered for deduction
2.Applicable for AY 2010-11 (FY 2009-10).
Payment to Transporters:
1.For any Transporters, if they Provide the PAN number, the TDS on contract payments is NIL.
2.But, if they do not provide the PAN during the payment, 1% TDS has to be made for Individuals/HUF and at 2% for others.
3.Payments to transporters without deducting TDS (as they have quoted PAN) should be reported by Deductor with PAN details to the Income Tax Department in the prescribed format.
4.Applicable for AY 2010-11 (FY 2009-10).
Compulsory PAN (Section 206AA)
1.It is mandatory to quote PAN in all correspondence, bills and vouchers exchanged between Deductor and deductee.
2.TDS shall be made at a flat rate of 20% (or actual rate, whichever is higher) for any payments, where assessee has not quoted the PAN during the payment.
a.This is applicable even in case where assessee gives Form 15G/15H u/s 197A.
b.This is also applicable for Non resident Payments.
3.Assessing officer shall not rise the letter for lower/no deduction, If assessee doesn’t quote a PAN.
4.Applicable for AY 2011-12 (FY 2010-11). Means the payments made on or after 01st April 2010.
TDS reconciliation (Section 200A)
1.A new section 200A is introduced.
2.TDS return filed by the deductor will be processed by the following way:
a.TDS deductible will be computed on the basis of data in TDS statement, after adjusting any arithmetic error or an incorrect claim.
b.The interest, if any, shall be computed on the basis of the sums deductible on the basis of data in TDS statement.
c.Any amount payable by / refund to Deductor shall be determined.
d.Intimation shall be sent to Deductor on Amount payable / refundable.
e.The amount refundable, if any shall be granted to Deductor.
TDS returns
1.Currently returns has to be filed Quarterly in Form 24Q/26Q/27Q/27EQ
2.Currently government is not allowed to decide the Periodicity of TDS returns, as the power is limited only for structure of forms and the manner.
3.In order to provide administrative flexibility in deciding the periodicity of such TDS related statements, the existing provisions are modified, so as to allow the Government to prescribe periodicity of such TDS statements besides prescribing their form and manner.
4.Applicable from 01st October 2009.
Computerized processing of TDS returns
1.Currently every TDS return involves manual-cum-computerized processing inside the department.
2.To make the process efficient, department will computerize whole process, where statements regard to TDS will be processed.
a.This will be on the same lines, how IT returns processing has been computerized in Income Tax Department.
b.This processing will allow manual interference for
1.Any arithmetical error in the statement.
2.An incorrect claim, if such incorrect claim is apparent from any information in the statement, for example, in respect of rate of deduction of tax at source where such rate is not in accordance with the provisions of the Act.
c.A Centralized Processing Center may be established in this regard.
1.Applicable for AY 2011-12 (FY 2010-11).
1.Applicable for AY 2010-11 (FY 2009-10).
2.194-I: Rental Payments
a.Earlier rates:
1.Plant and Machinery = 10%
2.Land or building or furniture or fittings to Individual/HUF = 15%
3.Land or building or furniture or fittings to Others = 20%
b.Revised Rates
1.Plant and Machinery = 2%
2.Land or building or furniture or fittings to anyone = 10%
3.194-C: Contracts
a.Earlier rates:
1.Contracts = 2%
2.Sub-Contracts = 1%
3.Advertisement Contracts = 1%
b.Revised Rates
1.Contracts to Individuals/HUF = 1%
2.Contracts to others = 2%
Surcharge and Cess
1.No surcharge or Cess is applicable for TDS. Only the specified TDS rates should be considered for deduction
2.Applicable for AY 2010-11 (FY 2009-10).
Payment to Transporters:
1.For any Transporters, if they Provide the PAN number, the TDS on contract payments is NIL.
2.But, if they do not provide the PAN during the payment, 1% TDS has to be made for Individuals/HUF and at 2% for others.
3.Payments to transporters without deducting TDS (as they have quoted PAN) should be reported by Deductor with PAN details to the Income Tax Department in the prescribed format.
4.Applicable for AY 2010-11 (FY 2009-10).
Compulsory PAN (Section 206AA)
1.It is mandatory to quote PAN in all correspondence, bills and vouchers exchanged between Deductor and deductee.
2.TDS shall be made at a flat rate of 20% (or actual rate, whichever is higher) for any payments, where assessee has not quoted the PAN during the payment.
a.This is applicable even in case where assessee gives Form 15G/15H u/s 197A.
b.This is also applicable for Non resident Payments.
3.Assessing officer shall not rise the letter for lower/no deduction, If assessee doesn’t quote a PAN.
4.Applicable for AY 2011-12 (FY 2010-11). Means the payments made on or after 01st April 2010.
TDS reconciliation (Section 200A)
1.A new section 200A is introduced.
2.TDS return filed by the deductor will be processed by the following way:
a.TDS deductible will be computed on the basis of data in TDS statement, after adjusting any arithmetic error or an incorrect claim.
b.The interest, if any, shall be computed on the basis of the sums deductible on the basis of data in TDS statement.
c.Any amount payable by / refund to Deductor shall be determined.
d.Intimation shall be sent to Deductor on Amount payable / refundable.
e.The amount refundable, if any shall be granted to Deductor.
TDS returns
1.Currently returns has to be filed Quarterly in Form 24Q/26Q/27Q/27EQ
2.Currently government is not allowed to decide the Periodicity of TDS returns, as the power is limited only for structure of forms and the manner.
3.In order to provide administrative flexibility in deciding the periodicity of such TDS related statements, the existing provisions are modified, so as to allow the Government to prescribe periodicity of such TDS statements besides prescribing their form and manner.
4.Applicable from 01st October 2009.
Computerized processing of TDS returns
1.Currently every TDS return involves manual-cum-computerized processing inside the department.
2.To make the process efficient, department will computerize whole process, where statements regard to TDS will be processed.
a.This will be on the same lines, how IT returns processing has been computerized in Income Tax Department.
b.This processing will allow manual interference for
1.Any arithmetical error in the statement.
2.An incorrect claim, if such incorrect claim is apparent from any information in the statement, for example, in respect of rate of deduction of tax at source where such rate is not in accordance with the provisions of the Act.
c.A Centralized Processing Center may be established in this regard.
1.Applicable for AY 2011-12 (FY 2010-11).
Wednesday, July 8, 2009
Sunday, July 5, 2009
Friday, May 29, 2009
NEW TDS RULES/FORM 17 EFFECTIVE FROM 01.07.09
At last I have arranged a press release according to which new tds rules are now effective from 01.07.2009 instead of 01.04.2009.Income Tax department again fooling taxpayers .As press release which has been issued on April 11,2009 is available to general public as well as press only on 11.05.2009???????.I think they treated this paper like a secret document and after persuasion and pressure from trade body only then it is made available to general Public.
As I have updated you earlier that Implementation of Form 17 and other new rules implementation may delay on 02.05.2009 but on that time no one has access to this so called "press release".Even highest accounting body ICAI has sought a clarification regarding implementation of Form 17.So by this any body can judge that when a highest accounting professional body has no knowledge of delay in implementation then we can easily assume that no boy know about it.
No information on Income tax or NSDL website....no news in major news papers only website that break the news taxindiaonline ,which has mentioned that old form can be used upto 30.06.2009 but that site also have no access to press release.(we can assume )
Its shameful for income tax department first because they have issued New system of TDS notification without any home work and second failed to inform the taxpayers about delay in implementation.Further due to this delay,many new problem has arisen.
1.According to new rules Govt deductor is now required to deposit tds, 7th of next month where as as per old rules tax is required to be deposited on same day ...many govt departments have stopped depositing tax on same day .Now the implementation of new rules is wef 01.07.2009 so they have to deposit the tax on same day...
2.As per old rules quarterly return is required to be deposited on 15 July for the first quarter where as in new return new return on form 24 C is reuired quarterly and form 24Q ,26Q,and 27EQ is required to be deposited only on 15 June in next year .Now the question is whether quarterly return(form 24Q,26Q,27q,27EQ) for etds /etcs for first quarter if Fy 2009-10 is required or not.
3.Unique transaction number is required to be given on Form 16 and 16A and on income tax returns ,as the system to generate this number has been postponed ,the question is here that whether the column of UTN will be kept blank in form 16 /16A and ITR form in respect of Quarter one or any sytem will be placed to generate the UTN for First quarter entries.
4.How Form 26AS of deductee will be updated If pan of deductee has not been updated in NSDL system either at the time of tax deposit or at the time of filing of return.
On the basis of above few query/point and other related point ,I strongly support the demand that new TDS rules should be implemented from 01.04.2010 . Implementation in mid of the Fy only create problems and confusion for the Taxpayers.
No.402/92/2006-MC (11 of 2009)
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
New Delhi, Dated: April 11, 2009
PRESS RELEASE
The Central Board of Direct Taxes have decided to defer the implementation of Notification No.31/2009 dated 25.3.2009 amending or substituting Rules 30, 31, 31A and 31AA of the Income Tax Rules, 1962. The amended / substituted Rules will now come into effect on 1st July 2009 instead of 1st April 2009.
Tax deductors / collectors may continue to deposit TDS / TCS tax and file TDS / TCS returns as per the pre-amended provisions in the interim period
As I have updated you earlier that Implementation of Form 17 and other new rules implementation may delay on 02.05.2009 but on that time no one has access to this so called "press release".Even highest accounting body ICAI has sought a clarification regarding implementation of Form 17.So by this any body can judge that when a highest accounting professional body has no knowledge of delay in implementation then we can easily assume that no boy know about it.
No information on Income tax or NSDL website....no news in major news papers only website that break the news taxindiaonline ,which has mentioned that old form can be used upto 30.06.2009 but that site also have no access to press release.(we can assume )
Its shameful for income tax department first because they have issued New system of TDS notification without any home work and second failed to inform the taxpayers about delay in implementation.Further due to this delay,many new problem has arisen.
