Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) are applicable only on certain taxable goods and services. If a good or service is exempted from tax, then TDS or TCS is not applicable on them.
For example, if a particular good is exempted from Goods and Services Tax (GST), then TDS or TCS would not be applicable on the purchase or sale of that good. Similarly, if a service is exempted from Service Tax, then TDS or TCS would not be applicable on payments made for that service.
However, it is important to note that there may be some exceptions to this general rule depending on the specific laws and regulations of the jurisdiction in question. Therefore, it is always advisable to consult with a tax expert or seek guidance from the relevant tax authority to determine the specific applicability of TDS or TCS on exempted goods or services.
Is there any exceptions?
Yes, there may be some exceptions to the general rule that TDS or TCS is not applicable on exempted goods or services. Some examples of exceptions include:
TCS on sale of certain goods: In some cases, TCS may be applicable on the sale of certain exempted goods. For example, under the GST law in India, TCS is applicable on the sale of certain goods such as alcohol, tobacco products, and motor vehicles, even if they are exempted from GST.
TDS on payment to contractors: In some cases, TDS may be applicable on payments made to contractors even if the work they are doing is related to exempted goods or services. For example, under the Income Tax Act in India, TDS is applicable on payments made to contractors for construction or repair work, even if the building or property is used for an exempted purpose.
Local laws and regulations: There may be some local laws and regulations that require TDS or TCS to be deducted even on exempted goods or services. For example, in some states in India, TCS is applicable on the sale of agricultural produce, even if it is exempted from GST.
It is always advisable to consult with a tax expert or seek guidance from the relevant tax authority to determine the specific applicability of TDS or TCS on exempted goods or services in a particular jurisdiction.
Difference between Direct Tax and Indirect Tax in India
Introduction
In India, the government’s right to impose taxes is derived from the Constitution Of India, which divides the power to levy taxes between the state and central governments. All taxes charged in India must be accompanied by a law issued by either the Parliament or the State Legislature. Indirect and direct taxes are the two most common types of taxes in India. In India, all taxes must be preceded by legislation passed by both the Parliament and State Legislatures.
What is a Direct tax?
Direct taxes are those that are paid directly to the government by an individual or a legal entity. Direct taxes are overseen by the CBDT (Central Board of Direct Taxes). Direct taxes are not transferable to another individual or company.
Types of Direct tax in India
Wealth Tax Act
Expenditure Tax Act
Income Tax Act
Interest Tax Act
Gift Tax Act
Advantages of Direct tax
Equitable – Indirect tax the individual who earns less income will pay less, while the one who is earning higher income will pay higher tax which will bring equality and relief to the less earner.
Reduces inequalities – The tax amount which is been collected by the government from the higher earners will be used in helping the one who is in need, which will help in reducing the inequalities.
Curbs inflation – With the increase and decrease in the direct tax rate government controls the inflation in the nation. If there is inflation then the increase in the direct tax rate will affect the buyer’s purchasing power which will help in controlling inflation.
Disadvantages of Direct tax
Restrain investment – Many people avoid investing because of direct taxes such as capital gain tax and security transaction tax. Direct taxes, in a sense, stifle investment.
Considered a burden – Taxpayers are considered a burden since they are compelled to pay direct taxes such as income tax in a single lump payment every year. Furthermore, the documentation procedure is inherently difficult and time-consuming.
What is an Indirect Tax?
Indirect taxes are the tax which is paid to the government at the time of purchasing any product or any services. unlike direct taxes, indirect taxes are not imposed on the income and profit of an individual or a company. In basic terms, when a buyer purchases a product or service, the excess amount levied by the supplier to the buyer is referred to as indirect tax. Initially, there are 7 types of indirect taxes in India that are excise duty, VAT (Value Added Tax), Service Tax, Entertainment Tax, Custom duty, and others, which are now collectively termed as Goods and Service Tax (GST) which is imposed by the government.
