BENGALURU: The Income Tax Department’s new guidelines on TDS (tax deducted at source) have added to the confusion regarding GST. Earlier, it said that TDS has to be deducted after excluding GST.
Archit Gupta, founder and CEO of tax & investing platform Clear (formerly ClearTax), said that interestingly, the guidelines have mentioned GST. The circular clarified that the tax required to be withheld under section 194S of the Act should be on the net consideration after excluding GST/charges levied by the deductor for rendering service.
“Even though as of today, GST is not applicable, and it’s going to come up in the council meeting, they have touched upon this interesting FAQ,” Gupta said. Sunil Badala, partner and head, financial services, tax, KPMG India said the guidelines provide clarity on many aspects, but certain doubts still persist. “As regards the clarification that TDS needs to be done on net consideration (excluding GST and charges), there appears to be an error as the guidelines mention GST / charges ‘levied by the deductor’ shall be excluded – the fact is GST /charges are ‘levied by the exchange/brokers,” he said.
One key thing is that the one per cent TDS is applicable when a payment is being made to any resident and that the exchange is required to furnish a quarterly statement for VDA transactions. One of the important clarifications that have come through these guidelines is TDS is applicable when you are doing P2P (peer-to-peer) transactions, then the buyer has to ensure that tax is deducted. “One per cent TDS is expected to remain this fiscal. It is important that the government look at revising the guidelines to encourage entrepreneurship in the Web 3.0 sphere,” said Khaleelulla Baig, co-founder and CEO of Koinbasket.