1.According to new rules Govt deductor is now required to deposit tds, 7th of next month where as as per old rules tax is required to be deposited on same day ...many govt departments have stopped depositing tax on same day .Now the implementation of new rules is wef 01.07.2009 so they have to deposit the tax on same day...
2.As per old rules quarterly return is required to be deposited on 15 July for the first quarter where as in new return new return on form 24 C is reuired quarterly and form 24Q ,26Q,and 27EQ is required to be deposited only on 15 June in next year .Now the question is whether quarterly return(form 24Q,26Q,27q,27EQ) for etds /etcs for first quarter if Fy 2009-10 is required or not.
3.Unique transaction number is required to be given on Form 16 and 16A and on income tax returns ,as the system to generate this number has been postponed ,the question is here that whether the column of UTN will be kept blank in form 16 /16A and ITR form in respect of Quarter one or any sytem will be placed to generate the UTN for First quarter entries.
4.How Form 26AS of deductee will be updated If pan of deductee has not been updated in NSDL system either at the time of tax deposit or at the time of filing of return.
On the basis of above few query/point and other related point ,I strongly support the demand that new TDS rules should be implemented from 01.04.2010 . Implementation in mid of the Fy only create problems and confusion for the Taxpayers.
No.402/92/2006-MC (11 of 2009)
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
New Delhi, Dated: April 11, 2009
PRESS RELEASE
The Central Board of Direct Taxes have decided to defer the implementation of Notification No.31/2009 dated 25.3.2009 amending or substituting Rules 30, 31, 31A and 31AA of the Income Tax Rules, 1962. The amended / substituted Rules will now come into effect on 1st July 2009 instead of 1st April 2009.
Tax deductors / collectors may continue to deposit TDS / TCS tax and file TDS / TCS returns as per the pre-amended provisions in the interim period
NEW INCOME TAX RETURN 2009-10 FORM & RELATED MATTERS
Circular No. 03 / 2009
F.No. 142/02/2009-TPL
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
….
New Delhi, the 21th May, 2009
Subject:- New Return Forms for Assessment Year 2009-10 – matters connected
thereto – regarding.
_______________________________________________________________________
The Central Board of Direct Taxes have, vide notification S.O. No.866 (E) dated 27th, March,notified the following new forms for Assessment Year 2009-10 :-
•(i) ITR-1 return of income for individuals having income from salary/ pension/ family pension and not having any other income except income by way of interest chargeable to income-tax under the head Income from other sources;
•(ii) ITR-2 return of income for Individuals and Hindu Undivided Families (HUFs) not having any income under the head Profits or gains of business or profession;
•(iii) ITR-3 return of income for Individuals and HUFs being partners in firms and not carrying out business or profession under any proprietorship;
•(iv) ITR-4 return of income for individual and HUFs having proprietory business or profession;
•(v) ITR-5 combined form for return of income and fringe benefits for Firms/ Association of Persons / Body of Individuals;
•(vi) ITR-6 combined form for return of income and fringe benefits for companies (other than companies claiming exemption under section 11;
•(vii) ITR-7 combined form for return of income and fringe benefits for persons including companies required to furnish return under section 139(4A) or section 139(4B) or section 139(4C) or section 139(4D);
•(viii) ITR-8 stand alone form for return of fringe benefits for persons who are not required to furnish return of income but are required to furnish return of fringe benefits.
The above return forms are available at http//www.incometaxindia.gov.in. Circular No. 03 / 2009
2. Rule 12 of the Income Tax Rules, 1962 (hereinafter referred to as ‘the said rule’) provides for the form and the manner in which the income tax return is required to be furnished.
3. Sub-rule (3) of the said rule provides that return of income/ fringe benefits can be furnished in any of the following manners:-
•(i) furnishing the return in a paper form;
•(ii) furnishing the return electronically under digital signature;
•(iii) transmitting the data in the return electronically and thereafter submitting the verification of the return in Form ITR-V;
•(iv) furnishing a bar-coded return in a paper form.
4. Sub-rule (5) of the said rule provides that the return of income/ fringe benefits for assessment year 2008-09 or any earlier assessment years shall be furnished in the appropriate form as applicable in that assessment year.
5 In exercise of the powers conferred by section 139D of the Income Tax Act,1961 (hereinafter referred to as ‘the Act’), ( read with clause (eebb) of sub-section (2) of section 295 of the Act, sub-rule (3) of the said rule provides that-
•(a) it shall be mandatory for the firms to whom provisions of section 44AB are applicable and for the companies (other than the companies claiming exemption under section 11) to furnish the return of income/ fringe benefits electronically in the manner mentioned at (ii) or (iii) of paragraph 3;
•(b) the return of income/ fringe benefits in Form ITR-7 by charitable/ religious trusts, political parties and other non-profit is to be furnished in the paper form only; and
•(c) all other taxpayers have the option to furnish the return of income/ fringe benefits in any of the manner mentioned in paragraph 3.
6. In exercise of the powers conferred by section 139C of the Income Tax Act,1961(hereinafter referred to as ‘the Act’), read with clause (eeba) of sub-section (2) of section 295 of the Act, sub-rule (2) of the said rule provides that the returns required to be furnished in above mentioned Forms (except in ITR-7) shall not be accompanied by any attachments/ annexures. Thus, taxpayers should not enclose with these return forms any statement showing the computation of income or tax, copies of balance-sheet, profit and loss account, TDS/ TCS certificates, proof of payment of advance tax or self-assessment tax. However, these documents
shall have to be produced before the Assessing Officer on demand by him. The Chief Commissioners of Income-tax/ Commissioners of Income-tax must ensure that documents if any, annexed with these returns or Form ITR-V are detached at the time of receiving these returns/ ITR-V and are returned to the taxpayers immediately.
7. Following clarifications are also issued in respect of certain issues arising from furnishing the returns in the above mentioned forms:
•(i) An assessee should obtain the report of audit from an accountant under section 44AB of the Act on or before the due date of the furnishing of the return and should fill out the relevant columns of the return forms on the basis of such report. However, the report of audit should not be attached with the return or furnished separately any time before or after the due date. The assessee should retain the report with himself. If called for by any income-tax authority during any proceeding under the Act, it shall b e incumbent upon the assessee to furnish/produce the same in original. No penalty under section 271B shall be initiated or levied for not furnishing the tax audit report on or before the due date. However, if the audit report has not been obtained before the due date, provisions of section 271B shall continue to be attracted.
•(ii) These returns are not to be accompanied with any other document including any statutory form or report of audit (other than the report under section 92E), which is otherwise required to be furnished before the due date or along with the return for making any claim. The provisions of the law shall be deemed to have been complied with in respect of the requirement of the filing of the attachments or documents or reports along with the return. No penalty shall be initiated/ levied for not furnishing such documents if such documents were otherwise obtained before the specified date, if any, provided in the statute. All these documents should be retained by the taxpayers. If called for by any income-tax authority during any proceeding under the Act, it shall be incumbent upon the assessee to Furnish /produce the same, in original.
•(iii) The report as required under section 92E of the Income-tax Act should not be furnished along with the return. However, it should be separately furnished before the date specified in rule 10E.
8. As stated in paragraph 5 above, it is mandatory for a company and a firm liable to audit under section 44AB of the Act to furnish the return electronically. However, electronic filing is optional for other categories of tax-payers. The e-Return has to be furnished at http://incometaxindiaefiling.gov.in. Further, it is advisable, though not mandatory, to use a digital signature for electronically furnishing the return. If the return is electronically furnished under a digital signature, the tax-payer is not required to furnish the Form ITR-V with
the Income-tax Department as a follow up to the electronic transmitting of data in the return. Similarly, any return which is digitally signed by the assessee and filed with an E-Return Intermediary (ERI), who, in turn, submits the return to the Income Tax Department under his digital signature, will also be deemed to have been filed under a digital signature of the assessee and no Form ITR-V is required to be submitted. In such cases, the date of electronic transmission of the data in the return shall be the date of furnishing the return.
9. However, if the assessee does not use a digital signature for electronically transmitting the data, he is required to follow-up the electronic transmission of the data by submitting the Form ITR-V with the Income-tax Department as verification of the electronic filing of the return. In such a case, the date of transmitting the data electronically will be the date of furnishing the return if the Form ITR-V is furnished within thirty days after the date of transmitting the data electronically. In case, Form ITR-V, is furnished after the above mentioned period, it will be deemed that the return in respect of which the Form ITR-V has been filed was never furnished and it shall be incumbent on the assessee to electronically re-transmit the data and follow it up by submitting the new Form ITR-V within thirty days.
10. Since the Form ITR-V is bar-coded, assessee is advised not to fold the same and post it in A4 size envelope. The assessee shall furnish the Form ITR-V to the Income-tax Department by mailing it to “Income Tax Department – CPC, Post Box No - 1, Electronic City Post Office, Bangalore - 560100, Karnataka” within thirty days after the date of transmitting the data electronically. The Post Box shall deliver all the Form ITR-V to the Centralized Processing Centre (CPC) of the Income-tax Department in Bangalore. Upon receipt of the Form ITR-V, the CPC shall send an e-mail acknowledging the receipt of Form ITR-V. The e-mail shall be sent in due course to the e-mail address furnished by the tax-payers in his return. No Form ITR-V shall be received in any other office of the Income-tax Department or in any other manner.
11. All returns filed electronically shall be processed, on priority basis, only at the Centralized Processing Centre of the Income-tax Department in Bangalore.
