Tax regulations

Simplifying tax regulations could improve India’s ranking in the Ease of Doing Business Index


MUMBAI / NEW DELHI: India may consider simplifying tax regulations such as withholding tax deduction (TDS) and withholding tax collection to improve its ranking in the global business rankings, according to a research report.

According to the Deloitte research report, India’s overall ranking is lowered due to a lower score in the tax department. The country could simplify

and TDS and could improve that score, said the tax policy document titled “Tax Deduction and Collection at Source Relaxed Compliance in India”.

According to the research paper, India may consider coordinating and using the Goods and Services Tax (GST) database and digitization for better implementation and simplifying TCS and TDS compliance.

“The need at the moment is close coordination regarding the use of the GST database so that tax authorities can track business transactions and impose TDS / TCS only on transactions that are not tracked through the database. GST invoices. Taxpayers would then be able to see the government’s information collection and use of technology, which would reduce the burden of compliance rather than just generating information for the tax department, ”the research said.

TDS is the income tax which is applicable on the income of individuals. The TCS, meanwhile, was recently introduced by the government.

The government in the 2020 finance bill had amended the income tax law and introduced a 1% tax (withholding tax) on all e-commerce transactions.

The government inserted the 194-O as part of the current income tax to include the 1% tax. “… where the sale of goods or the provision of services of an e-commerce participant is facilitated by an e-commerce operator through their digital or electronic facility or platform (regardless of their name), that e-commerce operator shall, at the time of crediting the amount of the 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 which method, whichever is earlier, is to deduct income tax at the rate of one per cent of the gross amount of those sales or services or both, “he said.

Deloitte’s research paper suggested that the government might consider reducing the scope of transactions under TDS and TCS. The government could also consider reducing the compliance burden under these regulations.

Simplifying tax regulations will not result in lost revenue for the government, the research paper argued.

“Despite a substantial reduction in the scope of transactions to be submitted to the TDS / TCS, it is not expected that there will be a loss of revenue. Indeed, the withholding tax of taxpayers will increase proportionally, as all these transactions are declared under the GST regime and are available to the income tax service, ”the research indicates.


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