Clarification From CBIC: GST Will Not Be Levied On Tax Collected At Source On The Purchase Of High-Value Items

The Central Board of Indirect Taxes and Customs (CBIC) has stated that Goods and Services Tax (GST) will not be collected on Tax Collected at Source (TCS) on high-value items, reports Press Trust of India (PTI).

“For the purpose of determination of value of supply under GST, tax collected at source (TCS) under the provisions of the Income Tax Act, 1961, would not be included as it is an interim levy not having the character of tax,” a notification by CBIC stated.

Tax collected at source (TCS) is a tax payable by a seller which he collects from the buyer at the time of sale. Under the IT Act, TCS is levied at one per cent on purchase of motor vehicles above Rs 10 lakh, jewellery exceeding Rs 5 lakh and bullion over Rs 2 lakh. It is also applicable on other high-value purchases at different rates.

GST on TCS would have implied a tax on tax, creating confusion. Thus, it has been removed.

Big Relief

EY India Tax Partner Abhishek Jain told PTI, “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, they were apprehensive of litigation on this aspect. The clarification by the government is a a welcome move.”