12. Since no documents are required to be furnished along with the return of income, the credit for Tax Deducted at Source (TDS), Tax Collected at Source (TCS), advance tax and self assessment tax (hereinafter collectively referred to as ‘pre-paid taxes’) shall be allowed on the basis of information relating to pre-paid taxes furnished in the relevant schedules of the return forms subject to matching with the information provided by the deductor, collector and the banks. Therefore, tax payers are advised to ensure that the information relating to pre-paid taxes is complete in all respect and correct. With a view to enabling the matching of information relating to pre-paid taxes furnished by the tax payers, the Income-tax Department has created a
system of Unique Transaction Number (UTN) and Challan Identification Number (CIN).Assesses must ensure that the deductor and the collector have provided them with separate UTNs in respect of each TDS and TCS transaction. Similarly, they must also ensure that the UTN for every TDS and TCS claim in the return is correctly filled in. Similarly, they must ensure that they correctly fill in the CIN in respect of payments of advance tax and self-assessment tax. Further, no disallowance of claim for pre-paid taxes shall be made by the Assessing Officer only on the ground that the TDS/TCS certificates and challans have not been furnished along with the return of income or Form ITR-V.
13. The return of income in Form No. ITR-1 to Form No.ITR-8 for Assessment Year 2009-10 have been notified which require, amongst other, the quoting of the relevant UTN for every TDS or TCS claim made by the assessee. Therefore, the credit for any TDS or TCS claim will be allowed, amongst others, if the assessee quotes the relevant UTN for every TDS and TCS claim and the said UTN matches with the UTN in the database of the Income Tax Department. With a view to enabling the processing of returns relating to financial year 2007-08 (Assessment Year 2008-09) and enabling the assessee to receive the UTN for TDS and TCS transactions in the Financial Year 2008-09 (relevant for Assessment Year 2009-10), the following procedure will be followed: -
•(a) National Securities Depository Limited (NSDL) shall assign an UTN for every TDS and TCS transaction record in Financial Year 2007-08 and 2008-09 reported in the quarterly returns received by it.
•(b) NSDL will create a facility to e-mail the UTN file to the deductor if the e-mail address of the deductor is available with them. In addition, they will also create a facility for the deductor to download the UTN file.
•(c) Upon receipt of the UTN, the deductor will inform the UTN to the deductee. In cases where the UTNs are available to the deductor before the issue of the TDS/TCS certificate to the deductee, the deductor will indicate the UTNs on the certificate. However, if the UTNs are not available to the deductor before the issue of TDS/TCS certificate, the deductor shall, subsequently, send a consolidated statement of all TDS/TCS transactions indicating the UTNs.
•(d) NSDL will also create a facility to allow independent viewing of the UTNs by the deductee. As a result, even if the UTNs are not received by the deductee from the deductor, they can be directly obtained from the NSDL database and quoted while making claims of TDS and TCS in the return of income.
14. In the past, instances have come to the notice of the Board that in spite of specific directions contained in the Instructions for filling the return forms, the practice of accepting returns, along with annexures is still continuing. Tax-payers have in the past also complained that staff and officials in certain stations are refusing to accept returns which are not accompanied with annexures. These practices are against the expressed policy of the Government and are not in consonance with the legal provisions. Therefore, it is emphasized that
Chief Commissioners of Income Tax must ensure strict compliance with the provisions of law. It may be reiterated that all annexures accompanying the income tax return forms should be detached and returned to the tax payers by the receiving official.
15. The contents of this circular are for strict compliance by all officers and staff of the Income Tax Department. Any violation by the officers and staff of Income Tax Department will be seriously viewed.
(Munesh Kumar)
Secretary,
Central Board of Direct Taxes
[F.No.142/02/2009-TPL]
F.No. 142/02/2009-TPL
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
….
New Delhi, the 21th May, 2009
Subject:- New Return Forms for Assessment Year 2009-10 – matters connected
thereto – regarding.
_______________________________________________________________________
The Central Board of Direct Taxes have, vide notification S.O. No.866 (E) dated 27th, March,notified the following new forms for Assessment Year 2009-10 :-
•(i) ITR-1 return of income for individuals having income from salary/ pension/ family pension and not having any other income except income by way of interest chargeable to income-tax under the head Income from other sources;
•(ii) ITR-2 return of income for Individuals and Hindu Undivided Families (HUFs) not having any income under the head Profits or gains of business or profession;
•(iii) ITR-3 return of income for Individuals and HUFs being partners in firms and not carrying out business or profession under any proprietorship;
•(iv) ITR-4 return of income for individual and HUFs having proprietory business or profession;
•(v) ITR-5 combined form for return of income and fringe benefits for Firms/ Association of Persons / Body of Individuals;
•(vi) ITR-6 combined form for return of income and fringe benefits for companies (other than companies claiming exemption under section 11;
•(vii) ITR-7 combined form for return of income and fringe benefits for persons including companies required to furnish return under section 139(4A) or section 139(4B) or section 139(4C) or section 139(4D);
•(viii) ITR-8 stand alone form for return of fringe benefits for persons who are not required to furnish return of income but are required to furnish return of fringe benefits.
The above return forms are available at http//www.incometaxindia.gov.in. Circular No. 03 / 2009
2. Rule 12 of the Income Tax Rules, 1962 (hereinafter referred to as ‘the said rule’) provides for the form and the manner in which the income tax return is required to be furnished.
3. Sub-rule (3) of the said rule provides that return of income/ fringe benefits can be furnished in any of the following manners:-
•(i) furnishing the return in a paper form;
•(ii) furnishing the return electronically under digital signature;
•(iii) transmitting the data in the return electronically and thereafter submitting the verification of the return in Form ITR-V;
•(iv) furnishing a bar-coded return in a paper form.
4. Sub-rule (5) of the said rule provides that the return of income/ fringe benefits for assessment year 2008-09 or any earlier assessment years shall be furnished in the appropriate form as applicable in that assessment year.
5 In exercise of the powers conferred by section 139D of the Income Tax Act,1961 (hereinafter referred to as ‘the Act’), ( read with clause (eebb) of sub-section (2) of section 295 of the Act, sub-rule (3) of the said rule provides that-
•(a) it shall be mandatory for the firms to whom provisions of section 44AB are applicable and for the companies (other than the companies claiming exemption under section 11) to furnish the return of income/ fringe benefits electronically in the manner mentioned at (ii) or (iii) of paragraph 3;
•(b) the return of income/ fringe benefits in Form ITR-7 by charitable/ religious trusts, political parties and other non-profit is to be furnished in the paper form only; and
•(c) all other taxpayers have the option to furnish the return of income/ fringe benefits in any of the manner mentioned in paragraph 3.
6. In exercise of the powers conferred by section 139C of the Income Tax Act,1961(hereinafter referred to as ‘the Act’), read with clause (eeba) of sub-section (2) of section 295 of the Act, sub-rule (2) of the said rule provides that the returns required to be furnished in above mentioned Forms (except in ITR-7) shall not be accompanied by any attachments/ annexures. Thus, taxpayers should not enclose with these return forms any statement showing the computation of income or tax, copies of balance-sheet, profit and loss account, TDS/ TCS certificates, proof of payment of advance tax or self-assessment tax. However, these documents
shall have to be produced before the Assessing Officer on demand by him. The Chief Commissioners of Income-tax/ Commissioners of Income-tax must ensure that documents if any, annexed with these returns or Form ITR-V are detached at the time of receiving these returns/ ITR-V and are returned to the taxpayers immediately.
7. Following clarifications are also issued in respect of certain issues arising from furnishing the returns in the above mentioned forms:
•(i) An assessee should obtain the report of audit from an accountant under section 44AB of the Act on or before the due date of the furnishing of the return and should fill out the relevant columns of the return forms on the basis of such report. However, the report of audit should not be attached with the return or furnished separately any time before or after the due date. The assessee should retain the report with himself. If called for by any income-tax authority during any proceeding under the Act, it shall b e incumbent upon the assessee to furnish/produce the same in original. No penalty under section 271B shall be initiated or levied for not furnishing the tax audit report on or before the due date. However, if the audit report has not been obtained before the due date, provisions of section 271B shall continue to be attracted.
•(ii) These returns are not to be accompanied with any other document including any statutory form or report of audit (other than the report under section 92E), which is otherwise required to be furnished before the due date or along with the return for making any claim. The provisions of the law shall be deemed to have been complied with in respect of the requirement of the filing of the attachments or documents or reports along with the return. No penalty shall be initiated/ levied for not furnishing such documents if such documents were otherwise obtained before the specified date, if any, provided in the statute. All these documents should be retained by the taxpayers. If called for by any income-tax authority during any proceeding under the Act, it shall be incumbent upon the assessee to Furnish /produce the same, in original.
•(iii) The report as required under section 92E of the Income-tax Act should not be furnished along with the return. However, it should be separately furnished before the date specified in rule 10E.
8. As stated in paragraph 5 above, it is mandatory for a company and a firm liable to audit under section 44AB of the Act to furnish the return electronically. However, electronic filing is optional for other categories of tax-payers. The e-Return has to be furnished at http://incometaxindiaefiling.gov.in. Further, it is advisable, though not mandatory, to use a digital signature for electronically furnishing the return. If the return is electronically furnished under a digital signature, the tax-payer is not required to furnish the Form ITR-V with
the Income-tax Department as a follow up to the electronic transmitting of data in the return. Similarly, any return which is digitally signed by the assessee and filed with an E-Return Intermediary (ERI), who, in turn, submits the return to the Income Tax Department under his digital signature, will also be deemed to have been filed under a digital signature of the assessee and no Form ITR-V is required to be submitted. In such cases, the date of electronic transmission of the data in the return shall be the date of furnishing the return.
9. However, if the assessee does not use a digital signature for electronically transmitting the data, he is required to follow-up the electronic transmission of the data by submitting the Form ITR-V with the Income-tax Department as verification of the electronic filing of the return. In such a case, the date of transmitting the data electronically will be the date of furnishing the return if the Form ITR-V is furnished within thirty days after the date of transmitting the data electronically. In case, Form ITR-V, is furnished after the above mentioned period, it will be deemed that the return in respect of which the Form ITR-V has been filed was never furnished and it shall be incumbent on the assessee to electronically re-transmit the data and follow it up by submitting the new Form ITR-V within thirty days.
