Overview of TCS and TDS in Previous Tax Regime

Until now, businesses with a turnover exceeding 10 Crore had to contend with complicated tax requirements.

Under Section 206C(1H), businesses were required to collect TCS at the time of sale when the sale amount exceeded 50 Lakhs.

Simultaneously, Section 194Q mandated TDS for purchases exceeding 50 Lakhs, creating overlapping liabilities for businesses.

This dual requirement often led to confusion among sellers and buyers as both had to navigate the complexities of their respective tax obligations, leading to potential penalties and compliance failures.

Key Changes in the Union Budget 2025

With the announcement of the Union Budget 2025, the government has amended the previously existing provisions effectively as follows:

End of TCS Collection on Sales: Starting from April 1, 2025, the TCS requirement under Section 206C(1H) will no longer be applicable. This change means that businesses exceeding the 10 Crore turnover threshold will not have to collect TCS on their sales transactions, providing a significant relief from compliance burdens.

Continuation of TDS on Purchases: Despite the removal of TCS liability, businesses will still need to adhere to the TDS requirements under Section 194Q for any purchases exceeding 50 Lakhs when the buy-side entity has a turnover exceeding 10 Crore.

Implications of the New Provisions

The modifications under the Union Budget will have a profound impact on how businesses operate, particularly in the following ways:

Simplified Tax Compliance: The removal of TCS removes the potential for confusion and mismanagement between sellers and buyers regarding who would deduct. This should streamline the sales transaction process significantly.

Reduced Financial Strain: Businesses will have fewer upfront costs related to TCS, possibly enhancing cash flow and allowing for more investment in growth opportunities.

Clearer Guidelines: The government has specified that if both parties in a transaction are liable for TDS under Section 194Q, it will take precedence over TCS responsibilities. This clarity helps businesses understand their obligations better.

Historical Context of Taxation in India

The changes are a part of an ongoing effort to simplify the taxation framework in India, especially for MSMEs and larger businesses. Over the years, multiple phases of taxation have sought to address the unique challenges faced by businesses:

Initial Introduction of TCS and TDS: These provisions were initially implemented to enhance tax compliance and collection mechanisms but have inadvertently created complexities, particularly for businesses with overlapping tax liabilities.

Response to Business Feedback: The recent changes reflect the government’s responsiveness to ongoing feedback from the business community regarding the tax system’s burdens.

Practical Application of the New Amendments

For businesses operating in India, understanding how to navigate these changes post-April 2025 is crucial. Here are a few considerations:

Consult a Tax Professional: Given the rapidly evolving landscape, companies should consult with tax professionals familiar with the new provisions to ensure full compliance and to leverage any potential benefits.

Stay Updated: Regularly monitor updates from the GST Platform and the CBEC-GST website for further elaborations on the implementation of these changes and how they may affect your business.

Conclusion

The amendments introduced in the Union Budget 2025 represent a significant shift in taxation policy, especially regarding TCS and TDS. By eliminating the TCS requirement while maintaining TDS on significant purchases, the government aims to make tax compliance more straightforward and manageable for businesses.
This change is expected to foster an environment of enhanced business operations, allowing companies to focus on growth without the burdensome compliance costs previously experienced. As India evolves its taxation framework, businesses must adapt to the changing landscape to optimize their tax obligations.

Stay informed about further legislative changes and engage with experts who can guide you through transitioning into this new compliance era.

If you want to learn more about GST compliance and the nuances of upcoming regulations, don’t forget to subscribe to our channel and stay updated with the latest information and practical insights!

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Also read our other related articles– GST MEIN CREDIT NOTE ISSUE KARNE KE NIYAM BADAL GAYE H

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The recent advisory issued by the GST portal regarding the filing of GSTR 3B, specifically focusing on the auto-population of invoice data. Starting from January 2025, the GST return filing process is set to undergo significant changes, where figures related to sales liability and turnover will be automatically populated from GSTR 1 and IFF (Invoice Furnishing Facility). A key point emphasized is that once the figures are auto-populated, tax filers will not be allowed to edit these figures in GSTR 3B. The importance of submitting accurate data in GSTR 1 is to avoid discrepancies in GSTR 3B. Additionally, the advisory aims to minimize errors in tax return filings, although practical implications may still lead to mismatches requiring corrections in subsequent filings.

