Month: December 2017

Common Queries of TDS compliance or Non Compliance and their Consequences

What will happen if-

  1. We do not deduct TDS?
  2. We deduct do not deposit the deducted amounts?
  3. We deducted and deposited the TDS amount but we do not file Return?
  4. We Filed TDS return but as per convenience not as per the due date prescribed?
  5. We Filed TDS return as per the due date prescribed but not Issued TDS/TCS certificates to deductees?

These are the common queries we encounter on daily basis in relation to TDS compliances, here in this Article I have tried to answer all the above questions and the Consequences in cases where question raised after the event of Non compliance occurred.  From the above Queries we have prepared a list of non compliances in relation to TDS and TCS which need to be taken care of in every organization where TDS or TCS is applicable.

Major TDS related Non Compliances:

  • Non Deduction or Short Deduction of TDS (Basically, Not As per TDS rates Prescribed),
  • Non Deposit of TDS by due date of Payment as Prescribed,
  • Non filing or late filing of TDS return or declaration of NIL return by due date of Filing of Return or filing within One year from the due date of filing of return,
  • Late filing of TDS return or declaration of NIL return after one year from the Due Date of Filing of Return,
  • Non Issuance of TDS Certificates by Due date as prescribed,
  • Wrong PAN or Invalid PAN or PAN not available in the Return but TDS deducted at Lower Rate of TDS (In such cases TDS @ 20% is required to be deducted, if TDS @ 20%is higher than Rate Prescribed)

Major TCS related Non Compliances:

  • Non Collection or Short collection of TCS (Basically, Not As per TCS rates Prescribed),
  • Non Deposit of TCS by Due date of Payment as Prescribed,
  • Non filing or Late Filing of TCS return or Declaration of NIL return by Due Date of Filing of Return or filing within One year from the due date of filing of return,
  • Late filing of TCS return or Declaration of NIL return after One year from the Due Date of Filing of Return,
  • Non Issuance of TCS Certificates by Due date as prescribed.

Following are the Major penalties, which are applicable in above mentioned cases of Non compliances:

  • Interest (If Not deposited TDS/TCS by the Due Date of Payment)
  • Late filing Fees (If Not filed TDS return by Due Date of Filing of Return)
  • Penalty (if Return is not filed within One year from the Due date of Filing of Return)

Interest

Under Section 201(1A) for late deposit of TDS after deduction, Deductor has to pay interest. Interest is @ 1.5% per month from the date at which TDS was deducted to the actual date of deposit. Note that Interest is to be calculated on a monthly basis and not based on the number of days i.e. part of a month is considered as a full month.

For example, say TDS payable amount is Rs5000 and the date of deduction is 10th January. Say you pay TDS on 20th May. Then the interest you owe is Rs 5000 x 1.5% p.m. x 5 months = Rs 375.

“Month” has not been defined in the Income Tax Act, 1961. However, in number of cases at High Court, it has been mentioned that it should be considered as a period of 30 days and not as an English calendar month.

TDS amount is to be paid from the date at which TDS was deducted, not from the date from which TDS was due.

For example, let the due date of TDS payment be 7th June and you have deducted TDS on 20th May. Say you have not deposited TDS by 7th June. Then you will be required to pay interest starting from 19th May and not 7th June.

Also consider the case in which you deposit tax one month after the due date. Say you have deducted TDS on 1st July. Then the due date is 7th August. Now say you deposit tax on 8th August (i.e. one day after the due date). Then interest is applicable from 1st July to 8th August i.e. for a period of 2 months. You now have to pay interest of 1.5% p.m. x 2 months = 3%.

Late Filing Fee

Under Section 234E, Dedcutor will have to pay a fine of Rs 200 per day (two hundred) until the Date of filing of return. Dedcutor has to pay this for every day of delay until the fine amount is equal to the amount you are supposed to pay as TDS.

