The Central Board of Indirect Taxes and Customs (CBIC) has declared that now TCS (Tax Collected at Source) would not be subsumed in the value of goods while calculating the GST (Goods & Service Tax).
The new declaration by the CBIC has brought good news for the luxury car lovers as the suspension of TCS from the value of goods for computing GST will consequence the alteration in rates of goods. Here, the affluence items include cars and jewellery having big value.
TCS is applicable at different rates on different items as per the norms of the Income Tax Act. As far as the premium car, jewellery & gold is concerned, TCS is imposed at the rate of 1% under the following circumstances:
- When the value of motor vehicle exceeds Rs.12 lakh
- When the value of gold jewellery surpasses Rs. 5 lakhs
- When the value of bullion is over Rs 2 lakh
But as per the new rules circulated by the Central Board of Indirect Taxes and Customs (CBIC), the TCS amount would be disallowed from the value of goods while estimating the Goods and Services Tax (GST) liability.
The Central Board of Indirect Taxes and Customs (CBIC) has changed their decision taken initially at the beginning of December, the decision regarding inclusion of TCS in the value of Goods when the TCS will be levied as per the Income Tax ACT. After receiving the representations from various stakeholders and discussing the same with Central Board of Direct Taxes (CBDT), where CBDT made it clear that TCS is not a tax paid on goods & services by the purchaser but an interim charged on the expected “income” resulting out of the trading of goods and services and needs to be adjusted against the final income-tax liability, the CBIC concluded to discontinue the incorporation of TCS amount in the value of goods for the calculation of GST liability.
“For the purpose of determination of the value of supply under GST, Tax collected at source (TCS) under the provisions of the Income Tax Act, 1961 would not be includible as it is an interim levy not having the character of tax,” the CBIC said.
The clarification, made by CBIC that alike income tax-acquired by the sellers at source on the value of the goods sold payable to the government on behalf of the consumer is not subject to GST, delivered a lot of relief to the businesses, especially to the automobile sector.
As per the tax expert, “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”.
“Recent corrigendum of CBIC eased the calculation process by breaking the circular referencing which would also result in marginally rationalising the tax payments (GST and income tax both),” the expert said.
AMRG & Associates Partner Rajat Mohan admitted that the former circular issued in December declared that the value of the product on which GST is to be charged is all-encompassing of TCS, resulted in the bewilderment among the traders as it amounted to a tax on tax.
The former declaration made the mechanism complex for the calculation of GST, while the latest GST circular eased the same process to a great extent and brought relaxation to the traders as well as customers.