Highlights

• Auto-Population Implementation : Starting January 2025, GSTR 3B will auto-populate figures from GSTR 1 and IFF.
• Hard Locking of Data: Sales liability figures in GSTR 3B will be frozen and cannot be edited after auto-population.
• Error Minimization Strategy : The advisory aims to assist taxpayers in filing accurate returns and reducing errors.
• Correction Mechanism: Any necessary changes will need to be handled through GSTR 1A before filing GSTR 3B.
• Discrepancy Risks: The auto-populated data may lead to potential mismatches between GSTR 1 and GSTR 3B.
• Adjustments for ITC: There will be a separate advisory regarding the editability of Input Tax Credit (ITC) amounts in GSTR 3B.
• Call to Action: Taxpayers are encouraged to register for the new system and prepare for the changes ahead.

Key Insights

• Automation in GST Filing: The shift towards auto-populating data in GSTR 3B represents a significant technological advancement in GST compliance. It aims to streamline the filing process and reduce manual errors, but it also places greater responsibility on taxpayers to ensure the accuracy of their GSTR 1 filings.

• Impact on Taxpayer Compliance: With the hard locking of sales liability, taxpayers will need to adopt a proactive approach to ensure that their reported figures in GSTR 1 are correct. This change may lead to increased compliance pressure but ultimately aims for greater accuracy in tax reporting.

• Connection Between GSTR 1 and GSTR 3B: The interdependency of GSTR 1 and GSTR 3B is highlighted, as any discrepancies in GSTR 1 will directly affect GSTR 3B. Taxpayers should ensure that their data is consistent across both forms to avoid complications.

• Manage Changes Through GSTR 1A: The introduction of GSTR 1A as a mechanism for correcting errors emphasizes the need for careful monitoring of tax liabilities. Taxpayers must be vigilant and make necessary adjustments in GSTR 1A before proceeding with GSTR 3B.

• Future Changes in ITC Handling: Although currently, there is flexibility in editing ITC amounts, future advisories will further clarify how these will be managed, indicating a potential tightening of regulations around ITC claims to ensure accuracy.

• Long-term Benefits of Enhanced Accuracy: The ultimate goal of these changes is to enhance the accuracy and integrity of GST filings. While the immediate effects may be challenging, the long-term benefits will likely outweigh the initial adjustments required by taxpayers.

• Need for Awareness and Training: With these significant changes looming, there is a clear need for taxpayer education and training on the new processes. This may include workshops, webinars, and informational resources to help taxpayers navigate the new filing system effectively.

FAQs

Q1: What is the new auto-population feature in GSTR 3B?

A1: The auto-population feature allows figures related to sales liability and turnover to be automatically filled in GSTR 3B based on data from GSTR 1 and IFF.

Q2: Can taxpayers edit the figures in GSTR 3B after auto-population?

A2: No, starting January 2025, the auto-populated figures in GSTR 3B cannot be edited.

Q3: How can taxpayers correct errors in their GSTR 1 filings?

A3: Taxpayers must use GSTR 1A to make any necessary adjustments before filing GSTR 3B.

Q4: What is the purpose of the advisory issued by the GST portal?

A4: The advisory aims to minimize errors in tax return filings and enhance the accuracy of GSTR submissions.

Q5: Will there be future changes regarding Input Tax Credit (ITC)?

A5: Yes, a separate advisory will address how ITC amounts can be managed in GSTR 3B moving forward.

Core Concepts

Auto-Population Mechanism: This concept refers to the automated process through which data from GSTR 1 and IFF will be directly filled into GSTR 3B, significantly reducing manual entry errors and streamlining the filing process.

Hard Locking of Sales Liability: The initiative to lock down figures related to sales liability in GSTR 3B prevents any post-submission adjustments, compelling taxpayers to ensure completeness and accuracy in prior filings.

Error Management through GSTR 1A: This mechanism allows taxpayers to amend discrepancies in GSTR 1 before the finalization of GSTR 3B, emphasizing the interlinked nature of these forms and the importance of timely corrections.

Impact on Compliance: The changes are designed to enhance compliance by reducing opportunities for error, thereby increasing the reliability of GST filings and the overall integrity of the tax system.

Future of ITC Handling: With changes expected in how ITC claims are managed, taxpayers must stay informed and adapt to new guidelines aimed at ensuring that claims are correctly reported and reconciled.

Taxpayer Responsibility: The advisory reinforces the concept that taxpayers must take greater responsibility for the accuracy of their filings, given the new restrictions on editing auto-populated data.

Educational Initiatives: The upcoming changes necessitate educational programs to help taxpayers understand and adapt to the new filing processes and regulatory requirements, ensuring a smooth transition to the updated system.