10. Since the Form ITR-V is bar-coded, assessee is advised not to fold the same and post it in A4 size envelope. The assessee shall furnish the Form ITR-V to the Income-tax Department by mailing it to “Income Tax Department – CPC, Post Box No - 1, Electronic City Post Office, Bangalore - 560100, Karnataka” within thirty days after the date of transmitting the data electronically. The Post Box shall deliver all the Form ITR-V to the Centralized Processing Centre (CPC) of the Income-tax Department in Bangalore. Upon receipt of the Form ITR-V, the CPC shall send an e-mail acknowledging the receipt of Form ITR-V. The e-mail shall be sent in due course to the e-mail address furnished by the tax-payers in his return. No Form ITR-V shall be received in any other office of the Income-tax Department or in any other manner.
11. All returns filed electronically shall be processed, on priority basis, only at the Centralized Processing Centre of the Income-tax Department in Bangalore.
12. Since no documents are required to be furnished along with the return of income, the credit for Tax Deducted at Source (TDS), Tax Collected at Source (TCS), advance tax and self assessment tax (hereinafter collectively referred to as ‘pre-paid taxes’) shall be allowed on the basis of information relating to pre-paid taxes furnished in the relevant schedules of the return forms subject to matching with the information provided by the deductor, collector and the banks. Therefore, tax payers are advised to ensure that the information relating to pre-paid taxes is complete in all respect and correct. With a view to enabling the matching of information relating to pre-paid taxes furnished by the tax payers, the Income-tax Department has created a
system of Unique Transaction Number (UTN) and Challan Identification Number (CIN).Assesses must ensure that the deductor and the collector have provided them with separate UTNs in respect of each TDS and TCS transaction. Similarly, they must also ensure that the UTN for every TDS and TCS claim in the return is correctly filled in. Similarly, they must ensure that they correctly fill in the CIN in respect of payments of advance tax and self-assessment tax. Further, no disallowance of claim for pre-paid taxes shall be made by the Assessing Officer only on the ground that the TDS/TCS certificates and challans have not been furnished along with the return of income or Form ITR-V.
13. The return of income in Form No. ITR-1 to Form No.ITR-8 for Assessment Year 2009-10 have been notified which require, amongst other, the quoting of the relevant UTN for every TDS or TCS claim made by the assessee. Therefore, the credit for any TDS or TCS claim will be allowed, amongst others, if the assessee quotes the relevant UTN for every TDS and TCS claim and the said UTN matches with the UTN in the database of the Income Tax Department. With a view to enabling the processing of returns relating to financial year 2007-08 (Assessment Year 2008-09) and enabling the assessee to receive the UTN for TDS and TCS transactions in the Financial Year 2008-09 (relevant for Assessment Year 2009-10), the following procedure will be followed: -
•(a) National Securities Depository Limited (NSDL) shall assign an UTN for every TDS and TCS transaction record in Financial Year 2007-08 and 2008-09 reported in the quarterly returns received by it.
•(b) NSDL will create a facility to e-mail the UTN file to the deductor if the e-mail address of the deductor is available with them. In addition, they will also create a facility for the deductor to download the UTN file.
•(c) Upon receipt of the UTN, the deductor will inform the UTN to the deductee. In cases where the UTNs are available to the deductor before the issue of the TDS/TCS certificate to the deductee, the deductor will indicate the UTNs on the certificate. However, if the UTNs are not available to the deductor before the issue of TDS/TCS certificate, the deductor shall, subsequently, send a consolidated statement of all TDS/TCS transactions indicating the UTNs.
•(d) NSDL will also create a facility to allow independent viewing of the UTNs by the deductee. As a result, even if the UTNs are not received by the deductee from the deductor, they can be directly obtained from the NSDL database and quoted while making claims of TDS and TCS in the return of income.
14. In the past, instances have come to the notice of the Board that in spite of specific directions contained in the Instructions for filling the return forms, the practice of accepting returns, along with annexures is still continuing. Tax-payers have in the past also complained that staff and officials in certain stations are refusing to accept returns which are not accompanied with annexures. These practices are against the expressed policy of the Government and are not in consonance with the legal provisions. Therefore, it is emphasized that
Chief Commissioners of Income Tax must ensure strict compliance with the provisions of law. It may be reiterated that all annexures accompanying the income tax return forms should be detached and returned to the tax payers by the receiving official.
15. The contents of this circular are for strict compliance by all officers and staff of the Income Tax Department. Any violation by the officers and staff of Income Tax Department will be seriously viewed.
(Munesh Kumar)
Secretary,
Central Board of Direct Taxes
[F.No.142/02/2009-TPL]
NEW TDS SYSTEM CLARIFICATION CIRCULAR -2/2009
Income tax department comes with a detailed circular regarding Provisions of new TDS and TCS system and try to resolve all the issue one by one but to what extent they are successful in their goal ,we have wait and see.I have Just gone through the circular and found some overlapping in time schedule they have given, in some of the provisions.The main issue in the circular are given below
1.Form 17: applicable from 01.04.2009 but tax deposit can be done only from 01.06.2009 through form 17.Period from 01.04.09 to 30.05.2009, form 17 is to be uploaded only without depositing the tax through this form.
2.UTN (unique transaction number ) will be available for AY 2009-10 also through NSDL
3.ITR form where TDS/TCS is involved ,UTN is necessary to be quoted against TDS entries for AY 2009-10 also ,so if you are planning to filing your income tax return and you have not UTN for tax deduction entries then you have to wait for a period and get it from your deductor.
4.Form 16:New form 16 applicable for ay 2010-11 can be issued upto 30June 2009 for AY 2009-10 or detail of UTN has to be given to deductor for AY 2009-10.
5.Form 24C is required to be filed quarterly and 24Q,26Q and 27q is required to be filed only yearly even not required for the first quarter of the FY 2009-10
Full circular is given for your ready reference ,I will try to update you on each and every aspect of the New TDS system and impact of the new clarification on Tax payer/and tax deductor and what we should do so that we can match ourselves with the NEW chagces.
F.No. 142/22/2008-TPL
Circular No. 02 / 2009
Page 1 of 8
F.No. 142/22/2008-TPL
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
….
New Delhi, the 21st May, 2009
•Subject:- New TDS and TCS payment and information reporting system- Notification No.858(E), dated 25th March, 2009 published in Official Gazette-regarding.
_______________________________________________________________________
The Finance Act, 2008 inserted a new sub-section (1A) in section 143 of the Income-tax Act,1961 empowering the Board to make a scheme for centralised processing of returns with a view to expeditiously determining the tax payable by, or the refund due to, the assessee. For the purposes of enabling centralised processing of returns, it is necessary to ensure the integrity of the database, in particular, the information relating to tax deduction at source, advance tax and self assessment tax.
2. One of the fundamental principles of financial accounting is that if a person claims credit for payment of money to a third person, the credit should be allowed only if the payment and the information relating to the transaction have been received from the third person. The advance tax and self assessment tax is paid directly by the assessee by filling a challan which bears a unique Challan Identification Number (CIN) and the PAN of the assessee. These two number systems are used to cross verify the claim of tax payment made by the assessee and allow appropriate credit.
3. In the context of TDS, the first best principle is that no claim for TDS / TCS should be admissible unless the deductor / payer has paid the amount so deducted / collected to the credit of the Central Government and the information relating to the transaction is received. Since the business process of the Income Tax department was manually organised and the volume of TDS related information was large, it was not feasible to undertake 100 per cent matching of TDS claims with information furnished by the deductor. Consequently, the Income Tax Department adopted a risk management strategy for allowing claim for TDS as a second best option. With the advances in information technology, it is technically feasible to design a business process which would enable 100 per cent matching in real time, thereby, eliminating the risk. Pursuant to the recommendation of the Task Force on Direct Taxes (chaired by Dr. Kelkar), as a first step in this direction, the deductors were required to electronically furnish the TDS related information (through the NSDL). This system was introduced in early 2004 as one of the modules of the Taxpayer Information Network (TIN).
4. The quantity and quality of data flowing through this module is far from satisfactory. The data is largely unverifiable. The matching of the deduction reported by the deductor and claimed by the deductee assessee continuous to be poor for the following reasons:-
•(i) Non-compliance, especially by Government deductors, with TDS return filing requirement.
•(ii) Low quoting of PAN number in TDS returns that are filed on account of non-furnishing of PAN by deductees to their deductors and negligence by deductors.
5. Unlike in the case of advance tax and self assessment tax, the TDS information does not bear a unique transaction identification number. As a result, the PAN forms the only basis for matching. To the extent PAN quoting is inadequate or deficient, it is not feasible to match the claim made by the deductee assessee with the TDS information reported by the deductor. Hence, it becomes necessary to make ad-hoc rules for allowing credit for TDS or in the alternative, interface with the assessee for physical verification of the TDS certificate. Both these approaches are flawed since there is no reconciliation of deductees claim with the information provided by the deductor and the integrity of the system is questionable. The efforts of the Income Tax Department over the last four years for improving the TDS and TCS database have not yielded desired result.
6. Further, Government (both Central and State together) is the largest deductor of tax being the largest employer and the largest spender on works contract. Under the extant procedure, tax deducted by the Central Government departments is paid to the account of the Central Government through book
transfer. Unlike other deductors, these departments do not make any direct payment of the TDS amount in the banks. Similarly, the Central Government Ministries, departments and their sub-ordinate and attached offices are large scale defaulters in complying with the TDS information reporting requirements. Even the certificates issued by these organisations are often illegible and of poor quality. Hence, these are unreliable. This has been a constant source of public grievance. It also creates an opportunity for interface with the taxpayer. This process also does not assure the department of the legitimate revenues and enforce compliance. Hence, the mechanism of payment of tax so deducted and compliance with the reporting requirements is not satisfactory.
