As per the research report by Deloitte, India’s overall ranking gets pulled down due to lower score in taxes department. The country could simplify TCS and TDS and could improve this score, the Tax Policy Paper titled ‘Tax deduction and collection at source Easing compliances in India’ said.
As per the research paper, India could look at co-ordinating and using Goods and Services Tax (GST) database and digitisation for better implementation and simplifying TCS and TDS compliance.
“The need of the hour is close coordination regarding the use of the GST database so that income-tax authorities can track business transactions and impose TDS/ TCS only on those transactions which are not tracked through the GST invoice database. Taxpayers would then be able to see information collection and use of technology by the government resulting in reduced compliance burden rather than just generating information for the tax department,” the research said.
TDS is the income tax that is applicable on income of individuals. TCS on the other hand was recently introduced by the government.
The government in the Finance Bill 2020 had amended the income tax act and introduced a 1% tax (tax deducted at source) on all e-commerce transactions.
The government inserted the 194-O in the current income tax framework to include the 1% tax. “..where sale of goods or provision of services of an e-commerce participant is facilitated by an e-commerce operator through its digital or electronic facility or platform (by whatever name called), such e-commerce operator shall, at the time of credit of amount of sale or services or both to the account of an e-commerce participant or at the time of payment thereof to such e-commerce participant by any mode, whichever is earlier, deduct income-tax at the rate of one per cent of the gross amount of such sales or services or both,” it says.
The Deloitte research paper suggested that the government could look at reducing the scope of transactions under TDS and TCS. Also the government could explore reducing the compliance burden under these regulations.
Simplifying the tax regulations will not lead to revenue loss for the government, the research paper argued.
“Despite substantial reduction in scope of transactions to be subject to TDS/TCS, it is not anticipated that there would be any loss of revenue. This is because the advance tax liability of taxpayers will increase proportionately, as all these transactions are reported under the GST regime and are available to the income-tax department,” the research said.