Also read our other related articles:https://gstplatform.com/4-digit-hsn-code-mandatory-w-e-f-1-february-2024/

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The high court also revoked the cancellation of registration of the taxpayer on account of “non filing of Goods and Services Tax (GST) returns for 6 months. The court was hearing a writ petition .

“This case highlights the callous manner in which the assesses has been harassed by the respondents,” the court observed in the case.The indirect tax department had issued show cause notice to the assesses  for not filing GST returns. However, the tax department later accepted that the returns were filed and no dues were pending.“The show cause notice was completely vague and did not even point out as to what ground the reply was proposed to to be sought, the petitioner appeared and apprised that all the returns have already been filed,” the court observed.

The court also asked the tax officer to pay Rs 10,000. In view of the specific findings recorded above to the effect that the petitioner was unnecessarily harassed, the writ petition is allowed with a cost of Rs. 10,000/- to be paid to the petitioner within 30 days by the respondent no. 2 (tax officer) from his own salary,” the high court ruled.

The post GST Relief for Taxpayers from High Court appeared first on GST Platform .

CBIC in a recent circular has laid down the special procedure to be followed against the non filers of GST returns.This also includes Recovery in GST if GSTR3B has not bee filed by you as per the provisions of the CGST Act.

To improve the compliance and increase revenue collection , dealers will be compelled to file Gstr3b by following the procedure.

If your return in Form Gstr3B is not filed even after the issue of order in GST ASMT 13 , recovery proceedings against you will be initiated.

Standard Operating Procedure detailed the steps to be taken for filing of GSTR3B.

Read Here : SOP for Non filers of GSTR3B

RECOVERY IN GST

As per the provisions of Gst Act , recovery proceeding will be initiated u/s 78 of CGST Act.

If amount mentioned in order passed under this act is not paid within 3 months section 78 will be levied.

To protect the revenue recovery can be done in the following ways as per section 79.

• Amount payable to you by officer can be deducted for the recovery.

• Recovery can be made by selling your goods which are under control of officer.

• If you have receivables , recovery can be made by that person from your dues for the defaulted amount.

• Recovery can also be made through selling pf movable or immovable property of such person who has defaulted.

• Recovery through collector of the address of the residence or business place of defaulted can also be made. For this certificate will be issued by the officer to the concerned collector of the area.

• Magisterial recovery can also be initiated against the person who is in default.

PROVISIONAL ATTACHMENT OF PROPERTY

Section 83 says that in order to protect the interest of revenue if it is necessary to do so, your assets of business, bank accounts may be attached in pursuance of writing order.

Any such attachment of any property or assets shall cease after the expiry of one year from date of attachment.

Read Also : GST REGISTRATION LIMIT

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This form is not required to be filed by a registered person having category as Input Service Distributor, Non-resident Taxable person , Composition dealer U/s 10 of CGST Act , Person responsible for deducting TDS U/s 51 of CGST Act , or person responsible for collecting TCS U/s 52 of CGST Act .

The due date to file this form is bifurcated and the small taxpayers have an option to file the return in Form GSTR1 quarterly.

The due date to file GSTR1 for persons other than small taxpayers and small taxpayers opting for monthly filing is 11^th of the following month .

For small taxpayers the due date for filing GSTR1 is the 30^th of the following quarter

Small Taxpayers means a taxpayer having aggregate turnover in the preceding financial year or during the current year for new registration less than one crore and fifty lacs .

The details furnished in GSTR1 by the supplier under B2B category in GST Portal shall be reflected in the corresponding GSTR2A of the recipient.

The form in GSTR1 may be amended by the supplier if any error , omission is committed in the month in which such mistake was identified . But the last date to amend the details of GSTR1 by a registered taxpayer shall be the earlier of the following dates :

The date of furnishing annual return in Form GSTR 9 OR

The date of filing return U/s 39 in Form GSTR3B for the September month following the year to which transaction is related to.

Currently , late fees has not been implemented in GST Portal for late filing of GSTR1 . The GST Council in his recent meeting has recently waived the late fee for filing GSTR1 from July 17 to November 19 if to is filed before 10.01.2020. After that late fees may be implemented for GSTR1 also in GST Portal.

Form GSTR2A – This is a read only document which is auto populated on the basis of GSTR1 filed by the supplier . The details which has been uploaded under B2B Category by the supplier is shown here . The form GSTR2A auto populates the purchase details , credit and debit notes details , TDS and TCS details , ISD Credits received details by the receiver . It also auto populates the amendment is respect of Purchase details and credit and debit notes uploaded by the supplier in his GSTR1.

