Tax collected at source

1.Tax collected at source (TCS)

Tax collected at source (TCS) is the tax payable by a seller which he collects from the buyer at the time of sale. Section 206C of the Income-tax act governs the goods on which the seller has to collect tax from the purchasers.

2. Goods covered under TCS provisions and rates applicable to them

When the below-mentioned goods are utilized for the purpose of manufacturing, processing, or producing things, the taxes are not payable. If the same goods are utilized for trading purposes then tax is payable. The tax payable is collected by the seller at the point of sale.

The rate of TCS is different for goods specified under different categories :

Type of Goods	Rate
Liquor of alcoholic nature, made for consumption by humans	1%
Timber wood under a forest leased	2.5%
Tendu leaves	5%
Timber wood by any other mode than forest leased	2.5%
A forest produce other than Tendu leaves and timber	2.5%
Scrap	1%
Minerals like lignite, coal and iron ore	1%
Bullion that exceeds over Rs. 2 lakhs/ Jewellery that exceeds over Rs. 5 lakhs	1%
Purchase of Motor vehicle exceeding Rs. 10 Lakhs	1%
Parking lot, Toll Plaza and Mining and Quarrying	2%

3. Classification of Sellers and Buyers for TCS

There are some specific people or organizations who have been classified as sellers for tax collected at source. No other seller of goods can collect tax at source from the buyers apart from the following list :

1. Central Government

2. State Government

3. Local Authority

4. Statutory Corporation or Authority

5. Company registered under Companies Act

6. Partnership firms

7. Co-operative Society

8. Any person or HUF who is subjected to an audit of accounts under Income tax act for a particular financial year.

Similarly, only a few buyers are liable to pay the tax at source to the sellers.

Let us know who are those buyers:

1. Public sector companies

2. Central Government

3. State Government

4. Embassy of High commision

5. Consulate and other Trade Representation of a Foreign Nation

6. Clubs such as sports clubs and social clubs

4. TCS Payments & Returns

a. The dates for paying TCS to the government are :

Collection Month	Quarter Ending	Due date of Payment	Due Date of filing return
April	30th June	7th May	15th July
May		7th June
June		7th July
July	30th September	7th August	15th October
August		7th September
September		7th October
October	31st December	7th November	15th January
November		7th December
December		7th January
January	31st March	7th February	15th May
February		7th March
March		7th April

*All sums collected by an office of the Government should be deposited on the same day of collection.

b. The seller deposits the TCS amount in Challan 281 within 7 days from the last day of the month in which the tax was collected.

c. Note: If the tax collector responsible for collecting the tax and depositing the same to the government does not collect the tax or after collecting doesn’t pay it to the government as per above due dates, then he will be liable to pay interest of 1% per month or a part of the month

d. Every tax collector has to submit quarterly TCS return i.e in Form 27EQ in respect of the tax collected by him in a particular quarter. The interest on delay in payment of TCS to the government should be paid before filing of the return.

5. Certificate of TCS

1. When a tax collector files his quarterly TCS return i.e Form 27EQ, he has to provide a TCS certificate to the purchaser of the goods.

2. Form 27D is the certificate issued for TCS returns filed. This certificate contains the following details:

a. Name of the Seller and Buyer

b. TAN of the seller i.e who is filing the TCS return quarterly

c. PAN of both seller and buyer

d. Total tax collected by the seller

e. Date of collection

f. The rate of Tax applied

3. This certificate has to be issued within 15 days from the date of filing TCS quarterly returns. The due dates are:

Quarter Ending	Date for generating Form 27D
For the quarter ending on 30th June	30th July
For the quarter ending on 30th September	30th October
For the quarter ending on 31st December	30th January
For the quarter ending on 31st March	30th May

In case you are still confused about filing TCS returns, feel free to consult the tax experts at ClearTax.

6. TCS Exemptions

Tax collection at source is exempted in the following cases :

1. When the eligible goods are used for personal consumption

2. The purchaser buys the goods for manufacturing, processing or production and not for the purpose of trading of those goods.

7. TCS under GST

a. Any dealer or traders selling goods online would get the payment from the online platform after deducting an amount tax @ 1 % under IGST Act. (0.5% in CGST & 0.5% in SGST)

b. The tax would have to be deposited to the government by 10th of the next month.

c. All the dealers/traders are required to get registered under GST compulsorily.

d. These provisions are effective from 1st Oct 2018.