Advantages of Indirect tax
The collection is easy – In contrast to direct taxes, indirect taxes do not require any paperwork or complicated procedures to be paid. When you buy goods or services, you must pay the tax immediately.
Convenience – In contrast to direct taxes, which are usually paid in one single payment, indirect taxes, such as GST, are paid in little amounts. A small amount of GST was included in the price when you buy goods or services, making GST payment more convenient for taxpayers.
Disadvantages of Indirect tax
More expensive – Individual needs to pay an excessive amount at the time of buying products and services, which makes the product and services more expensive.
Regressive – Indirect taxes are well-known for being regressive. They are not equitable, even though they ensure that everyone pays taxes regardless of their income. Indirect taxes are levied at the same rate on people of all income levels.
Differences between Indirect and Direct taxes
As, stated earlier direct taxes are the ones which is been imposed on the profit and income, while indirect tax is imposed on the products and services.
There is a mediator between the end consumer and the government in the indirect taxes, while the direct taxes are directly paid to the government.
The direct tax rate is different for an individual, company, and for other legal authorities, while indirect tax is the same for every individual and company.
The direct tax depends on the income, while indirect tax does not depend on the income of an individual.
Direct taxes cannot be shifted or passed to another individual, while indirect taxes can be passed or shifted to another person or any entity.
Both direct and indirect taxes serve different purposes. Differences in direct and indirect taxes are equitable since they are imposed on individuals based on their ability to pay. They are also cost-effective because of lower collection costs.
Background In case of ONGC Tripura Power Co. Ltd. v. State of Tripura, the petitioner has challenged the vires of Section 4(4)(d) of the Tripura Electricity Duty Act, 2019 on the ground that the same seeks to levy duty on inter-State sale of electricity which is beyond the competence of the State legislature. Petitioner ONGC Tripura Power Company Limited (OTPC, for short) is a power generating company and has set up a power generation station in the State of Tripura and generates electricity based on Gas Turbine Units and Steam Turbine Units. The petitioner sales bulk of its electricity generated from the said power project to seven north-eastern States including the State of Tripura. The Government of Tripura passed Tripura Electricity Duty Act, 2019 under which the State would levy duty on sale or consumption of electrical energy. Section 4 of the said act pertained to levy of electricity duty.
“4. Levy of electricity duty:
(4) Duty shall also be levied on-
(d) electricity sold outside the State and licensees shall have to pay electricity duty on sold energy charges.”
The above clause was point of dispute under the petition.
Petitoner’s Plea
i. Sale of power to the other six North Eastern States shall fall within Entry 54 and will be subject to Entry 92A of List I and cannot be taxed by the Government of Tripura.
ii. Provision which levies electricity duty on electricity sold outside the State is unconstitutional and is in the teeth of the law laid down by the judgment of the Supreme Court in the State of Andhra Pradesh v. National Thermal Power Corpn. Ltd.
Respondent’s contention
i. After amendment in constitution through Constitution (One Hundred and First Amendment) Act, 2016, the exclusion clause then applicable on the state legislature prohibiting enactment of Taxing statue imposing tax on supply of goods or of services outside the state now stand limited only to 6items as mentioned in Entry 54 of the State List and the definition of the term “goods” as contained in Section 2(d) of the Central Sales Tax Act, 1956.
ii. Entry 92A of List I of the Seventh Schedule will be read, interpreted and apply only in respect of those “goods” which has been defined by the Parliament in the Taxation Laws (Amendment) Act, 2017 by virtue of powers conferred under Article 286(2) of the Constitution of India.
iii. Entry 53, List II of Seventh Schedule now stands as an independent fountain source of State Legislative Power.
iv. State legislature of Tripura has been vested with power to enact statute imposing and prescribing tax on sale and supply of electricity outside the state on any licensee as defined under law.
Now to understand the rations behind pleas taken by the petitioner and respondent, we need to travel to the Constitution of India and more specifically:-
i. Constitution of India (Pre Amendment of 11-09-1956)
ii. The Constitution (Sixth Amendment) Act, 1956 (w.e.f 11-09-1956)
iii. The Constitution (Eightieth Amendment) Act, 2000 (w.e.f. 9-06-2000).
iv. The Constitution (One Hundred and First Amendment) Act, 2016 (w.e.f. 16-9-2016).
