TDS on Metal Scrap under GST: A Complete Guide

The Indian government has brought into effect new TDS provisions under the framework of Goods and Services Tax-specifically targeting all transactions in the form of metal scrap. With effect from 10 October 2024, these rules are aimed at improving tax compliance and transparency in the scrap materials sector. Let us dive into this and see what it will mean for the businesses buying and selling metal scrap.

What is TDS in GST for Metal Scrap?

TDS is a mechanism where tax is deducted at source at the time of making payment to the seller. Based on the latest GST rules, businesses, whose subject of business is procurement of metal scrap, are dutifully liable to deduct TDS at the time of entering into qualifying transactions.

And the transactions which attract TDS are under Chapter 72 to Chapter 81 of the Customs Tariff Act 1975, which comprises of:

Important Provisions of the TDS Rule

TDS shall apply on metal scrap under GST if the aggregate value of supplies exceeds ₹2,50,000 per transaction. The taxable value of scrap material will be deducted for deduction, and not the total invoice value.

Rate of deduction is provided as 2%, split as below:

Who must deduct TDS?

The Ministry of Finance issued Notification No. 25/2024-Central Tax on October 9, 2024, amending the earlier Notification No. 50/2018-Central Tax to clarify the Tax Deduction at Source (TDS) provisions under Section 51 of the CGST Act, 2017. Section 51 of the CGST Act 2017 deals with the mechanism of Tax Deduction at Source (TDS).

TDS provisions under Section 51 of the CGST Act shall not apply to the supply of goods or services between certain categories of persons specified in clauses (a), (b), (c), and (d) of sub-section (1) of Section 51 except for those specified in clause (d).

Process for becoming compliant

If you are a buyer dealing with metals scrap, here is what you need to do to become compliant with the new GST rules:

Obtain a Separate GST Registration

The buying party would be required to apply for a separate GST registration under REG-07 in order to start deducting TDS. Subsequently, the buyer can claim TDS on eligible transactions with which they will have to file a return month under Form GSTR-7. Simultaneously, the system generates a certificate of TDS, just like Form 16A under the Income Tax Act, after filing GSTR-7.

File Monthly Returns

The buyers who deduct TDS are liable to file GSTR-7 for the month. The return should be filed by the 10th of the next month where a payment liability will arise along with the return filing. This return should state the amount of TDS deducted.

Provide TDS Certificates

Once the return is filed by the purchaser, he shall issue the TDS certificate, GSTR-7A, to the supplier. Therefore, he would get the TDS credit to his ledger of cash at the end of every month.

TDS not Applicable in Respect of Metal Scrap

It is another important aspect that TDS under GST is not levied upon importing the metallic scraps. It does not draw any TDS deduction under such rules if the buyer imports scraps from abroad.

Conclusion

The introduction of TDS on metal scrap under the GST is perhaps a landmark to ensure better tax compliance in the industry. With the above move, the government has consequently mandated 2% TDS on all transactions, with an element of transparency and accountability that can be availed by the suppliers in due time.

Ensure your business is GST compliant with these new provisions by registering for GST TDS and the timely returns filing, contact Book My Accountant today for help with GST registration, TDS filing, and much more in accounting.

Strengthening the GST System: India's Second All-India Drive Against Fake GST Registrations

India’s GST is a key part of the tax system, aiming to unify indirect taxes effectively. However, some of the challenges have been fraudulent activities especially the abuse of GST registration. CBIC launched a drive to combat fake GST registrations, protect revenue, and fortify the GST system.

Identifying Fake GST Registrations

There are also fake GST registrations which are very dangerous since they affect the credibility of the GST system. The dishonest players get fake GST Identification Numbers (GSTINs) to commit tax fraud and falsely claim input tax credit. These actions impact the revenue and at the same time burden the honest taxpayers.

The CBIC, in consultation with the Directorate General of Analytics and Risk Management (DGARM), has a comprehensive strategy in place to track down and neutralize these fake GSTINs. New age data analytics and risk parameters identify suspicious GST numbers sent to tax departments for confirmation.

The Role of the GST Portal

The GST portal is very useful in registration as well as the monitoring of the whole process. You can use this channel to manage GST registration, check your application status, and access necessary tax details. Many fake registrations have been reported, resulting in strict verification procedures on the GST website. Tax officers are using the GST portal during this drive to verify GST numbers and registration compliance of genuine businesses.

Actions Against Fraudulent GSTINs

When fake GST registrations are identified, appropriate action is taken against them. Entities can be suspended or cancelled in their GST registration by the tax authorities if they are found to be committing fraud. They can suspend the input tax credit and reclaim any erroneously availed credit as well. Anyone who tries to misuse the GST system is immediately stopped.

