But many businessmen and their accountants said that refunds are taking time where the amount is more than Rs 1 crore. “These are mostly medium businessmen, and they say the delay is affecting their working capital. vertical TDS Rates are the reason for credit of refunds,” said one of them.
A chartered accountant said that this situation is forcing some traders to take expensive loans.
Businesses are required to deposit 10% TDS to the IT department on receipt of invoice amount from a customer. “The 10% TDS combined with 18% GST is almost a third of the transaction value. In most deals above Rs 1 crore, the company usually has a single digit margin. When IT executives keep 10% TDS. Long By the time, it creates serious liquidity issues,” said Vivek Mallya, a CA in Bengaluru.
The IT department pays 6% interest on delayed refunds, but businessmen say short-term borrowing to address the liquidity crunch comes at a higher cost, hurting margins.
An entrepreneur in Bengaluru said that the department has dues of around Rs 4 crore for the year ended March 2020, as per a notice received by him six months ago. But he hasn’t got the refund yet.
A Bengaluru-based CA R Ramakrishnan said the IT department issued refunds expeditiously, regardless of their size, from March to September last year during the height of the Covid-19 pandemic. “But now, even in cases where refunds are processed, officials are not sending checks on one pretext or the other,” he added.
“Even in cases where refunds are processed, officials are not sending checks on one pretext or the other”
Shailesh Monani, partner, audit and consulting firm PW&Co, said corporates are facing difficulties even in situations where refunds have been determined as due. “Another practical issue that affects foreign companies is that they are now required to have a bank account in India to get refunds. Opening such a bank account is time-consuming and not easy for foreign companies.”
Delhi-based FCA Pradeep Goyal said in a tweet,
MSMEs are waiting for refunds for the assessment year 2020-21, which, he said, have not been processed yet.
The IT Act, 1961, empowers officers under section 241A to withhold refund if the assessee is under assessment. Mallya said, “But the IT officer can invoke this provision only after recording the reason with proper information to the assessee with prior approval from his higher-up. But this is not happening, resulting in the assessee unable to contest the election. Huh.”
The IT law has provisions to allow a low-withholding rate or zero withholding rate in certain cases. But the department has been very reluctant to issue these orders even in appropriate cases, he said.