Background to Constitution of India and its relevant amendments
Article 246 lays down the subject matter of laws to be made by Parliament and the State legislature. It refers to the three lists given in Schedule VII of the Constitution – Union List, State List and Concurrent List. Further, Article 246A was brought through 101st Amendment which overrides Article 246, specifying power of Parliament and State legislature for laws in respect of Goods & Service Tax (GST)
Article 246 – Subject-matter of laws made by Parliament and by the Legislatures of States
Article 246A – Special provision with respect to goods and services tax – Inserted vide Constitution (One Hundred and First Amendment) Act, 2016
(1) Notwithstanding anything in clauses (2) and (3), Parliament has exclusive power to make laws with respect to any of the matters enumerated in List I in the Seventh Schedule (in this Constitution referred to as the ‘Union List’.
(1) Notwithstanding anything contained in articles 246 and 254, Parliament, and, subject to clause (2), the Legislature of every State, have power to make laws with respect to goods and services tax imposed by the Union or by such State.
(2) Notwithstanding anything in clause (3), Parliament, and, subject to clause (1), the Legislature of any State also, have power to make laws with respect to any of the matters enumerated in List III in the Seventh Schedule (in this Constitution referred to as the ‘Concurrent List’).
(2) Parliament has exclusive power to make laws with respect to goods and services tax where the supply of goods, or of services, or both takes place in the course of inter-State trade or commerce.
(3) Subject to clauses (1) and (2), the Legislature of any State has exclusive power to make laws for such State or any part thereof with respect to any of the matters enumerated in List II in the Seventh Schedule (in this Constitution referred to as the ‘State List’).
Explanation.—The provisions of this article, shall, in respect of goods and services tax referred to in clause (5) of article 279A, take effect from the date recommended by the Goods and Services Tax Council.]
(4) Parliament has power to make laws with respect to any matter for any part of the territory of India not included in a State notwithstanding that such matter is a matter enumerated in the State List.
Article 286 places restriction on State Legislature to impose tax on the sale or purchase of goods where such sale or purchase takes place in course of inter-state trade or commerce or in the course of import or export. Further, Article 286 gives power to Parliament for formulating principles for determining when sale or purchase takes place in any of the ways mentioned supra. Article 286 was amended earlier through Constitution (Sixth Amendment) Act, 1956 and under this power, Parliament brought Central Sales Tax Act, 1956.
Pre Amendment
Post Constitution (One Hundred and First Amendment) Act, 2016 (w.e.f. 16-9-2016).
Union List
Entry 92A
Taxes on the sale or purchase of goods other than newspapers, where such sale or purchase takes place in the course of inter-State trade or commerce.1
State List
Entry 52
Taxes on the entry of goods into a local area for consumption, use or sale therein.
Entry 53
Taxes on the consumption or sale or electricity.
Entry 54
Taxes on the sale or purchase of goods other than newspapers, subject to the provisions of entry 92A of Union List1.
1. Through Constitution (Sixth Amendment) Act, 1956.
Union List
Entry 92A
Taxes on the sale or purchase of goods other than newspapers, where such sale or purchase takes place in the course of inter-State trade or commerce.
State List
Entry 52
Omitted
Entry 53
Taxes on the consumption or sale or electricity.
Entry 54
Taxes on the sale of petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas, aviation turbine fuel and alcoholic liquor for human consumption, but not including sale in the course of inter-State trade or commerce or sale in the course of international trade or commerce of such goods.
Analysis
Before 101st Amendment, State Legislature has the power to impose tax on the consumption or sale of electricity through Entry 53. Through Entry 54, State legislate was able to impose tax on the sale or purchase of goods other than newspaper. Entry 54 was amended through Constitution (Sixth Amendment) Act, 1956 and it was made subject to Entry 92A of Union List. New entry 92A was inserted in Union list. Effect of such amendment was that State legislature could not impose tax on sale or purchase of goods which is in the course of inter-state trade or commerce.