Another essential part of this drive is the crackdown on the e-way bill system. Inter-state transportation requires the generation of the e-way bill through the GST portal, which is mandatory. From the analysis of e-way bills, tax authorities can also get additional information and prevent the abuse of GST registration.

Monitoring and Reporting

This drive must therefore have a sound monitoring and reporting system that can enhance its success. The GST Council Secretariat compiles weekly reports on identified tax evasion cases and activities leading to recoveries. An approach like this allows you to track progress and keep the drive from being deflected.

Special GST Drive Guidelines

Tax officers will visit registered businesses from August 16 to October 31, 2024, as part of a GST drive. Businesses are advised to take the following actions to ensure compliance:

  • Disclose all additional places of business.
  • Keep proper and updated records of all transactions, including purchase and sale invoices, consignment notes, and e-way bills.
  • Reconcile stock and cash balances regularly.
  • Maintain all bill books, vouchers, and documents in an organized manner.
  • Prominently display the GST registration certificate at every place of business, including godowns.
  • Complete bank authentication and KYC verification on the GST portal.
  • Place signboards properly at every location.

Conclusion

The second All-India drive against fake GST registrations is evidence of the Indian government’s seriousness towards maintaining a proper tax regime. This initiative proposes the use of the GST portal in protecting government revenue and the integrity of the GST system through data analytics. The government has called on business organizations to observe the GST laws by registering their GST number and other tax details. This drive is not merely to punish the offenders but also to build confidence in the Indian taxation system.

At Book My Accountant (BMA), we understand the complexities of the GST system and the importance of compliance. Experienced professionals on our team provide comprehensive GST consultancy services, ensuring that your business stays compliant with all regulations. From GST registration to ongoing compliance checks, BMA is your trusted partner in navigating the intricacies of the Indian tax system. Contact us today to learn how we can support your business in this crucial All-India drive against fake GST registrations.

Maximizing Efficiency Through Regular GST Health Check Up

The GST Health Check is a detailed analysis of how a business manages its GST compliance. It is a comprehensive and methodical examination of a business’s GST activities and responsibilities. This review evaluates a business's handling of GST, tax law compliance, report accuracy, and internal procedures. The review's first goal is to ensure business compliance with GST laws to reduce risks and penalties. Its purpose is to minimize risk exposure, avoid penalties, and ensure GST law compliance.

Elements of GST health check up

  • GST Registration Check
    A business undergoes a GST Registration Check to ensure proper GST registration and compliance with the law. The check confirms the business is ready to account for GST, recover it from customers, and claim input tax credits. It covers the analysis of the registration information and other related factors to ensure that the business satisfies all the requirements of GST registration. A GST Registration Check is an important component of a business’s GST compliance plan. This is important in ensuring that the business has complied with the necessary legal requirements on GST registration, has not omitted any crucial information, and is in line with the set laws to reduce on possible complications in tax management.                     
  • GST Books of Accounts Check
    A GST Books of Accounts Check entails an assessment of all the records of a business entity concerning the Goods and Services Tax (GST). We check to ensure that all GST transactions are accurately recorded, in compliance with GST laws and regulations, and are fully substantiated. The business ensures compliance with GST in terms of accounting practices and fulfills all GST responsibilities adequately. Through proper reviewing and verifying of GST transactions, invoices and records, this leads to minimizing risks, compliance and proper management of GST.
  • GST Liability & Payment Check
    GST Liability & Payment Check helps identify the amount of GST liability and payment to be made by the business. Thus, through proper analysis of the GST liabilities and payments, one can be in a position to report, meet compliance and manage GST effectively. It assists in keeping the financial records accurate, staying out of trouble with the tax authorities, and improving general tax compliance. To ensure that GST compliance is observed and penalties are avoided, while also maintaining cash flow, this check is essential.
  • GST ITC Eligibility Check
    GST ITC or Input Tax Credit Eligibility Check is a thorough verification process that helps in ascertaining whether a business is correctly availing input tax credit as per the GST laws. Input Tax Credit enables the business to avail credit of the GST paid on the inputs and use the same to pay the GST levied on the output. It is important to ensure that ITC claims are correct and do not violate the provisions of GST laws to avail the maximum benefits and to avoid any complications. This process assists in the prevention of risks, non-compliance with penalties, and accurate determination of ITC claims.
  • GST E-way Bill/E-Invoice Check
    We review electronic documents like GST E-Way Bill and E-Invoice under GST framework. This check ensures correct e-way bills and e-invoices compliance. E-way bills and e-invoices are necessary for the proper functioning of the supply chain and GST compliance. The e-way bills/E-invoices are issued in compliance with the threshold limits set under the GST laws for transporting goods. The e-way bill is verified to ensure all details are correctly mentioned on it. This includes the GSTIN of the supplier and recipient, invoice number, date, and description of goods. The e-invoices are generated with the correct and complete details, as verified by the e-invoices check. Details include GSTIN, invoice number, date, supply info, tax amount, and GST format.
  • GST Returns/Refund Check
    This verifies business GST compliance and refund processing. This check helps firms with GST records, detects issues, and optimizes tax situations. The GST returns verify sales, purchases, taxes, and adjustments. We match the figures from the GST returns with those in our account books for verifying their arithmetical correctness. This check ensures the business is GST compliant and meets refund requirements with correct supporting documents.
  • GST Dept Notices / Orders Check
    This is a process of going through and responding to the notices/orders issued by the GST department. Ensuring businesses function properly, comply with requirements, and identify tax issues is crucial for risk prevention. The check reviews GST authorities' notices and orders to ensure understanding of the matters or directions provided. Establish and follow specific steps to address issues within the provided time frame by conducting this check.
  • GST VLCR Check
    This is a process of conducting a critical assessment on the vendors or suppliers to determine their compliance to GST laws. This check is important for the credibility of a business’s supply chain, the ITCs claimed, and to minimize compliance risks. This check is concerned with the verification of the vendor’s compliance with GST, the correctness of the tax treatment, and the soundness of the business relationship. In this regard, vendor loyalty entails confirming that the vendor complies with GST requirements and has sound business ethics.

