Relief for auto sector: No GST on tax collected at source, government clarifies

NEW DELHI: In a relief for the automobile sector, the government has clarified that no goods and services tax needs to be paid on tax collected at source (TCS) under the Income Tax Act.

The Central Board of Indirect Taxes and Customs had earlier said that GST is payable on the invoice value plus TCS and not just on the value of the goods, implying that consumers had to cough up GST on the value of tax collected by an auto dealer.

TCS is applicable on automobiles priced above Rs 10 lakh at the rate of 1% and is levied on the ex-showroom price, which includes the applicable GST. This directive had the sector worried over increase in prices.

It also affected the telecom sector, especially the tower segment, which faces GST and TCS levies on the sale of scrap, besides the mineral and coal sectors.

The directive was issued in the form of a corrigendum to the circular issued on December 31, following representations from the industry.

“In the light of the representations received from the stakeholders, the matter has been re-examined in consultation with the Central Board of Direct Taxes (CBDT).

The CBDT has clarified that 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,” it said.