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

Direct Tax Vs Indirect Tax

Direct Tax Vs Indirect Tax:

Direct taxes are paid in entirety by a taxpayer directly to the government. It is also defined as the tax where the liability as well as the burden to pay it resides on the same individual. Direct taxes are collected by the central government as well as state governments according to the type of tax levied. Major types of direct tax include:

• Income Tax: Levied on and paid by the same person according to tax brackets as defined by the income tax department.
• Corporate Tax: Paid by companies and corporations on their profits.
• Wealth Tax: Levied on the value of property that a person holds.
• Estate Duty: Paid by an individual in case of inheritance.
• Gift Tax: An individual receiving the taxable gift pays tax to the government.
• Fringe Benefit Tax: Paid by an employer that provides fringe benefits to employees, and is collected by the state government.

Indirect tax, as mentioned above, include those taxes where the liability to pay the tax lies on a person who then shifts the tax burden to another individual.

Some types of indirect taxes are:

• Excise Duty: Payable by the manufacturer who shifts the tax burden to retailers and wholesalers.
• Sales Tax: Paid by a shopkeeper or retailer, who then shifts the tax burden to customers by charging sales tax on goods and services.
• Custom Duty: Import duties levied on goods from outside the country, ultimately paid for by consumers and retailers.
• Entertainment Tax: Liability is on the cinema owners, who transfer the burden to cinemagoers.
• Service Tax: Charged on services rendered to consumers, such as food bill in a restaurant.

Therefore, the prime difference between direct tax and indirect tax is the ability of the taxpayer to shift the burden of tax to others. Direct taxes include tax varieties such as income tax, corporate tax, wealth tax, gift tax, expenditure tax etc. Some examples of indirect taxes are sales tax, excise duty, VAT, service tax, entertainment tax, custom duty etc. However, this is not an exhaustive list of taxes and more types of taxes are levied by the government on specific cases.

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Key differences between Direct and Indirect Tax

Key differences between Direct and Indirect Tax are:

1. Direct tax is levied and paid for by individuals, Hindu undivided Families (HUF), firms, companies etc. whereas indirect tax is ultimately paid for by the end-consumer of goods and services.
2. The burden of tax cannot be shifted in case of direct taxes while burden can be shifted for indirect taxes.
3. Lack of administration in collection of direct taxes can make tax evasion possible, while indirect taxes cannot be evaded as the taxes are charged on goods and services.
4. Direct tax can help in reducing inflation, whereas indirect tax may enhance inflation.
5. Direct taxes have better allocative effects than indirect taxes as direct taxes put lesser burden over the collection of amount than indirect taxes, where collection is scattered across parties and consumers’ preferences of goods is distorted from the price variations due to indirect taxes.
6. Direct taxes help in reducing inequalities and are considered to be progressive while indirect taxes enhance inequalities and are considered to be regressive.
7. Indirect taxes involve lesser administrative costs due to convenient and stable collections, while direct taxes have many exemptions and involve higher administrative costs.
8. Indirect taxes are oriented more towards growth as they discourage consumption and help enhance savings. Direct taxes, on the other hand, reduce savings and discourage investments.
9. Indirect taxes have a wider coverage as all members of the society are taxed through the sale of goods and services, while direct taxes are collected only from people in respective tax brackets.
10. Additional indirect taxes levied on harmful commodities such as cigarettes, alcohol etc. dissuades over-consumption, thereby helping the country in a social context.

For more

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Tax, it's types, direct, indirect

Tax is a mandatory fee imposed upon individuals or corporations by the Central and the State Government to help build the economy of a country by meeting various public expenses. Taxes are broadly divided into two categories- Direct and Indirect taxes.

What is Direct Tax?

It is a tax levied directly on a taxpayer who pays it to the Government and cannot pass it on to someone else.

What are the direct taxes imposed in India?

Some of the important direct taxes imposed in India are mentioned below:

• Income Tax- It is imposed on an individual who falls under the different tax brackets based on their earning or revenue and they have to file an income tax return every year after which they will either need to pay the tax or be eligible for a tax refund.

• Estate Tax– Also known as Inheritance tax, it is raised on an estate or the total value of money and property that an individual has left behind after their death.

• Wealth Tax– Wealth tax is imposed on the value of the property that a person possesses.

However, both Estate and Wealth taxes are now abolished.

What are the advantages of direct taxes?

Direct taxes do have a certain advantage for a country’s social and economic growth. To name a few,

• It curbs inflation: The Government often increases the tax rate when there is a monetary inflation which in turn reduces the demand for goods and services and as a result of descending demand, the inflation is bound to condense.

• Social and economic balance: Based on every individual’s earnings and overall economic situation, the Government has well-defined tax slabs and exemptions in place so that the income inequalities can be balanced out.

What is the most common disadvantage of direct taxes?

Direct taxes come with a handful of disadvantages. But, the very time-consuming procedures of filing tax returns is a taxing task itself.

What is Indirect Tax?

It is a tax levied by the Government on goods and services and not on the income, profit or revenue of an individual and it can be shifted from one taxpayer to another.

Earlier, an indirect tax meant paying more than the actual price of a product bought or a service acquired. And there was a myriad of indirect taxes imposed on taxpayers.

Let’s discuss a few indirect taxes that were earlier imposed in India:

• Customs Duty- It is an Import duty levied on goods coming from outside the country, ultimately paid for by consumers and retailers in India.

• Central Excise Duty– This tax was payable by the manufacturers who would then shift the tax burden to retailers and wholesalers.

• Service Tax– It was imposed on the gross or aggregate amount charged by the service provider on the recipient.

• Sales Tax– This tax was paid by the retailer, who would then shifts the tax burden to customers by charging sales tax on goods and service.

• Value Added Tax (VAT)– It wascollected on the value of goods or services that were added at each stage of their manufacture or distribution and then finally passed on to the customer.

See more on

https://cleartax.in/s/direct-indirect-taxation-india-explained