For example, say that TDS payable amount is Rs 5000 on 13th June and it is paid on 17th December (i.e. 189 days, counting 17th December). Then the calculation comes out to Rs 200 x 189 days = Rs 37800, but since this is greater than Rs 5000, Dedcutor will have to pay only Rs 5000 as the late filing fee. Added to this, Dedcutor also have to pay interest which is covered in the section 201(1A) mentioned above.

Penalty

Equals to the amount that was failed to be deducted/collected or remitted may be imposed.

Prosecution (Sec 276B): If a person fails to pay to the credit of the Central Government,—

The Tax deducted at source by him as required by or under the provisions of Chapter XVII-B, he shall be punishable with rigorous imprisonment for a term which shall not be less than three months but which may extend to seven years and with a fine.

Penalty for late filing of TDS return:

Penalty (Sec 234E): Deductor will be liable to pay way of fee Rs.200 per day till the failure to pay TDS continues. However penalty should not exceed the amount of TDS for which statement was required to be filed.

Penalty (Sec 271H): Assessing officer may direct a person who fails to file the statement of TDS within due date to pay penalty minimum of Rs.10,000 which may extended to Rs.1,00,000.  Penalty under this section is in addition to the penalty u/s 234E. This section will also cover the cases of incorrect filing of TDS return.

No penalty under section 271H will be levied in case of delay in filing the TDS/TCS return if following conditions are satisfied:

  • The tax deducted/collected at source is paid to the credit of the Government.
  • Late filing fees and interest (if any) is paid to the credit of the Government.
  • The TDS/TCS return is filed before the expiry of a period of one year from the due date specified in this behalf.

Penalty for Non Issuance of TDS/TCS Certificate or Late Issuance of TDS/TCS Certificate:

272A(2)(g) :shall pay, by way of penalty, a sum of one hundred rupees for every day during which the failure continues Penalty shall not exceed the amount of tax deductible or collectible, as the case may be.

Penalty for Quoting Wrong PAN / Invalid PAN:

272B. Penalty for quoting wrong or invalid PAN, penalty of Rs. 10000/- may be imposed as required under section 139A (5A).

Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of any agency of the Indian government. Examples of analysis performed within this article are only examples. Assumptions made within the analysis are not reflective of the position of any government entity of India.

Alert-2 Important Due Dates December 2017 and January 2018

IMPORTANT DUE DATES
For December 2017 & January 2018

The following are some of the important due dates for the coming 2 months related to payments and filing!

 

Due Dates December 2017
07th  December, 2017 TDS/TCS payment for November 2017
15th  December, 2017 Advance Tax (Income tax) 3rd (75% of Advance Tax Payable) Installment Y 2018-2019
Provident Fund payment for November 2017
20th December, 2017 GST Payment for November 17
GST Return (Form GSTR- 3B) November 17
21st December, 2017 DVAT payment for November 17
ESIC Payment for November 2017
31st December, 2017 FORM GSTR-1 (For Months from July to October, 2017)

(Monthly returns for registered persons having aggregate 7- turnover of more than 1.5cr in the preceding financial year or the current financial year )
FORM GSTR-1 (For Quarter-2 ending on 30th September, 2017)

(Quarterly for registered persons having aggregate turnover of upto 1.5cr. in the preceding financial year or the current financial year )

 

Due Dates January 2018
07th  January, 2018 TDS/TCS payment for December 2017
10th January, 2018 FORM GSTR-1 (For Month November, 2017)

(Monthly returns for registered persons having aggregate  turnover of more than 1.5cr in the preceding financial year or the current financial year )
15th January 2018 Provident Fund payment for December 2017
20th January, 2018 GST Payment for December, 2017
GST Return (Form GSTR- 3B) December, 2017
21st January, 2018 DVAT payment for December, 2017
ESIC Payment for December, 2017
25th January, 2018 DVAT Return Q3 (October – December 2017) FY 2017-2018
30th January, 2018 TCS Certificate (Form 27D) Q3 FY 2017-2018
31st January, 2018 TDS Return Q3 (October – December 2017) FY 2017-2018

 

If you seek any further clarity, feel free to write to us on, info@gapeseedconsulting.com or you can also call us at +91-9599444639.

