The
Central Board of Indirect Taxes and Customs (CBIC) has clarified that
for the purpose of calculation of GST on a particular good, the tax
collected at source (TCS) would not be included in
the price of the good
as the same is an interim levy.
A clarification in this regard
was issued by the CBIC after representation from the industry and
consultation from the Central Board of Direct Taxes (CBDT). According to
the clarification, 'TCS is not 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 of the buyer'.
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Tax
experts say the clarification is a big relief for many industries.
Abhishek Jain, Tax Partner, EY India, 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 leviable
on the TCS component, given the otherwise clarification by the
government, they were quite apprehensive of litigation on this aspect".
The
clarification came following a circular issued on 31 December 2018,
where it was said that the taxable value for the purposes of GST should
include the TCS amount collected under the provisions of the Income Tax
Act, as the value to be paid to the supplier by the recipient was
inclusive of the said TCS.
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TCS
is collected from buyers of certain goods--Bullion that exceeds over Rs
2 lakhs/ Jewellery that exceeds over Rs. 5 lakhs, etc--by sellers. TCS
is used as a mechanism by the income tax department to track evasion of
tax.