7. Unlike the Central Government, the State Government is required to make a consolidated payment of the TDS amount in respect of all its deductors and deductions directly into the Reserve Bank of India. This is done by the Accountant General of the State. As a result, there is no correlation between the deduction, payment and reporting. Further, compliance by State Governments with the TDS information reporting requirement is no better than in the case of the Central Government.
8. In the light of the above, the Department adopted the second best option of a risk management strategy for allowing TDS claims. Under this strategy, the Department has been allowing credit for TDS claims even though the transactions do not fully match/reconcile with the information provided by the deductor. Further, the Department have also been unable to undertake follow up verification of such claims at the deductors end on account of inadequate resources. As a result the system is vulnerable and exposes public revenues to extreme risk of fraud and leakage.
9. With a view to resolving the problems in granting credit for pre-paid taxes, the Central Board of Direct Taxes constituted a sub-group to analyse the various problems in granting credit for prepaid taxes and make appropriate recommendations. According to the Sub-group, the problem of matching and reconciliation of prepaid taxes is rooted in the three sets of data pertaining to TDS entering the system separately at different times from different sources, thus causing mismatch. Therefore, the Sub-group recommended that the ‘problem can be solved if the agency receiving the TDS amount and the TDS returns (and the documents by which this is done) is the same. In such a situation the TDS payments can be immediately credited to the accounts of the deductees by the agency handling both the operations. For example, if the detailed list giving break-up and identity particulars of deductees are given to the bank along with the TDS challans for the consolidated amount of TDS at the time of payment, the accounts of deductees can be simultaneously credited, thus eliminating the reconciliation issues between challan data in OLTAS and in TDS returns. Owing to the advances in technology, it is now feasible to implement this recommendation.
10. The Sub-group also examined the issue of granting credit for TDS deducted by government deductors and recommended that Central Government deductors should also be brought into the discipline of deposit of TDS in bank accounts like other deductors.
11. As stated above, the Government has introduced the centralised processing of returns which envisages no interface with the taxpayer. Further, the processing is also required to be done in an automated jurisdiction-less manner. Therefore, it is necessary to have in place a perfect TDS payment and information reporting system so as to optimise the efficiency of the centralised return processing system. It is imperative to move to the first best solution to also minimize the risk of financial fraud. This is in the interest of all stakeholders – Government, Income-tax Department and taxpayers.Therefore, the Board have decided that, henceforth, claim for TDS and TCS shall be allowed only if the–
•(i) amount has been deposited by the deductor / collector;
•(ii) information relating to the deductee has been furnished by the deductor / collector;and
•(iii) claim matches the information furnished by the deductor / collector.
12. With a view to enabling the implementation of the aforesaid decision, the TDS and TCS payment and information reporting system has been redesigned vide notification No. 858(E) dated 25th March, 2009 published in Official Gazette. The salient features of the new TDS and TCS payment and information reporting system are the following: -
•(i) The new system has been harmonized for all deductors (including Central and State Governments). Therefore, like non-governmental tax deductors, every deductor in the Central and State Government have also been made responsible for making direct payment of TDS in the bank. They are no longer allowed to make payments of the TDS and TCS by making book adjustments or consolidated payments. As a result, the TDS payment and information reporting system will be uniform across deductors.
•(ii) Rule 30 and Rule 37 CA of the Income-tax Rules, 1962 have been substituted to provide,inter alia, for the following: -
◦(a) All sums of tax deducted at source under Chapter XVII-B and of tax collected at source under Chapter XVII-BB shall, in general, be paid to the credit of the Central Government within one week from the end of the month in which the deduction, or collection, is made. Similarly, the same time limit for payment will also apply for income-tax due under sub-section (1A) of section 192.
◦(b) It is mandatory for all deductors (including Central Government and State Governments) to pay the amount by electronically remitting it into the RBI, SBI or any authorized bank.
◦(c) It is mandatory for all deductors (including Central Government and State Governments) to make the payment by electronically furnishing an income-tax challan in Form No. 17.
•(iii) In the process of electronically furnishing the income-tax challan in Form No. 17, thedeductor will be simultaneously required to furnish to the Taxpayer Information Network (TIN) system maintained by National Securities Depository Limited (NSDL) either through screen based upload or file upload, three basic information relating to the deduction i.e., PAN, name of the deductee and amount of TDS/TCS.
•(iv) Upon successful remittance of the TDS/TCS to Central Government account and the uploading of the basic information as mentioned above to the TIN system, every deduction record will be assigned a unique transaction number (UTN).
•(v) NSDL will create a facility to e-mail the UTN file to the deductor if the e-mail address of the deductor is available with them. In addition, they will also create a facility for the deductor to download the UTN file.
•(vi) The UTN will be required to be quoted by the deductor on the TDS/TCS certificate issued by him to the deductee.
•(vii) NSDL will also create a facility to allow independent viewing of the UTNs by the deductee.
•(viii) With a view to enabling the Income Tax Department to monitor compliance by the deductor with the TDS provisions, every person (including Central Government and State Government) who has obtained a Tax Deduction or Collection Account Number (TAN) shall electronically furnish a quarterly statement of compliance with TDS provisions in Form No. 24C. It is mandatory for all TAN holders to furnish this form irrespective of whether any payment liable to TDS has been made or not. This form shall be furnished on or before the 15th July, the 15th October, the 15th January in respect of the first three quarters of the financial year, respectively, and on or before the 15th June following the last quarter of the financial year. This e-form No. 24C has to be furnished at incometaxindiaefiling.gov.in. The first quarter in respect of which Form 24C is required to be furnished is the quarter ending on 30th June, 2009.
•(ix) In order to enable the deductor to furnish the UTN to the deductee, the existing Form 16 and Form 16A have been appropriately modified.
•(x) The quarterly returns of TDS and TCS hitherto required to be filed in Form No. 24Q,Form No. 26Q, Form No. 27Q and Form No. 27EQ shall now be required to be filed for all quarters on or before the 15th June following the Financial Year. Effectively, the quarterly returns have now been replaced by an annual return.
13. The above new system will be effective for all tax deducted at source or tax collected at source on or after the 1st April, 2009. However, any TDS or TCS effected on or after the 1st April, 2009 but not later than 31st May, 2009 shall continue to be paid to the credit of the Central Government by using the old challan form. The TDS or TCS effected on or after the 1st June, 2009 shall be required to be paid electronically by electronically furnishing income tax challan in Form No. 17.
14. Where the payment of TDS or TCS effected on or after the 1st April, 2009 but not later than 31st May, 2009 is paid to the credit of the Central Government by using the old challan form, the deductor / collector shall, nevertheless, be required to fill up Form No.17 in respect of such payments any time between 1st July, 2009 to 15th July, 2009. Therefore, the deductors/collectors are advised to prepare the schedule relating to details of TDS / TCS from deductees in Form No.17 in advance (in an excel sheet) and be in a state of preparedness to file the same by 15th July, 2009 so that the UTNs relating to TDS / TCS transactions carried out in the month of April and May can be generated / obtained for onward transmission to the deductees.
15. Further, a deductor can split the total amount of TDS and TCS which he is required to deposit to
the credit of the Central Government so that every deposit to the account of the Central Government is
made through a separate challan in Form 17. For example, if a deductor is liable to deposit Rs. 1 lakh, he
can split the amounts into four payments of Rs 25000/- each and deposit each of the amounts through a
separate challan in Form 17 at four different times.
16. The return of income in Form No. ITR-1 to Form No.ITR-8 for Assessment Year 2009-10 have
been notified which requires, amongst other, the quoting of the relevant UTN for every TDS or TCS claim
made by the assessee. Therefore, the credit for any TDS or TCS claim will be allowed, amongst others, if
the assessee quotes the relevant UTN for every TDS and TCS claim and the said UTN matches with the
UTN in the database of the Income Tax Department. With a view to enabling the processing of returns
relating to Financial Year 2007-08 (Assessment Year 2008-09) and enabling the assessee to receive the
UTN for TDS and TCS transactions in the Financial Year 2008-09 (relevant for Assessment Year 2009-10),
the following procedure shall be followed: -
•(a) National Securities Depository Limited (NSDL) shall assign an UTN for every TDS and TCS transaction records in Financial Years 2007-08 and 2008-09, reported in the quarterly returns received by it.
•(b) NSDL will create a facility to e-mail the UTN file to the deductor if the e-mail address of the deductor is available with them. In addition, they will also create a facility for the deductor to download the UTN file.
•(c) Upon receipt of the UTN, the deductor will inform the UTN to the deductee. In cases where the UTNs are available to the deductor before the issue of the TDS/TCS certificate to the deductee, the deductor will indicate the UTNs on the certificate. However, if the UTNs are not available to the deductor before the issue of TDS/TCS certificate, the deductor shall, subsequently, send a consolidated statement of all TDS/TCS transactions indicating the UTNs.
•(d) NSDL will also create a facility to allow independent viewing of the UTNs by the deductee. As a result, even if the UTNs are not received by the deductee from the deductor, they can be directly obtained from the NSDL database and quoted while making claims of TDS and TCS in the return of income.
17. TDS certificates were hitherto required to be issued in Form 16 or Form 16A as the case may be. Similarly, TCS certificates were issued in Form 27D. These forms have been substituted by the new Form 16, Form 16A and Form 27D with effect from the 1st day of April, 2009. In the new Forms, it is mandatory for the deductor/collector to quote, inter-alia, the UTN. Therefore, where the certificate is required to be issued in respect of deduction or collection made before the 1st April, 2009, the deductor/collector may adopt any of the following course of action:-
•(a) The deductor/collector may issue certificate of deduction or collection in the Form 16,Form 16A or Form 27D, as the case may be, as it existed prior to 1st April, 2009 and send a consolidated statement of UTNs to the deductee/buyer/lessee etc., as soon as the same is received by him; or
•(b) The deductor/collector may issue certificate of deduction or collection in the new Form 16, Form 16A or Form 27D, as the case may be.