Matter came up before Supreme Court in case of NTPC Ltd.,(supra) to decide upon following issues:-
i. Whether Electricity is goods
ii. Whether Entry 53 is in isolation to Entry 54 or it is also subject to Entry 54 of State List
iii. Whether State legislature can impose tax on inter-state sale of electricity
Issue was discussed in detail by the Hon’ble Supreme court and following was held:
i. The definition of goods as given in Article 366 (12) of the Constitution was considered by this Court and it was held that the definition in terms is very wide according to which “goods” means all kinds of moveable property and thus electricity held to be covered under ‘goods’
ii. Entry 53 has to be read in harmonised way with Entry 54. Since Entry 54 is subject to entry 92A of the Union list, Entry 53 also has to be read as subject to Entry 54. Since electricity falls under meaning of ‘goods’, state legislature cannot tax on consumption or sale of electricity in course of inter trade commerce.
iii. Source of power to levy tax doesn’t come from the entries of Seventh Schedule. Competence to legislation has to be traced to the constitution. The prohibition which is imposed by Article 286(1) of the Constitution is independent of the legislative entries in Seventh Schedule. Bans imposed by Articles 286 and 269 on the taxation powers of the State are independent and separate and must be got over before a State legislature can impose tax on transactions of sale or purchase of goods.
However, State legislature of Tripura enacted Tripura Electricity Duty Act’ 2019 thereby levying electricity duty on inter-state sale of electricity. The main contention of the respondent in ONGC Tripura Power Co. Ltd. (supra) was that after amendment by Constitution (One Hundred and First Amendment) Act, 2016, Entry 54 was no more subject to Entry 92A of the Union List and thus accordingly, state legislature is restricted to impose tax only on 6 items mentioned in Entry 54 of the State List. Resultantly Entry 53, List II of Seventh Schedule now stands as an independent fountain source of State Legislative Power.
Decision
Hon’ble High Court of Tripura held that Sec 4(4)(d) of the Tripura Electricity Duty Act’ 2019 is ultra-vires and un-constitutional to the power of state legislature basis following:
* The entries in the lists in Schedule VII are not the source of power of legislation but are fields of legislation in relation to which the State or Union legislation has the authority to frame a law.
* Article 246-A which was inserted by the 101st Amendment also while enabling the Union as well as the State legislatures to frame laws for levying goods and services tax, nevertheless retained this limitation on the power of the State legislature when in clause (2) it provided that the Parliament has exclusive power to make laws with respect to goods and services tax where the supplies takes place in the course of inter-State trade or commerce.
* Clause (5) of Article 269-A authorizes the Parliament to frame a law to formulate the principles for determining the place of supply, and when a supply of goods, or of services or both takes place in the course of inter-State trade or commerce.
* Power to levy tax on inter-State supply of goods or services is retained by the Parliament and also the power to frame the law specifying as to when supply of goods, or of services can be said to have taken place in the course of inter-State trade or commerce.
* Article 286 thus prior to its amendment by 101st Amendment Act, 2016, was concerning the sale or purchase of goods. Even after the amendments by the said Amending Act when post this amendment the phrase “the sale or purchase of goods” was replaced by “the supply of goods or of services or both”, the heading of the Article remained the same namely “restrictions as to imposition of tax on the sale or purchase of goods”.
CBIC ABOLISHES LICENCE RENEWAL REQUIREMENT FOR CUSTOMS BROKERS, AUTHORISED CARRIERS
The Central Board of Indirect Taxes and Customs (CBIC) has w.e.f. 23.07.2021 abolished the requirement of periodic renewals of Licence/Registration issued to Customs Brokers and Authorised Carriers. This would greatly help reduce the compliance burden cast on the trade, which had to otherwise make application and submit numerous documents to renew their licenses/registrations.
