In a relief to buyers of high-value cars and jewelry, the Central Board of Indirect Taxes and Customs (CBIC) has said that the TCS amount would be excluded from the value of goods for computing Goods and Services Tax (GST) liability.
Not just automobiles and jewelry, under the I-T Act, tax collection at source (TCS) is also levied on other purchases at different rates.
TCS levied at 1% if purchasing motor-vehicles above Rs. 10L
Under the I-T Act, the TCS is levied at 1% on purchase of motor vehicles above Rs. 10 lakh, jewelry exceeding Rs. 5 lakh and bullion over Rs. 2 lakh.
For other purchases, it is levied at different rates.
The CBIC in a circular said that the TCS amount would be excluded from the value of goods while computing the GST liability.
CBIC took the decision after consultation with CBDT
Earlier in December, the CBIC had said that the TCS amount would also be included while ascertaining the GST liability on goods on which TCS is applicable under the I-T Act.
In view of the representations received from various stakeholders and after consultation with the Central Board of Direct Taxes (CBDT), the CBIC has decided to exclude the TCS amount.
TCS is not a tax but a interim levy: CBIC
The CBDT has clarified that TCS isn't a tax on goods but an interim-levy on the possible "income" arising from the sale of goods by the buyer and to be adjusted against the final income-tax liability.
"For the purpose of determination of value of supply under GST, TCS wouldn't be includible as it's an interim-levy not having the character of tax," the CBIC said.
This clarification comes as quite a relief for businesses: Jain
Ernst & Young (EY) India Tax Partner Abhishek Jain said, "This clarification comes as quite a relief for businesses specifically the automotive sector."
"While most industry players already believed that GST should not be levied on the Income-tax TCS component, given the otherwise clarification by the Government, they were quite apprehensive of litigation on this aspect," he further said.
Recent corrigendum of CBIC eased the calculation process, said Rajat
AMRG & Associates Partner Rajat Mohan said the erstwhile circular issued by the CBIC unnecessary complicated the mechanism of calculating GST where TCS-Income tax was also collected by the supplier.
"Recent corrigendum of CBIC eased the calculation process by breaking the circular referencing which would also result in marginally rationalizing the tax payments (GST and income tax both)," Mohan said.