Conclusion

Now, you can guarantee your business’s GST compliance with Book My Accountant’s GST Health Check. Our professional staff scrutinizes all aspects of your GST operation including registration, record keeping, liability and input tax credit claims. We also manage e-way bills, returns, refunds, and departmental notices; consequently, this helps mitigate risks that may arise to your business. By partnering with us, you can stay compliant, reduce risks, and optimize your tax management processes, allowing you to focus on what you do best: that can help you grow your business.

Call Book My Accountant now to fix your business’s financial problems and GST issues. Let us deal with the challenges while you concentrate on achievement.

Streamline Section 16 of CGST Ac Compliance with BMA's VLCR Report

In today’s scenario of highly sensitive regulatory mechanism, Section 16(4) of the CGST Act, 2017 has been a major obstacle for all the business entities in India. Many of the enterprises have not been able to meet these provisions hence leading to high demand notices and financial burdens. This paper offers a detailed Section 16 and its sub-sections breakdown and actionable advice for any business to manage its ITC.

Interpretation of Section 16 of the CGST Act

Before delving into Section 16(4), it's crucial to grasp the broader context of Section 16:

  • Section 16(1): Allows every registered taxpayer to claim credit of ITC subject to the condition and restriction as mentioned in section 49.
  • Section 16(2): Draws conditions under which a registered person may claim ITC:
    • Supply of goods or services or both for consideration and issuance of tax invoice or debit note.
    • The delivery of the goods or services.
    • Payment of the ITC incurred on the goods to the Government.
    • Filing of a return under section 39.
  • Section 16(3): The rule is that if the taxpayer has claimed depreciation on the tax portion, this does not permit ITC on capital goods.
  • Section 16(4): Restrictions shall apply to any invoice or debit note claiming ITC. These restrictions will be in effect until the end of the year in which the invoice or debit note was issued or the annual return is filed, whichever comes first. This takes effect after the 30th of November of the following year.

Major Issues with Section 16(4) of CGST Act

Some courts have adopted constitutional interpretation to Section 16(4) and have interpreted that for availing ITC, one must meet only those conditions mentioned in Section 16(2). However, when interpreting Section 16 and the principles of statutory interpretation, it is evident that Sections 16(2), 16(3), and 16(4) form a part of restrictions regarding the scope and operation of ITC claims.

Supreme Court Observations

Thus, the Hon’ble Supreme Court has held that the taxpayers are under a statutory obligation to self-assess the eligible ITC under section 16(1) and section 16(2). This self-assessment involves:

Here are some practical tips for compliance:

To ensure smooth ITC claims and avoid penalties, businesses should:

  • Maintain Accurate Records: All the invoices and debit notes must be maintained properly for which it is important.
  • Monitor Vendor Compliance: Greatly reduce the time it takes for the ITC to be reflected in the GSTR-2B when the vendor files the GSTR-1.
  • Claim Timely ITC: Greatly reduce the time specified for availing ITC within the financial year, or by the end of November of the following year.
  • Verify Vendor Filings: Make sure that vendors have filled their returns in the right manner sometimes may be time consuming.
  • Address Mismatches Promptly: It is advisable that there is no discrepancy between the details mentioned in GSTR-2A/2B and GSTR-3B so that no demand is raised by the tax authorities.

