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'.
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.
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.