18. Rule 31 of the Income Tax Rules, as it existed prior to its substitution, provides that, in general, the TDS certificates in Form 16 and Form 16A should be issued within one month from the end of the month in which the deduction is made. Similarly, Rule 37D, as it existed prior to its substitution, provides that, in general, the TCS certificates in Form 27D should be issued within one month from the end of the month in which the collection is made. Therefore, if the deductor/collector chooses to adopt the course specified in item (b) of para 13 above, the TDS/TCS certificate may be issued beyond the stipulated period of one month but not later than 30th June, 2009.
19. As regards, TDS/TCS certificates in respect of deduction or collection effected on or after the 1st April, 2009, it is mandatory to issue the certificates in the new Forms and quote the UTN relating to the TDS/TCS transactions.
20. As stated above, a new Form 24C has been notified to monitor compliance with the provisions of TDS/TCS. The first part of the Form relates to personal information and filing status. The Schedule COM-I relates to details of TDS/TCS compliance in the first month of the relevant quarter. Likewise details of TDS/TCS compliance for the second and third month of the relevant quarter would have to be reported in Schedule COM-2 and Schedule COM-3 respectively. In this Schedule in column (3), for example, against section 194A in column (1), the TAN holder is required to furnish the total amount of interest paid during the month. Let us assume that this total amount is Rs. 1 crore. In column (4) of the corresponding entry, the deductor is required to furnish the total amount on which TDS was liable or eligible to be deducted out of Rs. 1 crore. As is well known, no TDS is required to be deducted if the interest payment is less than Rs. 10,000. If the total of the amounts of interest payment/credit less than Rs. 10,000 is Rs. 30 lakhs, then the deductor must report in column (4) an amount of Rs. 70 lakhs (Rs. 1 crore – Rs. 30 lakhs). In column (5), the deductor has to report that the total amount on which tax was deducted at prescribed rate out of the amount reported in column (4). In the instant case the rate of tax to be deducted at source is 11.33 percent (including surcharge and education cess). However, in many instances the recipients of interest exceeding the threshold limit of Rs. 10,000/- would either furnish certificate for non deduction of tax or deduction at a lower rate than the prescribed rate. Let us assume that the amount of interest paid to such recipients is Rs. 15 lakhs. Therefore, the amount of interest payment liable to TDS at the prescribed rate would be Rs. 55 lakhs (Rs. 70 lakhs – Rs. 15 lakhs), which is required to be reported in column (5). Since the prescribed rate is 11.33%, and the amount of interest liable to TDS at the prescribed rate is Rs. 55 lakhs, the amount of TDS on such payment is Rs. 6,23,150/-. This amount is required to be reported in column (6). In column (7), the deductor is required to report the amount of Rs. 15 lakh i.e., the amount of interest payment liable to TDS at less
than the prescribed rate. Let us assume that the TDS at ‘nil’ or lower rate on the amount of Rs. 15 lakh
is Rs. 50,000/-. This amount would be required to be reported in column (8). The total amount of TDS
of Rs. 6,73,150/- (Rs. 6,23,150 + Rs. 50,000) is required to be reported in column (9). The above
example is reproduced below in the tabular form as would appear in Form 24C:-
21. Form 24C is required to be furnished by all TAN holders irrespective of whether a TDS/TCS transaction has been effected during the quarter or not. In the event of the column (3) of the Schedules in From 24C is zero for all nature of payments, the deductor/collector should specify in the section on filing status in Form 24C that it is a case of ‘Nil Return’ and it would not be necessary to fill in the Schedules.
22. In Schedule PAY of Form 24C, the deductor/collector is required to indicate the details of the payment of the TDS/TCS to the credit of the Central Government.
23. The new TDS and TCS payment and reporting system will enable faster payment, accurate accounting and uniformity across deductors. It will facilitate accurate, quicker and full credit for taxes paid enabling faster refunds to taxpayers. It will also minimize interface of tax administration with taxpayers and intermediaries, thereby eliminating any opportunity for rent seeking behaviour.
(Munesh Kumar)
Secretary
Central Board of Direct Taxes
1.Form 17: applicable from 01.04.2009 but tax deposit can be done only from 01.06.2009 through form 17.Period from 01.04.09 to 30.05.2009, form 17 is to be uploaded only without depositing the tax through this form.
2.UTN (unique transaction number ) will be available for AY 2009-10 also through NSDL
3.ITR form where TDS/TCS is involved ,UTN is necessary to be quoted against TDS entries for AY 2009-10 also ,so if you are planning to filing your income tax return and you have not UTN for tax deduction entries then you have to wait for a period and get it from your deductor.
4.Form 16:New form 16 applicable for ay 2010-11 can be issued upto 30June 2009 for AY 2009-10 or detail of UTN has to be given to deductor for AY 2009-10.
5.Form 24C is required to be filed quarterly and 24Q,26Q and 27q is required to be filed only yearly even not required for the first quarter of the FY 2009-10
Full circular is given for your ready reference ,I will try to update you on each and every aspect of the New TDS system and impact of the new clarification on Tax payer/and tax deductor and what we should do so that we can match ourselves with the NEW chagces.
F.No. 142/22/2008-TPL
Circular No. 02 / 2009
Page 1 of 8
F.No. 142/22/2008-TPL
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
….
New Delhi, the 21st May, 2009
•Subject:- New TDS and TCS payment and information reporting system- Notification No.858(E), dated 25th March, 2009 published in Official Gazette-regarding.
_______________________________________________________________________
The Finance Act, 2008 inserted a new sub-section (1A) in section 143 of the Income-tax Act,1961 empowering the Board to make a scheme for centralised processing of returns with a view to expeditiously determining the tax payable by, or the refund due to, the assessee. For the purposes of enabling centralised processing of returns, it is necessary to ensure the integrity of the database, in particular, the information relating to tax deduction at source, advance tax and self assessment tax.
2. One of the fundamental principles of financial accounting is that if a person claims credit for payment of money to a third person, the credit should be allowed only if the payment and the information relating to the transaction have been received from the third person. The advance tax and self assessment tax is paid directly by the assessee by filling a challan which bears a unique Challan Identification Number (CIN) and the PAN of the assessee. These two number systems are used to cross verify the claim of tax payment made by the assessee and allow appropriate credit.
3. In the context of TDS, the first best principle is that no claim for TDS / TCS should be admissible unless the deductor / payer has paid the amount so deducted / collected to the credit of the Central Government and the information relating to the transaction is received. Since the business process of the Income Tax department was manually organised and the volume of TDS related information was large, it was not feasible to undertake 100 per cent matching of TDS claims with information furnished by the deductor. Consequently, the Income Tax Department adopted a risk management strategy for allowing claim for TDS as a second best option. With the advances in information technology, it is technically feasible to design a business process which would enable 100 per cent matching in real time, thereby, eliminating the risk. Pursuant to the recommendation of the Task Force on Direct Taxes (chaired by Dr. Kelkar), as a first step in this direction, the deductors were required to electronically furnish the TDS related information (through the NSDL). This system was introduced in early 2004 as one of the modules of the Taxpayer Information Network (TIN).
4. The quantity and quality of data flowing through this module is far from satisfactory. The data is largely unverifiable. The matching of the deduction reported by the deductor and claimed by the deductee assessee continuous to be poor for the following reasons:-
•(i) Non-compliance, especially by Government deductors, with TDS return filing requirement.
•(ii) Low quoting of PAN number in TDS returns that are filed on account of non-furnishing of PAN by deductees to their deductors and negligence by deductors.
5. Unlike in the case of advance tax and self assessment tax, the TDS information does not bear a unique transaction identification number. As a result, the PAN forms the only basis for matching. To the extent PAN quoting is inadequate or deficient, it is not feasible to match the claim made by the deductee assessee with the TDS information reported by the deductor. Hence, it becomes necessary to make ad-hoc rules for allowing credit for TDS or in the alternative, interface with the assessee for physical verification of the TDS certificate. Both these approaches are flawed since there is no reconciliation of deductees claim with the information provided by the deductor and the integrity of the system is questionable. The efforts of the Income Tax Department over the last four years for improving the TDS and TCS database have not yielded desired result.
6. Further, Government (both Central and State together) is the largest deductor of tax being the largest employer and the largest spender on works contract. Under the extant procedure, tax deducted by the Central Government departments is paid to the account of the Central Government through book
transfer. Unlike other deductors, these departments do not make any direct payment of the TDS amount in the banks. Similarly, the Central Government Ministries, departments and their sub-ordinate and attached offices are large scale defaulters in complying with the TDS information reporting requirements. Even the certificates issued by these organisations are often illegible and of poor quality. Hence, these are unreliable. This has been a constant source of public grievance. It also creates an opportunity for interface with the taxpayer. This process also does not assure the department of the legitimate revenues and enforce compliance. Hence, the mechanism of payment of tax so deducted and compliance with the reporting requirements is not satisfactory.
7. Unlike the Central Government, the State Government is required to make a consolidated payment of the TDS amount in respect of all its deductors and deductions directly into the Reserve Bank of India. This is done by the Accountant General of the State. As a result, there is no correlation between the deduction, payment and reporting. Further, compliance by State Governments with the TDS information reporting requirement is no better than in the case of the Central Government.
8. In the light of the above, the Department adopted the second best option of a risk management strategy for allowing TDS claims. Under this strategy, the Department has been allowing credit for TDS claims even though the transactions do not fully match/reconcile with the information provided by the deductor. Further, the Department have also been unable to undertake follow up verification of such claims at the deductors end on account of inadequate resources. As a result the system is vulnerable and exposes public revenues to extreme risk of fraud and leakage.
