Several policy changes, including taxes on foreign remittances, debit and credit card usage, easing commuter convenience, etc are effective starting October 1.

The Narendra Modi government is introducing several policy changes — including taxes on foreign remittances, debit and credit card usage, easing commuter convenience — that will be effective starting October 1.

The Wire looks at six important changes and how it will affect both businesses, consumers and the average citizen.

New tax rules for e-commerce players

In order to bring the e-commerce ecosystem into the tax net, online retail companies will now be required to deduct income tax at source (TDS) at the rate of 1% of the gross amount on sales or services facilitated by the digital platform. The deduction is to be made at the time of payment to the e-commerce participant.

However, there’s a lack of clarity on several issues such as definition of “services” and “gross amount”.

An e-commerce platform has three different models of business: inventory-based model (where goods are directly sold by the e-commerce platform), marketplace-based model (where the e-commerce platform acts as an operator between buyers and sellers) and hybrid of inventory- and marketplace-based model. The new section 194-O of the Income Tax Act seeks to target marketplace-based model of e-commerce platforms, as per an ET report.

Andersen LLP Partner Sandeep Jhunjhunwala told ET in a report that the most significant uncertainty on e-commerce TDS is around the treatment of subsequent returns of goods by customers and consideration of discount codes and gift vouchers for computing amounts to be subject to TDS.

The section 194-O also mandates a seller to collect 0.1% tax from the buyer if sale consideration exceeds Rs 50 lakh or if aggregate sale value exceeded Rs 50 lakh in any previous year.

Also read: Labour Laws Perform a Redistributive Function. Diluting Them Has Serious Consequences.

E-invoicing for large businesses

Taxpayers with an aggregate turnover exceeding Rs 500 crore in a financial year will have to generate e-invoices from this month onwards.  E-invoicing involves uploading details about GST invoices, credit notes, debit notes for all B2B supplies and exports on a portal designated by GSTN, the company that process tax returns. This is apart from the regular invoices created on their own accounting/billing/ERP systems.

According to reports, larger companies will be most affected as many of them generate around 5,000 invoices per day.

Experts said although the move is expected to reduce errors and mismatches and may prove to be helpful in the long run, but it may also create additional workload on the firms initially. Pune-based tax consultant Pritam Mahure told The Hindu in a report that some of the taxpayers are ready, however, there are a few taxpayers who are still struggling due to lack of access to IT team and resources for implementing e-invoicing.

The Central Board of Indirect Taxes and Customs (CBIT) on Thursday said in a statement that it has waived penalties on e-invoices issued during October, only if the companies comply within 30 days, said a report. It added that no such relaxation would be available for the invoices issued from November 1, 2020.

Tax on foreign remittances 

Any foreign remittance exceeding Rs 7 lakh will attract a tax collected at source at the rate of 5% at the time of remitting the money or at the rate of 10% if PAN or Aadhaar is not available, according to a report. However, TCS will not be applicable if the remitter is subject to the TDS, under the Income Tax Act, 1961.

For education-related foreign remittances funded by loans, a TCS of 0.5% will be levied for an amount above Rs 7 lakh.

It is also important to note that the TCS will not be applicable if you make all arrangements of foreign tour on your own.

Debit and credit cards

All new credit and debit cards issued by banks will now be only enabled for transactions at ATMs and point of sale (PoS) terminals within India, and both card holders will now be allowed to set up transaction limits.

Card users will now have an option to opt-in or opt-out of services for online transactions (e-commerce), international transactions, and NFC-based transactions, through their bank’s mobile app or internet banking. This won’t be the default anymore.

Smart TVs to become costlier

Open cell panels that are used to manufacture LCD/LED screens for televisions will attract 5% import duty from this month. The move comes amid an upcoming festive season and efforts by the government to incentivise local manufacturing.

Open cell panel is the most important and expensive component used in TV manufacturing. It accounts for 65-70% of its production cost, as per reports. At present, there are no panel manufacturers in India.

“The current zero customs duty regime for open cells ended on September 30. The idea was to enable TV makers to become self-reliant by sourcing these components locally,” a government official told Moneycontrol in a report.

Motor vehicle rules

The Ministry of Road Transport and Highways recently made some amendments to the Central Motor Vehicles Rules, 1989, effective October 2020, to improve safety issues on the road.

Vehicular documents like driving license, registration certificate, insurance documents, etc that are validated through government portal will not be required in physical form anymore. The documents can be uploaded on digi-locker or m-parivahan, which are available on Play Store. Other measures like license disqualification, issuing challans, etc will also happen digitally. Drivers can use mobile phones only for route navigation, so that they don’t lose their concentration while driving.