Buyers of high-value goods could see the final cost of products such as jewelry, bullion and motor-vehicles drop in the coming days.
The Central Bureau of Indirect Taxes and Customs has clarified in a corrigendum about a previous circular. In December 2018 the CBIC issued a circular saying that the taxable value for purposes of GST shall include the Tax Collected at Source (TCS) component under provisions of Income tax act.
However, in a corrigendum published on March 7 2019, the department made a clarification stating they were made in consultation with stakeholders including the Central Bureau of Direct Taxes (CBDT).
The circular signed by Upender Gupta, Principal Commissioner for GST says, "The CBDT has clarified that Tax collection at source (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."
The circular from CBIC further adds, "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 includible as it is an interim levy not having the character of tax."
This circular could impact the pricing of motor vehicles priced above Rs 10 lakhs, jewellery of over Rs 5 lakhs and bullion priced over Rs 2 lakhs. TCS (Tax Computed at Source) is in the range of 1% on general products.
In April 2017, cash purchases of jewellery were to attract 1% TCS for amount over Rs 2 lakhs. Previous ceiling was Rs 5 lakhs.
The policy also stated that the buyer would pay a 1% TCS on motor vehicles priced over Rs 10 lakhs (ex-showroom Price). This amount could be calculated by the manufacturer as well as dealers.
After the corrigendum was published, a PTI story cited industry experts saying that the latest clarification was a relief to automotive industry and removed the complicated mechanism of calculating GST where TCS-Income tax was also involved.
The latest circular could be a value accretive for the Gold and jewellery industry. This could also spur buyer sentiment in the automotive industry.
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