9. With a view to resolving the problems in granting credit for pre-paid taxes, the Central Board of Direct Taxes constituted a sub-group to analyse the various problems in granting credit for prepaid taxes and make appropriate recommendations. According to the Sub-group, the problem of matching and reconciliation of prepaid taxes is rooted in the three sets of data pertaining to TDS entering the system separately at different times from different sources, thus causing mismatch. Therefore, the Sub-group recommended that the ‘problem can be solved if the agency receiving the TDS amount and the TDS returns (and the documents by which this is done) is the same. In such a situation the TDS payments can be immediately credited to the accounts of the deductees by the agency handling both the operations. For example, if the detailed list giving break-up and identity particulars of deductees are given to the bank along with the TDS challans for the consolidated amount of TDS at the time of payment, the accounts of deductees can be simultaneously credited, thus eliminating the reconciliation issues between challan data in OLTAS and in TDS returns. Owing to the advances in technology, it is now feasible to implement this recommendation.
10. The Sub-group also examined the issue of granting credit for TDS deducted by government deductors and recommended that Central Government deductors should also be brought into the discipline of deposit of TDS in bank accounts like other deductors.
11. As stated above, the Government has introduced the centralised processing of returns which envisages no interface with the taxpayer. Further, the processing is also required to be done in an automated jurisdiction-less manner. Therefore, it is necessary to have in place a perfect TDS payment and information reporting system so as to optimise the efficiency of the centralised return processing system. It is imperative to move to the first best solution to also minimize the risk of financial fraud. This is in the interest of all stakeholders – Government, Income-tax Department and taxpayers.Therefore, the Board have decided that, henceforth, claim for TDS and TCS shall be allowed only if the–
•(i) amount has been deposited by the deductor / collector;
•(ii) information relating to the deductee has been furnished by the deductor / collector;and
•(iii) claim matches the information furnished by the deductor / collector.
12. With a view to enabling the implementation of the aforesaid decision, the TDS and TCS payment and information reporting system has been redesigned vide notification No. 858(E) dated 25th March, 2009 published in Official Gazette. The salient features of the new TDS and TCS payment and information reporting system are the following: -
•(i) The new system has been harmonized for all deductors (including Central and State Governments). Therefore, like non-governmental tax deductors, every deductor in the Central and State Government have also been made responsible for making direct payment of TDS in the bank. They are no longer allowed to make payments of the TDS and TCS by making book adjustments or consolidated payments. As a result, the TDS payment and information reporting system will be uniform across deductors.
•(ii) Rule 30 and Rule 37 CA of the Income-tax Rules, 1962 have been substituted to provide,inter alia, for the following: -
◦(a) All sums of tax deducted at source under Chapter XVII-B and of tax collected at source under Chapter XVII-BB shall, in general, be paid to the credit of the Central Government within one week from the end of the month in which the deduction, or collection, is made. Similarly, the same time limit for payment will also apply for income-tax due under sub-section (1A) of section 192.
◦(b) It is mandatory for all deductors (including Central Government and State Governments) to pay the amount by electronically remitting it into the RBI, SBI or any authorized bank.
◦(c) It is mandatory for all deductors (including Central Government and State Governments) to make the payment by electronically furnishing an income-tax challan in Form No. 17.
•(iii) In the process of electronically furnishing the income-tax challan in Form No. 17, thedeductor will be simultaneously required to furnish to the Taxpayer Information Network (TIN) system maintained by National Securities Depository Limited (NSDL) either through screen based upload or file upload, three basic information relating to the deduction i.e., PAN, name of the deductee and amount of TDS/TCS.
•(iv) Upon successful remittance of the TDS/TCS to Central Government account and the uploading of the basic information as mentioned above to the TIN system, every deduction record will be assigned a unique transaction number (UTN).
•(v) NSDL will create a facility to e-mail the UTN file to the deductor if the e-mail address of the deductor is available with them. In addition, they will also create a facility for the deductor to download the UTN file.
•(vi) The UTN will be required to be quoted by the deductor on the TDS/TCS certificate issued by him to the deductee.
•(vii) NSDL will also create a facility to allow independent viewing of the UTNs by the deductee.
•(viii) With a view to enabling the Income Tax Department to monitor compliance by the deductor with the TDS provisions, every person (including Central Government and State Government) who has obtained a Tax Deduction or Collection Account Number (TAN) shall electronically furnish a quarterly statement of compliance with TDS provisions in Form No. 24C. It is mandatory for all TAN holders to furnish this form irrespective of whether any payment liable to TDS has been made or not. This form shall be furnished on or before the 15th July, the 15th October, the 15th January in respect of the first three quarters of the financial year, respectively, and on or before the 15th June following the last quarter of the financial year. This e-form No. 24C has to be furnished at incometaxindiaefiling.gov.in. The first quarter in respect of which Form 24C is required to be furnished is the quarter ending on 30th June, 2009.
•(ix) In order to enable the deductor to furnish the UTN to the deductee, the existing Form 16 and Form 16A have been appropriately modified.
•(x) The quarterly returns of TDS and TCS hitherto required to be filed in Form No. 24Q,Form No. 26Q, Form No. 27Q and Form No. 27EQ shall now be required to be filed for all quarters on or before the 15th June following the Financial Year. Effectively, the quarterly returns have now been replaced by an annual return.
13. The above new system will be effective for all tax deducted at source or tax collected at source on or after the 1st April, 2009. However, any TDS or TCS effected on or after the 1st April, 2009 but not later than 31st May, 2009 shall continue to be paid to the credit of the Central Government by using the old challan form. The TDS or TCS effected on or after the 1st June, 2009 shall be required to be paid electronically by electronically furnishing income tax challan in Form No. 17.
14. Where the payment of TDS or TCS effected on or after the 1st April, 2009 but not later than 31st May, 2009 is paid to the credit of the Central Government by using the old challan form, the deductor / collector shall, nevertheless, be required to fill up Form No.17 in respect of such payments any time between 1st July, 2009 to 15th July, 2009. Therefore, the deductors/collectors are advised to prepare the schedule relating to details of TDS / TCS from deductees in Form No.17 in advance (in an excel sheet) and be in a state of preparedness to file the same by 15th July, 2009 so that the UTNs relating to TDS / TCS transactions carried out in the month of April and May can be generated / obtained for onward transmission to the deductees.
15. Further, a deductor can split the total amount of TDS and TCS which he is required to deposit to
the credit of the Central Government so that every deposit to the account of the Central Government is
made through a separate challan in Form 17. For example, if a deductor is liable to deposit Rs. 1 lakh, he
can split the amounts into four payments of Rs 25000/- each and deposit each of the amounts through a
separate challan in Form 17 at four different times.
16. The return of income in Form No. ITR-1 to Form No.ITR-8 for Assessment Year 2009-10 have
been notified which requires, amongst other, the quoting of the relevant UTN for every TDS or TCS claim
made by the assessee. Therefore, the credit for any TDS or TCS claim will be allowed, amongst others, if
the assessee quotes the relevant UTN for every TDS and TCS claim and the said UTN matches with the
UTN in the database of the Income Tax Department. With a view to enabling the processing of returns
relating to Financial Year 2007-08 (Assessment Year 2008-09) and enabling the assessee to receive the
UTN for TDS and TCS transactions in the Financial Year 2008-09 (relevant for Assessment Year 2009-10),
the following procedure shall be followed: -
•(a) National Securities Depository Limited (NSDL) shall assign an UTN for every TDS and TCS transaction records in Financial Years 2007-08 and 2008-09, reported in the quarterly returns received by it.
•(b) NSDL will create a facility to e-mail the UTN file to the deductor if the e-mail address of the deductor is available with them. In addition, they will also create a facility for the deductor to download the UTN file.
•(c) Upon receipt of the UTN, the deductor will inform the UTN to the deductee. In cases where the UTNs are available to the deductor before the issue of the TDS/TCS certificate to the deductee, the deductor will indicate the UTNs on the certificate. However, if the UTNs are not available to the deductor before the issue of TDS/TCS certificate, the deductor shall, subsequently, send a consolidated statement of all TDS/TCS transactions indicating the UTNs.
•(d) NSDL will also create a facility to allow independent viewing of the UTNs by the deductee. As a result, even if the UTNs are not received by the deductee from the deductor, they can be directly obtained from the NSDL database and quoted while making claims of TDS and TCS in the return of income.
17. TDS certificates were hitherto required to be issued in Form 16 or Form 16A as the case may be. Similarly, TCS certificates were issued in Form 27D. These forms have been substituted by the new Form 16, Form 16A and Form 27D with effect from the 1st day of April, 2009. In the new Forms, it is mandatory for the deductor/collector to quote, inter-alia, the UTN. Therefore, where the certificate is required to be issued in respect of deduction or collection made before the 1st April, 2009, the deductor/collector may adopt any of the following course of action:-
•(a) The deductor/collector may issue certificate of deduction or collection in the Form 16,Form 16A or Form 27D, as the case may be, as it existed prior to 1st April, 2009 and send a consolidated statement of UTNs to the deductee/buyer/lessee etc., as soon as the same is received by him; or
•(b) The deductor/collector may issue certificate of deduction or collection in the new Form 16, Form 16A or Form 27D, as the case may be.
18. Rule 31 of the Income Tax Rules, as it existed prior to its substitution, provides that, in general, the TDS certificates in Form 16 and Form 16A should be issued within one month from the end of the month in which the deduction is made. Similarly, Rule 37D, as it existed prior to its substitution, provides that, in general, the TCS certificates in Form 27D should be issued within one month from the end of the month in which the collection is made. Therefore, if the deductor/collector chooses to adopt the course specified in item (b) of para 13 above, the TDS/TCS certificate may be issued beyond the stipulated period of one month but not later than 30th June, 2009.