Sample Entries for GST in Different Situations

Sample Entries for GST in Different Situations

As we all are aware about the fact that GST has already been introduced by the Central Government/State Government. The GST Law has been in force since 1st of July 2017, after the 18th GST council Meeting held on 30th June 2017. From the date of Implementation of GST law, GST council held 5 more meetings on different dates (Latest 23rd Meeting was held on 10th November 2017) in which the council has reviewed various Provisions of the GST law due to various reasons.

Major impact of such review has been noticed as

  1. Change in Rate of Tax on Different services or Goods,
  2. Extension of due dates for filing of returns required under the Law,
  3. Postponement of some provisions or returns till next upcoming financial year,
  4. Introduction of Supplementary Forms of return till the date all other forms would be available for filing etc. ,
  5. Procedural amendments also took place during the period

While there will be certain initial transition challenges, GST will bring in clarity in many areas of business. One of the areas is accounting and bookkeeping.

In this Article, we are going to discuss about the Change in accounting entries after Implementation of GST law to keep the books of accounts at par for Compliance with the Law.

Before GST scenario:

When GST was introduced there were many other taxes vanished by the Central Government/State Government, following the taxes which are not in force after GST like Excise, VAT, CST, Service Tax.

For those taxes we required to maintain separate books of accounts, ledger, register etc (apart from the Purchase, Sale, Inventory) .

  1. Excise Payable A/c (For Manufacturer)
  2. CENVAT credit A/c (For Manufacturer)
  3. Service tax Payable A/c
  4. Input Service Tax A/c (CENVAT Register)
  5. VAT Payable A/c
  6. VAT Input A/c
  7. CST A/c’s (For Inter-State Sale Purchase Transactions)

For example, A Person (Trader) Mr. A was required to maintain following Basic accounts :

  1. VAT Payable A/c
  2. VAT Input A/c
  3. CST A/c’s (For Inter-State Sale Purchase Transactions)
  4. Service Tax A/c (However, He was not able to claim any Service tax input credit as he is a Trader with Output VAT. Service tax was not allowed to set off against the VAT/CST)

Now, after the implementation of GST,

GST is One Tax, which includes impact of all previous taxes such as Excise, VAT, and Service Tax.

Now, the same trader Mr. A is required to maintain the following a/cs apart from Purchase, Sale, Inventory etc

  • Input CGST a/c
  • Output CGST a/c
  • Input SGST a/c
  • Output SGST a/c
  • Input IGST a/c
  • Output IGST a/c
  • Electronic Cash Ledger (to be maintained on Government GST portal to pay GST)

While, the number of accounts is more, apparently, once you go through the accounting you will find it is much easier for record keeping. One of the biggest advantages Mr. A will have is that he can set off his input tax on service with his output tax on sale also.

Accounting entries under GST

Illustration 1: Intra-state Transaction

  1. A purchased goods for Rs. 1,00,000 locally (intrastate)
  2. He sold them for Rs. 1,50,000 in the same state
  3. He paid legal consultation fees Rs. 5,000
  4. He purchased Printer for his office for Rs. 12,000

Assuming CGST @9% and SGST@9%

The entries will be-

1 Purchase A/c ………………Dr. 1,00,000
Input CGST A/c ……………Dr.     9,000
Input SGST A/c ………    …Dr.     9,000
              To Creditors A/c 1,18,000
2 Debtors A/c ………………Dr. 1,77,000
             To Sales A/c 1,50,000
             To Output CGST A/c 13,500
             To Output SGST A/c 13,500
3 Legal fees A/c ………..……Dr. 5,000
Input CGST A/c ……………Dr. 450
Input SGST A/c ……………Dr. 450
             To Bank A/c 5,900
4 Printer A/c ………..……Dr. 12,000
Input CGST A/c ……………Dr. 1080
Input SGST A/c ……………Dr. 1080
             To Royal Printer Shop A/c 14,160

 