Example: Mr. Raj(seller) is a trader who sells clothes online on Flipkart (buyer). He receives an order for Rs 10, 000 inclusive of commission. Flipkart would thus be deducting tax for Rs 100 (1% of Rs. 10000).

8. Submission of Form 24G

In case of an office of the Government, where tax has been paid to the credit of Central Government without the production of a challan associated with the deposit of the tax in a bank, below are the changes to the rules, Form 24G has to be submitted:

Rules where TDS is deposited without challan (changes to Rule 30)

a. If TDS has been deposited without a challan, the person to whom TDS has been reported for depositing to the government – such a person has to submit a statement in Form 24G to the agency authorised by the Principal Director of income tax (systems). [Rule 30(4)].

b. Such Form 24G must be submitted issued within 15 days from the end of the relevant month. For the month of March, the form should be submitted by 30 April 2019.

c. Form 24G must be submitted (a) electronically under digital signature (b) electronically along with verification in Form 27A (c) or verified through an electronic process as prescribed.

d. Person referred to in bullet 1 shall inform the Book Identification number generated to each of the deductors for whom the sum deducted has been deposited.

e. The Principal Director General of Income Tax (Systems) shall specify the procedure for furnishing and verification of statement Form 24G.

Rules where TCS under section 206C is deposited without challan (changes to Rule 37CA)

a. If TCS has been deposited without a challan, the person to whom the collector has reported the TCS for depositing to the government – such a person will submit Form 24G to the agency authorised by the Principal Director of income tax (systems).

b. Such Form 24G must be submitted within 15 days from the end of the relevant month.

c. If Form 24G pertains to month of March, it must be submitted on or before 30th April.

d. Form 24G must be issued (a) electronically under digital signature (b) electronically along with verification in Form 27A (c) or verified through an electronic process as prescribed.

e. Person referred to in bullet 1 shall inform the Book Identification number generated to each of the deductors for whom the sum deducted has been deposited.

f. The Principal Director General of Income Tax (Systems) shall specify the procedure for furnishing and verification of statement Form 24G.

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Remission of Tax

Remission of Tax/Duty: In the Central Excise provisons, “remission” means relieving the tax payer from the obligation to pay tax on goods when they are lost or destroyed due to any natural causes. Remission is subject to conditions stipulated under the law and rules made thereunder.

Q. Whether such type of remission is allowed under GST law?

Yes. The proposed section 11 of the Model GT law permits remission of tax on supply of goods.

Q. Whether remission is allowed for goods lost or destroyed before supply?

Remission of tax will apply only when tax is payable as per law i.e taxable event should have happened and tax is required to be paid as per law. Under GST law, levy is applicable upon supply of goods. Where goods are lost or destroyed before supply, taxable even does not occur in order to pay tax. Accordingly remission of tax does not arise. So, on plain reading of the language used in Section 11, remission is allowed only for those cases where supply of goods is found to be deficient in quantity due to natural causes

https://taxguru.in/goods-and-service-tax/reverse-charge-mechanism-remission-tax-gst-regime.html?amp

Composition scheme under GST

1. Who can opt for Composition Scheme

A taxpayer whose turnover is below Rs 1.0 crore* can opt for Composition Scheme. In case of North-Eastern states and Himachal Pradesh, the limit is now Rs 75* lakh.

As per the CGST (Amendment) Act, 2018, a composition dealer can also supply services to an extent of ten percent of turnover, or Rs.5 lakhs, whichever is higher. This amendment will be applicable from the 1st of Feb, 2019. Further, GST Council in its 32nd meeting proposed an increase to this limit for service providers on 10th Jan 2019*.

Turnover of all businesses registered with the same PAN should be taken into consideration to calculate turnover.

*CBIC has notified the increase to the threshold limit from Rs 1.0 Crore to Rs. 1.5 Crores.

*Update as on 10th Jan 2019

As per 32nd GST Council Meeting held on 10th Jan 2019, Service Providers can opt into the Composition Tax Scheme, and the Government has set the threshold turnover for service providers at Rs. 50 lakhs to be eligible for this scheme.

