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Several key direct and indirect tax changes will kick in from 1 October, which businesses and individual taxpayers need to take note of. These are provisions meant to gather data about transactions, spending patterns and fund flow across borders as tax administration increasingly becomes data and technology driven. Mint takes a look at what these key changes are.

TCS on foreign remittances

A 5% tax collected at source will be applicable on funds sent abroad, subject to riders. This will cover any amount sent abroad to buy foreign tour packages as well as every other amount above Rs700,000 sent abroad unless it is from an income that is already tax-deducted at source (TDS). Bankers would be liable to collect TCS and remit to the government, therefore, incidence of TCS is on the remitter, explained Sandeep Jhunjhunwala , partner at Nangia Andersen LLP, a tax advisory firm. The TCS is available as credit at the time of filing income tax returns. The idea of TCS is to identify cases in which the remittance patterns of individuals are not commensurate to the income reported in the tax returns, explained Jhunjhunwala. Banks may start collecting tax at source even on international credit card transactions done in foreign currency, said Vikram Doshi, partner tax & regulatory, PwC India.

Compulsory GST e-invoicing for large businesses

e-Invoicing has been made applicable to businesses with at least 500 crore sales from 1 October. Businesses have to submit sales invoice in a portal designated by GSTN, the company that process tax returns. This is expected to automate a lot of data entry work, reduce errors and mismatches, capture sales related details in the system instantaneously and improve compliance. This is also expected to improve tax officials’ trust in the compliance of companies and reduce chances of audits or surveys. The provision is applicable on business-to-business transactions, explained Pratik Jain, leader indirect tax, PwC India. “This would provide real-time access to these invoices to the government and is expected to reduce tax leakage. Businesses need to keep their IT systems ready and also ensure that vendors are compliant," said Jain.

5% import duty on television component

A key component used in making television sets—open cell panel—will attract 5% import duty from 1 October with the government turning down requests for extending the duty exemption any further. The relief was given for one year. The government is keen to promote local production by giving some tariff protection from low cost imports.

TCS on sale of goods

Sellers having Rs10 crore revenue in the previous year need to collect income tax at source at the rate of 0.1% on receipt of sale consideration above 5 million. The tax is applicable on the amount above 5 million. The government clarified on Tuesday that this provision is not applicable to securities and commodities transactions and to electricity trade.

TDS on e-commerce

From Wednesday, e-commerce platforms such as Amazon are required to deduct income-tax at source (TDS) at the rate of 1% of the gross amount paid to sellers who use the platform for sales. The idea is to bring small e-commerce participants into the tax net. The deduction is to be made at the time of payment to the e-commerce participant. “Although the uncertainty in case of liability in third-party gateways in settlement of e-commerce transaction has been clarified by the recent circular (issued on 29 September, 2020), predicament in relation to the treatment of subsequent sales returns, discount codes and gift vouchers requires immediate attention of the regulators," said Jhunjhunwala.

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