19. As regards, TDS/TCS certificates in respect of deduction or collection effected on or after the 1st April, 2009, it is mandatory to issue the certificates in the new Forms and quote the UTN relating to the TDS/TCS transactions.
20. As stated above, a new Form 24C has been notified to monitor compliance with the provisions of TDS/TCS. The first part of the Form relates to personal information and filing status. The Schedule COM-I relates to details of TDS/TCS compliance in the first month of the relevant quarter. Likewise details of TDS/TCS compliance for the second and third month of the relevant quarter would have to be reported in Schedule COM-2 and Schedule COM-3 respectively. In this Schedule in column (3), for example, against section 194A in column (1), the TAN holder is required to furnish the total amount of interest paid during the month. Let us assume that this total amount is Rs. 1 crore. In column (4) of the corresponding entry, the deductor is required to furnish the total amount on which TDS was liable or eligible to be deducted out of Rs. 1 crore. As is well known, no TDS is required to be deducted if the interest payment is less than Rs. 10,000. If the total of the amounts of interest payment/credit less than Rs. 10,000 is Rs. 30 lakhs, then the deductor must report in column (4) an amount of Rs. 70 lakhs (Rs. 1 crore – Rs. 30 lakhs). In column (5), the deductor has to report that the total amount on which tax was deducted at prescribed rate out of the amount reported in column (4). In the instant case the rate of tax to be deducted at source is 11.33 percent (including surcharge and education cess). However, in many instances the recipients of interest exceeding the threshold limit of Rs. 10,000/- would either furnish certificate for non deduction of tax or deduction at a lower rate than the prescribed rate. Let us assume that the amount of interest paid to such recipients is Rs. 15 lakhs. Therefore, the amount of interest payment liable to TDS at the prescribed rate would be Rs. 55 lakhs (Rs. 70 lakhs – Rs. 15 lakhs), which is required to be reported in column (5). Since the prescribed rate is 11.33%, and the amount of interest liable to TDS at the prescribed rate is Rs. 55 lakhs, the amount of TDS on such payment is Rs. 6,23,150/-. This amount is required to be reported in column (6). In column (7), the deductor is required to report the amount of Rs. 15 lakh i.e., the amount of interest payment liable to TDS at less
than the prescribed rate. Let us assume that the TDS at ‘nil’ or lower rate on the amount of Rs. 15 lakh
is Rs. 50,000/-. This amount would be required to be reported in column (8). The total amount of TDS
of Rs. 6,73,150/- (Rs. 6,23,150 + Rs. 50,000) is required to be reported in column (9). The above
example is reproduced below in the tabular form as would appear in Form 24C:-
21. Form 24C is required to be furnished by all TAN holders irrespective of whether a TDS/TCS transaction has been effected during the quarter or not. In the event of the column (3) of the Schedules in From 24C is zero for all nature of payments, the deductor/collector should specify in the section on filing status in Form 24C that it is a case of ‘Nil Return’ and it would not be necessary to fill in the Schedules.
22. In Schedule PAY of Form 24C, the deductor/collector is required to indicate the details of the payment of the TDS/TCS to the credit of the Central Government.
23. The new TDS and TCS payment and reporting system will enable faster payment, accurate accounting and uniformity across deductors. It will facilitate accurate, quicker and full credit for taxes paid enabling faster refunds to taxpayers. It will also minimize interface of tax administration with taxpayers and intermediaries, thereby eliminating any opportunity for rent seeking behaviour.
(Munesh Kumar)
Secretary
Central Board of Direct Taxes
UTN(unique transaction number) mandatory for ITR AY 2009-10
Dear Friends,In new ITR for Ay 2009-10 new columns has been inserted in TDS schedule regarding UTN(inique Transaction Number) ,at the time of releasing of Form Every body assume that this is a error by Income tax Department but Now department has clarified vide circular 2/2009 that UTN is mandatory to be filled in New ITR for AY 2009-10 ,otherwise TDS credit will not be given.But after these circular Following new point arises which requires clarification.
1. Department has issued clarification circular on 21/05/2009 ,however person can file his return for Ay 2009-10 from 1st April 2009 ,so what will be the remedy for tax payers who have filed their return between Ist April 2009 to 21st may 2009 without the detail of UTN.
2. Department has started New form 26AS from the year 2005-06 ,In which TDS and entries are being posted from TDS return uploaded by the Deductor ,so if the Credit has been shown in form 26AS for tax deduction then credit should be given to the deductee even he has not filled UTN detail in ITR.
3. Last quarter return for previous year 2008-09 regarding TDS (24Q and 26Q) can be submitted by the deductor upto 15th June 2009.As per detail given below UTN number of AY 2009-10 can be alloted by NSDL only after receipt of TDS return from deductor and thereafter deductor will provide UTN numbers to deductee either in seprate sheet or in New form 16 Format with UTN by 30th June 2009.So in best possible scenario deductee can get detail of UTN by 30th June2009 where as last date to file Income tax return is 31.07.2009 so deductee has only one month time to file the return.so In my opinion this time should also be extended and date to file Income tax Return for Ay 2009-10 should be extended to 30.09.2009 for taxpayer which is presently fixed as 31st July 2009.
UTN MANDATORY TO FILE ITRs FOR A.Y.2009-10
. The return of income in Form No. ITR-1 to Form No.ITR-8 for Assessment Year 2009-10 have been notified which requires, amongst other, the quoting of the relevant UTN for every TDS or TCS claim made by the assessee. Therefore, the credit for any TDS or TCS claim will be allowed, amongst others, if the assessee quotes the relevant UTN for every TDS and TCS claim and the said UTN matches with the UTN in the database of the Income Tax Department. With a view to enabling the processing of returns relating to Financial Year 2007-08 (Assessment Year 2008-09) and enabling the assessee to receive the UTN for TDS and TCS transactions in the Financial Year 2008-09 (relevant for Assessment Year 2009-10), the following procedure shall be followed: -
(a) National Securities Depository Limited (NSDL) shall assign an UTN for every TDS and TCS transaction records in Financial Years 2007-08 and 2008-09, reported in the quarterly returns received by it.
(b) NSDL will create a facility to e-mail the UTN file to the deductor if the e-mail address of the deductor is available with them. In addition, they will also create a facility for the deductor to download the UTN file.
(c) Upon receipt of the UTN, the deductor will inform the UTN to the deductee. In cases where the UTNs are available to the deductor before the issue of the TDS/TCS certificate to the deductee, the deductor will indicate the UTNs on the certificate. However, if the UTNs are not available to the deductor before the issue of TDS/TCS certificate, the deductor shall, subsequently, send a consolidated statement of all TDS/TCS transactions indicating the UTNs.
(d) NSDL will also create a facility to allow independent viewing of the UTNs by the deductee. As a result, even if the UTNs are not received by the deductee from the deductor, they can be directly obtained from the NSDL database and quoted while making claims of TDS and TCS in the return of income
1. Department has issued clarification circular on 21/05/2009 ,however person can file his return for Ay 2009-10 from 1st April 2009 ,so what will be the remedy for tax payers who have filed their return between Ist April 2009 to 21st may 2009 without the detail of UTN.
2. Department has started New form 26AS from the year 2005-06 ,In which TDS and entries are being posted from TDS return uploaded by the Deductor ,so if the Credit has been shown in form 26AS for tax deduction then credit should be given to the deductee even he has not filled UTN detail in ITR.
3. Last quarter return for previous year 2008-09 regarding TDS (24Q and 26Q) can be submitted by the deductor upto 15th June 2009.As per detail given below UTN number of AY 2009-10 can be alloted by NSDL only after receipt of TDS return from deductor and thereafter deductor will provide UTN numbers to deductee either in seprate sheet or in New form 16 Format with UTN by 30th June 2009.So in best possible scenario deductee can get detail of UTN by 30th June2009 where as last date to file Income tax return is 31.07.2009 so deductee has only one month time to file the return.so In my opinion this time should also be extended and date to file Income tax Return for Ay 2009-10 should be extended to 30.09.2009 for taxpayer which is presently fixed as 31st July 2009.
UTN MANDATORY TO FILE ITRs FOR A.Y.2009-10
. The return of income in Form No. ITR-1 to Form No.ITR-8 for Assessment Year 2009-10 have been notified which requires, amongst other, the quoting of the relevant UTN for every TDS or TCS claim made by the assessee. Therefore, the credit for any TDS or TCS claim will be allowed, amongst others, if the assessee quotes the relevant UTN for every TDS and TCS claim and the said UTN matches with the UTN in the database of the Income Tax Department. With a view to enabling the processing of returns relating to Financial Year 2007-08 (Assessment Year 2008-09) and enabling the assessee to receive the UTN for TDS and TCS transactions in the Financial Year 2008-09 (relevant for Assessment Year 2009-10), the following procedure shall be followed: -
(a) National Securities Depository Limited (NSDL) shall assign an UTN for every TDS and TCS transaction records in Financial Years 2007-08 and 2008-09, reported in the quarterly returns received by it.
(b) NSDL will create a facility to e-mail the UTN file to the deductor if the e-mail address of the deductor is available with them. In addition, they will also create a facility for the deductor to download the UTN file.
(c) Upon receipt of the UTN, the deductor will inform the UTN to the deductee. In cases where the UTNs are available to the deductor before the issue of the TDS/TCS certificate to the deductee, the deductor will indicate the UTNs on the certificate. However, if the UTNs are not available to the deductor before the issue of TDS/TCS certificate, the deductor shall, subsequently, send a consolidated statement of all TDS/TCS transactions indicating the UTNs.
(d) NSDL will also create a facility to allow independent viewing of the UTNs by the deductee. As a result, even if the UTNs are not received by the deductee from the deductor, they can be directly obtained from the NSDL database and quoted while making claims of TDS and TCS in the return of income
Subscribe to:
Posts (Atom)