Total Input CGST=9,000+450+1080= Rs. 10,530
Total Input SGST=9,000+450+1080= Rs. 10,530
Total output CGST=13,500
Total output SGST=13,500
Therefore Net CGST payable=13,500-10,530=2970
Net SGST payable=13,500-10,530=2970

5 Output CGST A/c ……………Dr. 13,500
Output SGST A/c ……………Dr. 13,500
          To Input CGST A/c 10,530
            To Input SGST A/c 10,530
             To Electronic Cash Ledger A/c 5,940

 

Thus, after adjustment of input tax credit, tax liability of Rs. 27,000 is reduced to only Rs.5,940.  It can be noticed from the above that GST paid on legal fees is also adjusted which was not possible before GST scenario.

If, any input tax credit remains, the same can be carried forward to the next year.

 

Illustration 2: Inter-state Transaction

  1. A purchased goods Rs. 1,50,000 from outside the State
  2. He sold Rs. 1,50,000 locally
  3. He sold Rs.1,00,000 outside the state
  4. He paid telephone bill Rs. 5,000
  5. He purchased a Desktop for his office for Rs. 12,000 (locally)

Assuming CGST @9% and SGST@9%

1 Purchase A/c ………………Dr. 1,50,000
Input IGST A/c ……………Dr. 27,000
           To Creditors A/c 1,77,000
2 Debtors A/c ………………Dr. 1,77,000
             To Sales A/c 1,50,000
             To Output CGST A/c 13,500
             To Output SGST A/c 13,500
3 Debtors A/c ………………Dr. 1,18,000
             To Sales A/c 1,00,000
             To Output IGST A/c 18,000
4 Telephone Expenses A/c ..…Dr. 5,000
Input CGST A/c ………………..Dr. 450
Input SGST A/c …..……………Dr. 450
             To Bank A/c 5,900
5 Computer A/c.…..Dr. 12,000
Input CGST A/c ……………Dr. 1080
Input SGST A/c ……………Dr. 1080
             To Royal Computer Shop A/c 14160

 

Total CGST input =450+1,080=1,530
Total CGST output =13,500
Total SGST input =450+1,080=1,530
Total SGST output =13,500
Total IGST input =27,000
Total IGST output =18,000

Particulars CGST SGST IGST
Output liability 13,500 13,500 18,000
Less: Input tax credit
   CGST 1,530
   SGST 1,530
   IGST 9,000 18,000
Amount payable 2,970 11,970 NIL

 

IGST input will first be applied to set off IGST and then CGST. Balance if any will be applied to set off SGST.

So out of total input IGST of Rs. 27,000, firstly it has completely set off against IGST. Then balance Rs.9,000 against CGST.
From the total Rs.45,000, only Rs. 14,040 is payable.
So the setoff entries will be-

Set off against CGST output
1 Output CGST ………………Dr. 10,530
           To Input CGST A/c 1,530
           To Input IGST A/c 9,000
2 Set off against SGST output
Output SGST ………………Dr. 1,530
           To Input SGST A/c 1,530
3 Set off against IGST output
Output IGST ………………Dr. 18,000
           To Input IGST A/c 18,000
4 Final payment
Output CGST A/c ……………Dr. 2,970
Output SGST A/c ……………Dr. 11,970
             To Electronic Cash Ledger A/c 14,940

 

Accounting Policy and Principle:

GAAP is applicable on GST. Principle of Revenue Recognition etc. will automatically be applicable. It is mandatory to comply with the GAAP.

*GAAP – Generally Accepted Accounting Principles

Period to retain the Books for Accounts:

Every registered person must keep and maintain books of account at least for five years from the due date of filing of Annual Return for the relevant year.

Due to Transition to GST it is needed to address aspects of financial reporting systems for proper reporting & compliance under the law.

It has been noticed by us that many of the business facing accounting or compliance issues due to various reason one of them being accounting issues, which has been addressed in this Article.For other identified issues, we are here to assist you in the interest of both Assessee and the Government of India and Indian states.

If you seek any further clarity , feel free to write to us on, info@gapeseedconsulting.com or you can also call us at +91-9599444639.