As per the new Rules and latest Directives from the CBIC (Central Board of Indirect Taxes and Customs), the Cars having price range more than Rs 10 lakh could cost more to the Indians due to the extra tax charged as per the new directives and rules from the Government’s end. As per the Government Rules, GST is payable on the invoice value plus tax collected at source under the Income-tax and not only on the value of the goods. In support of this law, the clarification statement says that the customers will ultimately have to pay GST on the value of tax collected by an auto dealer.
Besides the minerals and coal sectors, the telecom sector, especially the tower segment that faces GST and TCS levies on the sale of scrap, would get impacted by the latest directive from the Government.
TCS is applicable on automobiles costing above Rs 10 lakh, at the rate of 1% and is charged bases the ex-showroom price, which includes the applicable GST.
“It is clarified that… taxable value for the purposes of GST collection shall include the TCS amount collected under the provisions of the Income Tax Act as the value has to be paid to the supplier by the buyer is inclusive of the said TCS,” the CBIC said in a circular.
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Under the income tax law, the suppliers of some particular goods are liable to collect TCS on items like scrap, at the time they receive the amount against supply. The recipient of the supply who is subjected to TCS could claim a deduction in lieu of the tax collected while discharging his income tax liability.
According to experts, this clarification would adversely impact the automobile industry and would eventually result in the increase in the price of the goods and would impact the pocket of the customers.
If we see thoroughly, TCS is basically not a consideration for the goods sold but is merely the collection of income tax on behalf of the buyer. Hence, in such case, the applicability of GST looks incorrect.
“Typically, the practice of industry has been to exclude TCS while computing GST. If GST is required to be paid on TCS, then it will lead to additional burden on consumers and will also result to a circular reference in computation as TCS is to be computed on GST as well,” said Pratik Jain, partner and national indirect taxes leader, PwC.
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Jain further added that since TCS is essentially collected and paid on behalf of the buyer, logically it should not be subjected to GST. Also, the government should understand and consider amending the law, if required.
Kerala HC Reverse the Decision on TCS Under GST
The Kerala high court recently opposed the decision on TCS under GST on the cars above 10 lakh in India. The opposed decision has come across through the media. The court has stayed the applicability of GST on TCS as it demanded further review on the applicability of such tax. The auto industry explained that such additional would further hamper the industry growth as well as surge the price unnecessarily.