2. Who cannot opt for Composition Scheme

The following people cannot opt for the scheme-

• Manufacturer of ice cream, pan masala, or tobacco
• A person making inter-state supplies
• A casual taxable person or a non-resident taxable person
• Businesses which supply goods through an e-commerce operator

3. What are the conditions for availing Composition Scheme?

The following conditions must be satisfied in order to opt for composition scheme:

• No Input Tax Credit can be claimed by a dealer opting for composition scheme
• The dealer cannot supply GST exempted goods
• The taxpayer has to pay tax at normal rates for transactions under the Reverse Charge Mechanism
• If a taxable person has different segments of businesses (such as textile, electronic accessories, groceries, etc.) under the same PAN, they must register all such businesses under the scheme collectively or opt out of the scheme.
• The taxpayer has to mention the words ‘composition taxable person’ on every notice or signboard displayed prominently at their place of business.
• The taxpayer has to mention the words ‘composition taxable person’ on every bill of supply issued by him.
• As per the CGST (Amendment) Act, 2018, a manufacturer or trader can now also supply services to an extent of ten percent of turnover, or Rs.5 lakhs, whichever is higher. This amendment will be applicable from the 1st of Feb, 2019.

4. How can a taxpayer opt for composition scheme?

To opt for composition scheme a taxpayer has to file GST CMP-02 with the government. This can be done online by logging into the GST Portal.

This intimation should be given at the beginning of every Financial Year by a dealer wanting to opt for Composition Scheme.

Here is a step by step Guide to File CMP-02 on GST Portal.

5. How Should a Composition Dealer raise bill?

A composition dealer cannot issue a tax invoice. This is because a composition dealer cannot charge tax from their customers. They need to pay tax out of their own pocket.

Hence, the dealer has to issue a Bill of Supply.

The dealer should also mention “composition taxable person, not eligible to collect tax on supplies” at the top of the Bill of Supply.

6. What are the GST rates for a composition dealer?

Following chart explains the rate of tax on turnover applicable for composition dealers :

As per notification dated 01.01.2018, turnover in case of traders has been defined as ‘ Turnover of taxable supplies of goods’.

7. How should GST payment be made by a composition dealer?

GST Payment has to be made out of pocket for the supplies made.

The GST payment to be made by a composition dealer comprises of the following:

• GST on supplies made.
• Tax on reverse charge
• Tax on purchase from an unregistered dealer*

*Only on the specified categories of goods and services and well as the notified class of registered persons with effect from 1st Feb 2019 but is yet to be notified. Hence, not applicable until then.

8. What are the returns to be filed by a composition dealer?

A dealer is required to file a quarterly return GSTR-4 by 18th of the month after the end of the quarter. Also, an annual return GSTR-9A has to be filed by 31st December of next financial year*.

*Update as on 22nd December 2018: Due date for filing GSTR-9, GSTR-9A and GSTR-9C is extended till 30th June 2019 by CBIC for FY 2017-18

Latest update on Due dates:

Due date for GSTR-4 for the period Oct-Dec 2018 is 18.01.2019

Also, note that a dealer registered under composition scheme is not required to maintain detailed records.

9. What are the advantages of Composition Scheme?

The following are the advantages of registering under composition scheme:

• Lesser compliance (returns, maintaining books of record, issuance of invoices)
• Limited tax liability
• High liquidity as taxes are at a lower rate

10. What are the disadvantages of Composition Scheme?

Let us now see the disadvantages of registering under GST composition scheme:

• A limited territory of business. The dealer is barred from carrying out inter-state transactions
• No Input Tax Credit available to composition dealers
• The taxpayer will not be eligible to supply exempt goods or goods through an e-commerce portal.

Here is a video to understand about composition scheme under GST

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Reverse charge under GST

1. What is Reverse Charge?

Normally, the supplier of goods or services pays the tax on supply. In the case of Reverse Charge, the receiver becomes liable to pay the tax, i.e., the chargeability gets reversed.

2. When is Reverse Charge Applicable?

A. Supply from an Unregistered dealer to a Registered dealer

If a vendor who is not registered under GST, supplies goods to a person who is registered under GST, then Reverse Charge would apply. This means that the GST will have to be paid directly by the receiver to the Government instead of the supplier.

The registered dealer who has to pay GST under reverse charge has to do self-invoicing for the purchases made.

For Inter-state purchases the buyer has to pay IGST. For Intra-state purchased CGST and SGST has to be paid under RCM by the purchaser.

B. Services through an e-commerce operator

If an e-commerce operator supplies services then reverse charge will be applicable to the e-commerce operator. He will be liable to pay GST.

For example, UrbanClap provides services of plumbers, electricians, teachers, beauticians etc. UrbanClap is liable to pay GST and collect it from the customers instead of the registered service providers.

