Courts in India have started taking strict actions against companies that have been knowingly causing a delay or following ways to avoid to deposit the tax deducted at source (TDS) to the government. In a recent action, directors of two Indian companies were given jail term for six months and one year respectively by a court. The court has also instructed the two companies to pay a fine for the offense.
Another Indian court has fined a plastic manufacturer company with Rs 8 lakh fine for the same offense. All the three orders have been issued in the past two months, which will send a definite signal to companies who are involved or may plan to get involved in the similar GST offenses, says a GST official.
Among the two companies mentioned above, one is a Delhi based construction company which had reportedly committed a tax default of over Rs 60 lakh during FY 2009-10. The director of the company has received six months’ jail along with a fine of Rs 25,000 for violating TDS related tax laws.
The second one is a hospitality firm in Delhi which has been found guilty of causing the delay in depositing TDS amount to the government account. According to reports, the firm had collected about Rs 25 lakhs in TDS during FY 2008-09 and 1009-10 but the payment to the government was only made a year later. The director of the said company has been sentenced for 12 months of imprisonment, along with Rs 1 lakh of fine for the offense.
The third case was processed by a trial court which has sentenced a plastic manufacturing company with Rs 8 lakh fine for committing TDS default of around Rs 79 lakh during three consecutive financial years in the period of 2008 to 2011. The case was forwarded to the session court which decided to uphold the lower court’s decision.
“The delay in payment of TDS causes undue hardship to taxpayers as their taxes are deducted but not deposited in the government account. Hence these taxpayers find it difficult to claim the credit for their taxes,” said an official.
According to the Income Tax Act, any income tax amount deducted must be submitted to the central government within seven days of the month in which the tax has been charged. Failure to do so will result in prosecution followed by jail sentence or fine or both if proved guilty. The deductors can, however, avoid prosecution by offering to pay higher penal interest to compound the offense.