At present , no action is required to be taken by the recipient on the basis of GSTR2A as it is a read only document .This document shows the status of filing GSTR1 by the supplier . Through this form the purchaser shall reconcile his claim of input tax credit on the invoices which were uploaded. The ITC of invoices which were not uploaded by supplier and not shown in GSTR2A shall be restricted to

20 % of uploaded invoices as per Rule 36(4). In the 38^th GST Council meeting this limit was reduced to 10% which awaits notification.

It can be downloaded in JSON as well as excel format for the purpose of reconciliation in the GST Portal.

Read Also : GST COUNCIL MEETING DECISIONS

Form GSTR3B – This is the return form introduced as a temporary arrangement at the time of implementation of GST in India . Eventually, this return form GSTR3B has been made compulsory for filing in order to collect revenue and to ease the filing process of gst returns as mandated by the GST Act .

GSTR3B is a summary return in which every regular registered taxpayer has to furnish details pf outward supply made , claim Input Tax Credit in respect of purchase made , Pay the liability of reverse charge basis if any and declare the exempt supplies made and acquired during the tax period.

This form must be filed monthly before 20^th of the following month . The output tax liability shall be adjusted with the Input Tax Credit claimed and the net tax payable if any shall be paid in cash . The excess itc after adjustment shall be carried forward to next tax period .

Late fess for belated filing of GSTR3B is Rs 50 per day if there is transaction in  the tax period and Rs 20 if it is a NIL return .

Form GSTR4 – This is quarterly form for filing details of supplies by the composition taxpayers U/s 10 of CGST Act. This form was required to be filed upto FY 2018-19 which was replaced with Form CMP 08 from FY 2019-20 to ease the filing process.

In GSTR4 currently CMP 08 , only outward supply and inward supply liable to reverse charge on which tax liability has arisen shall be declared in the return form .

The GSTR4 is required to filed annually from the FY 2019-20.The due date to file GSTR4 was 18^th of following quarter in which the transaction was done . Now CMP 08 is required to be filed and the due date remains the same as for GSTR4 .

The due date to file annual GSTR4 is 30^th April following the end of Financial Year to which the transaction relates.

Form GSTR-5  The form GSTR5 is to be filed by the Non resident Taxable person . The due date to file GSTR5 is 20^th of following month to which the details pertain.

Form GSTR-5A – This form is to be filed by the person supplying online information and database access retrieval services by a person located outside India to a non taxable person in India. The due date to file this form is also 20^th of the following month.

Form GSTR 6 – This is form for distributing the Input on services by the Input Service Distributors to its branches. The due date to file this form is 13^th of the following month .

Form GSTR 7 – This form is required to be filed by every person registered in GST and is liable to deduct TDS as per the provisions of Section 51 of CGST Act. The details of tax deducted has to be uploaded in GSTR7 by the deductor before 10^th of the following month in which deduction was made.

Form GSTR8 – This form is required to be filed by every person registered in GST and is liable to Collect TCS as per the provisions of Section 52 of CGST Act. The details of tax collected  has to be uploaded in GSTR8 by the collector before 10^th of the following month in which collection was made.

Form GSTR9 – This is the annual return for the regular registered taxpayers in GST. It has to be filed by every registered person as per section 44 of CGST Act . For the FY 2017-18 and 2018-19 , it has been decided by CBIC that person having turnover below 2 crores will have an option to file this form .

The due date for filing GSTR9 was 31^st December of the following Financial Year . For FY 2017-18 date has been extended till 31.01.2020 in the GST Council meeting held on 18^th December 2019.

The due date for filing GSTR9 for FY 2018-19 has been extended till 31.03.2020.

Form GSTR 9A – This is the form for Annual return to be filed by every composition taxpayers in GST. The due date is 321^st December of the following Financial Year . For 1718 due date is extended till 31.01.2020 and for FY 1819 it is extended till 31.03.2020

Form GSTR9C – GSTR9C is a reconciliation and audit statement which shall be filed by the every registered taxpayers in GST if his aggregate turnover in the preceding financial year exceeds Rupees Two Crore .

Due date is same as for filing GSTR9.

Form GSTR-10 – This is the final return which must be filed by a person registered in GST in case of cancellation of GSTIN . This form must be filed within 90 days of the cancellation order.

Form GSTR11 – This is the statement of inward supplies by persons having UIN

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