If the e-commerce operator does not have a physical presence in the taxable territory, then a person representing such electronic commerce operator for any purpose will be liable to pay tax. If there is no representative, the operator will appoint a representative who will be held liable to pay GST.

C. Supply of certain goods and services specified by CBEC

CBEC has issued a list of goods and a list of services on which reverse charge is applicable.

3. Time of Supply under Reverse Charge

A. Time Of Supply in case of Goods

In case of reverse charge, the time of supply shall be the earliest of the following dates:

• the date of receipt of goods
• the date of payment*
• the date immediately after 30 days from the date of issue of an invoice by the supplier

If it is not possible to determine the time of supply, the time of supply shall be the date of entry in the books of account of the recipient.

*This point is no more applicable based this Notification No. 66/2017 – Central Tax issued on 15.11.2017

Illustration:

1. Date of receipt of goods 15th May 2018
2. Date of invoice 1st June 2018
3. Date of entry in books of receiver 18th May 2018

The Time of supply of service, in this case, will be 15th May 2018

B. Time Of Supply in case of Services

In case of reverse charge, the time of supply shall be the earliest of the following dates:

• The date of payment
• The date immediately after 60 days from the date of issue of invoice by the supplier

If it is not possible to determine the time of supply, the time of supply shall be the date of entry in the books of account of the recipient.

Illustration:

1. Date of payment 15th July 2018
2. Date immediately after 60 days from the date of issue of invoice (Suppose the date of invoice is 15th May 2018, then 60 days from this date will be 14th July 2018)
3. Date of entry in books of receiver 18th July 2018

The Time of supply of service, in this case, will be 14th July 2018

4. What is Self Invoicing?

Self-invoicing is to be done when you have purchased from an unregistered supplier AND such purchase of goods or services falls under reverse charge.

This is due to the fact that your supplier cannot issue a GST-compliant invoice to you, and thus you become liable to pay taxes on their behalf. Hence, self-invoicing, in this case, becomes necessary.

To create such an invoices on ClearTax GST software, follow the below steps:

Step 1 – Click on ‘+ New Purchase Invoice’ to create a new invoice

Step 2 – As you can see, you need to fill data in multiple fields. Let’s understand each field in detail:

1. Enter the serial number of the bill into the field marked ‘Invoice Serial Number’. Since your supplier has not issued an invoice and you are creating an invoice on their behalf, you need to add a serial number on your own. You can create and maintain a serial number series for reverse charge bills, for easier invoicing

2. Enter the ‘Invoice Date’. This date must be based on time of supply

3. Enter any detail such as the order number etc., into the field marked ‘Reference Number’

4. Under ‘Due Date’, you have to mention the date by when you have to make the payment to the supplier for the purchase you made (mentioning this date is not mandatory)

5. Under ‘Vendor Name’, enter the supplier’s name. Remember this name cannot be your own name, even if you are doing self-invoicing under reverse charge

6. In case the vendor’s name is not set already, you can add a new vendor

7. Enter details of goods/ services purchased

8. From the drop-down under ‘Advance Settings’, select ‘Reverse Charge’

9. Now, fill in all the details displayed on your screen.

Step 3 – After filling all the other details, click on Save.

For more details

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Uploading invoice

Process of Uploading Invoices on GSTN

Go to website gst.gov.in>>Dashboard>>Service>>Returns>>>>Returns Dashboard>>File returns>>Details of outward supplies of goods or services>> Prepare online OR Prepare Offline

Preparing Offline

You need to upload a JSON file. For that, you need to convert your excel file to JSON file.

Preparing online

You will have many options such as:

• B2B
• B2C (Large invoices)
• Credit/debit Notes

Click which is appropriate>>Add invoice>>Fill up details>>Save

Examples

B2B

You can select export sales, sales to SEZ, sales through e-commerce etc.

B2C

You can also fill in sales made through places like Amazon-

Day One Experience of Uploading Invoices on GSTN Portal

The website is clear and easy to use. There are separate types of invoices to choose from and you can fill up the details accordingly.

Problems we faced while uploading on GSTN Portal

1. It is difficult to find out where one should upload invoices
2. Only JSON files will be allowed to be uploaded. So, you must convert your excel sheet of invoices to JSON mode
3. Entering all bills one by one will be time-consuming

https://cleartax.in/s/uploading-invoices-on-gstn