Effect of this Amendment:
The net effect of the amendments carried out to the Customs Brokers Licensing Regulations, 2018 and Sea Cargo Manifest and Transhipment Regulations, 2018, is that the existing licenses/registration would have a lifetime validity and also allowed a licensee/registration holder to voluntarily come forward to surrender his license/registration if s/he wishes.
Key Highlights:
A provision has been made to invalidate licences/registrations that are inactivity for more than a year.
These steps would prevent misuse of dormant licences/registrations by unscrupulous person who misdeclare import or export or wrongly obtain export refunds/incentives and when caught, put the burden on the original license/registration holder.
The interest of the genuine trade is safeguarded by empowering the Commissioners of Customs to revalidate the licence/registration in case the inactivity is for genuine reasons.
The life-long validity of licenses/registrations is expected to provide a major relief to the trade by reducing their compliance burden and promoting the Ease of Doing Business in India.
Removing the requirement of seeking periodic renewals also reduces interface between the Customs and the trade, which is a deliverable of the CBIC’s ‘Contactless Customs’ initiative, a critical component of its flagship Turant Customs programme.
The CBIC has amended the Customs Brokers Licensing Regulations, 2018 and Sea Cargo Manifest and Transhipment Regulations, 2018, to state that all such existing licenses/registration would have a lifetime validity.
Source: Press Info / Twitter
Disclaimer: Every effort has been made to avoid errors or omissions in this material. In spite of this, errors may creep in. Any mistake, error or discrepancy noted may be brought to our notice which shall be taken care of in the next edition. In no event the author shall be liable for any direct, indirect, special or incidental damage resulting from or arising out of or in connection with the use of this information.
Just as we have different tax return forms for different purposes, The United States of America is no exception. U.S. also prescribes different types of tax returns for different purposes.
The tax returns are differentiated on the basis of the income on which one is liable to pay taxes. This is similar to filing of different returns prescribed by Indian Income Tax Department for different “Persons” and “Income from Different Sources”.
U.S. Income Tax Return for Corporation (Other than S corporation)
Accounting as per : Calendar Year -15th April (following year end) Non-Calendar Year – 15th Day of Third month following the close of corporation’s tax year
6
1120S
U.S. Income Tax Return for S Corporation
Accounting as per : Calendar Year -15th March(following year end) Non-Calendar Year – 15th Day of Third month following the close of corporation’s tax year
7
2553
Election by a Small Business Corporation
An entity can opt for status of S corporation with unanimous consent of shareholders on or before 15th day of third month of its tax year
Accounting as per : Calendar Year -15th May(following year end) Non-Calendar Year – 15th Day of fifth month following the close of entity’s tax year
11
5500
U.S. Income Tax Return for Employee Benefit Plan
Accounting as per : Calendar Year -7th July(following year end) Non-Calendar Year – Last Day of seventh month following the close of entity’s tax year (There are exceptions for direct filing entities DFE’s)
Apart from the above specific returns, there are certain other Information Returns that should be filed as well such as W-2, 1099-MISC, 1097, 1098, 1099, 3921, 3922 etc. The time-lines for all these returns vary.
Furthermore if any of the above due-date falls on a Saturday, Sunday or legal holiday, the deadline is moved to the next business day.
Wrapping Up
The above is a small effort to bring preliminary awareness about the various tax returns in U.S. and their applicable due-dates. Further please bear in mind that the above due-dates are generic and prone to change in case of any automatic extension. Shall you have any concerns or would like to have any discussions, please feel free to reach out to me at caheergajjar@gmail.com
Disclaimer : IN NO EVENT THE AUTHOR SHALL BE LIABLE FOR ANY DIRECT, INDIRECT, SPECIAL OR INCIDENTAL DAMAGE RESULTING FROM OR ARISING OUT OF OR IN CONNECTION WITH THE USE OF THIS INFORMATION.
Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) are applicable only on certain taxable goods and services. If a good or service is exempted from tax, then TDS or TCS is not applicable on them.