Utilizing the BMA-VLCR Report

The BMA-VLCR report is one of the reference materials that would enable organizations to follow the provisions of GST. Businesses benefit by using reports to identify vendor non-compliance early.The report monitors vendors' compliance with GST laws and addresses issues. Examiners assess and compare claims with BMA-VLCR report to ensure accuracy and financial security.

Conclusion

While discussing the GST compliance where the law is quite specific with regard to the requirements of the businesses, one cannot afford to ignore Section 16 of the CGST Act, 2017. Some of these are record keeping, compliance by the vendors, claiming ITC within the stipulated time, cross verification of the vendor’s returns and handling of any discrepancy if found. The BMA-VLCR report also helps in enhancing the efficiency and effectiveness in managing GST compliance to ensure statutory compliance and ITC rights of organizations. Therefore, businesses should actively address GST issues and prepare to handle them to avoid penalties and maintain a stable business. Stay current, and compliant and safeguard your business against GST problems.

Stay current, stay legal, and safeguard your enterprise from the legalities of GST compliance.

Blog by BMA

Navigating the Maze of Input Tax Credit (ITC) in GST: An Analysis of Section 16(4)

The ITC (Input Tax Credit) may be difficult to understand within the labyrinth of regulations of taxation, but undoubtedly it is one of the most important mechanisms for the businesses to operate in the tax system. The Input Tax Credit (ITC) under GST lets businesses reduce tax on inputs by offsetting it against output tax, preventing double taxation.Claiming ITC faces obstacles, notably under Section 16(4) of the GST Act, warranting a closer look.

Understanding Section 16(4) of the GST (Goods and Services Tax) Act

You must claim Input Tax Credit (ITC) under section 16(4) of the GST Act before the prescribed period ends; failing to do so means you will forfeit the opportunity to use it.The strict restriction introduced by the provision governs the order of claims for the number of credits in the last sentence.

Stated Conditions for Claiming ITC

To claim ITC under GST, businesses must adhere to several conditions outlined in Sub-Sections (1) to (4) of Section 16. These conditions include possessing valid tax invoices, receiving goods or services, and filing tax returns within the specified timeframes. Compliance with these prerequisites is essential for businesses to avail themselves of the benefits of ITC.

Arguments Against Section 16(4)

Constitutional Validity:

Section 16(4) is a controversial provision that could contradict the constitutional rights to equality and freedom to conduct business as it gives some companies an unfair advantage over others.

Administrative Burden:

Companies involved in intricate economic deals bear an increased administrative burden when tax reporting deadlines are imposed upon them. They must ensure that they comply with all the deadlines that have been provided.

Compliance Challenges:

Businesses face significant challenges meeting this deadline due to payment delays or disputes hindering timely acquisition of deserved ITC.

Impact on Cash Flow:

The import tax credit time limit can hurt cash flow, especially in industries with long payment cycles or during recessions.

Legal Ambiguity:

A challenge arises from the uncertain or unclear language and the misworded subsection (16)(4), opening the way for potential interpretation issues.

Counterarguments and Analysis

Legislative Intent:

It is crucially important to take into account the legislative purpose of introducing a time period for claiming ITC and whether it is in sync with the general objectives of the GST regime such as promoting tax compliance and minimizing revenue losses.

Preventing Fraud and Revenue Leakage:

Time limits performs very important functions like preventing tax evasion, fraud and revenue losses. Providing a mechanism whereby the government can avert the revenue loss is the role of Section 16(4).

Legislative Intent:

It is crucially important to take into account the legislative purpose of introducing a time period for claiming ITC and whether it is in sync with the general objectives of the GST regime such as promoting tax compliance and minimizing revenue losses.

Preventing Fraud and Revenue Leakage:

Time limits performs very important functions like preventing tax evasion, fraud and revenue losses. Providing a mechanism whereby the government can avert the revenue loss is the role of Section 16(4).

Harmonization with International Practices:

An evaluation of time limits for claiming ITC in the GST regime, in the context of international practices, may reveal whether they are reasonable and abide by global standards.

Conclusion

The debate on GST Act 16(4) highlights system weaknesses, compliance costs, and dispute settlement concerns.Clear legal definitions explaining judicial review are essential for a good GST experience. The business community needs to be able to adapt well to ITC provisions.

While GST may sound daunting, Book My Accountant will make sure that you are compliant and can grow your business with an efficient GST framework.