TDS & TCS - Easing Corporate India's Compliance Burden

The webinar began with the panelists discussing the fundamental reasoning behind introducing the means of TDS and TCS tax collection. Maulik Doshi - Senior Executive Director, Nexdigm began by giving a timeline of the recent inclusions where TDS and TCS apply, along with the benefits and challenges that companies and individuals face when complying with these provisions.

Post introduction, the panelists were asked how companies dealt with the changes in the TDS and TCS provisions. To this, Anuprita Mehta - Head of Taxation, ArcelorMittal Nippon Steel India, stated the importance of analyzing the constantly changing environment, making the necessary changes in the Enterprise Resource Planning (ERP) systems and automating the entire process since deadlines are close. She went on to explain the specific changes and checks that are to be made on the ERP systems.

Anuprita also highlighted the importance of an API (Application Programming Interface) being introduced by the Income Tax Department, which would be beneficial at the time of invoice posting, so that the appropriate rate of TDS can be applied.

Next, the panelists were asked to share their experiences to understand the government's reasoning behind introducing these provisions. Beginning with stating the objective of 206 C, Mayur Desai - Senior Vice President of Taxation, Ambuja Cements Ltd & ACC, stated that the primary goal was to widen and deepen the tax net. Subsequently, the objective of the recently introduced 194 Q, which overrides 206 C, is to ensure compliance burden only on those in a position to comply. He added that such a cross between sections makes comprehending the Acts tedious. While simplicity is the reason behind introducing these provisions, the approach does not align with the objectives.

The panelists were then asked to shed some light on how the companies and clients respond when asked to comply with the new provisions. To this, Nishit Parikh - Partner, Direct Taxation, Sudit K. Parikh & Co. LLP, mentioned that since the government is moving to an all-digital documentation model, clients that were not tech-savvy had the hardest time adapting and the number of such clients was sizeable. Mayur Desai mentioned the complications that Tax firms and companies face due to the limited time and a large amount of document processing.

Next, the panelists were asked whether a declaration from vendors would suffice or whether there would be a need for ITR copies. Adding to this, panelists were also asked whether TDS would be required for businesses engaged in exports.

To this, Nishit stated that through the government portal, one could verify a vendor's past year's returns, then there is no declaration requirement. However, the issue here is that the portal may not provide details on the TDS.

The panelists discussed the importance of classifying and illuminating the kinds of TDS and TCS provisions for software transactions as that area has some deal of vagueness and leads to litigation.

The panelists then argued that the government should provide some relaxation to the payers of the TDS and TCS provisions if there is no scope of utility being provided. This would help taxpayers prepare for what is not available in the utility and would make the process much faster. It would also help firms if the government could describe the kind of utility they would be providing. Not only that but a great deal of simplicity is required as there is a large gray area when it comes to TDS and TCS provisions.

Lastly, the panel mentioned that the government should allow representatives of corporations to address their concerns with new regulations in the provisions as there could be some instances faced by companies that the government would not have anticipated due to no first-hand experience.

After quick and interesting audience questions round, the webinar ended by acknowledging that the government is likely to consider pushing deadlines in light of the COVID-19 situation, and firms should be prepared for the worst-case scenario by working to meet the tight deadlines, even though they seem difficult to complete.