Individuals looking to buy a car priced Rs 10 lakh and above need to pay an extra amount towards Goods and Services Tax (GST) as per the latest order from Central Board of Direct Taxes (CBIC). As per the latest clarification, customers are required to pay GST on both invoice value in addition to tax collected at source (TCS) under income tax rules. Those looking to buy a car will now have to pay GST on the value of tax collected by a car seller as well. As of now, TCS is applicable on automobiles that are priced above Rs 10 lakh at a rate of one per cent and is usually levied on the ex-showroom price which already includes applicable GST.
In a circular released four days ago, the tax body said, Section 15(2) of CGST Act specifies that the value of supply shall include any taxes, duties cesses, fees and charges levied under any law for the time being in force other than the SGST Act, the UTGST Act and the GST [Compensation to States] Act, if charged separately by the supplier. It is clarified that as per the above provisions, taxable value for the purposes of GST shall include the TCS amount collected under the provisions of the Income Tax Act since the value to be paid to the supplier by the buyer is inclusive of the said TCS, the circular added.
According to an Economic Times Report, the latest directive is expected to cause disruption in the telecom sector as well, especially due to the tower business which will now have to give GST and TCS on sale of scrap; mineral and coal sectors will also be affected. The clarification is also expected have an adverse effect on several other industries but mostly the automobile sector as cost of buying scrap material will also be taxed additionally.
Vide notification No. 36/2017-Central Tax (Rate) and notification No. 37/2017- Integrated Tax (Rate) both dated 13.10.2017, it has been notified that Intra-State and inter-State supply respectively of used vehicles, seized and confiscated goods, old and used goods, waste and scrap by the Central Government, State Government, Union territory or a local authority to any registered person, would be subject to GST on reverse charge basis as per which tax is payable by the recipient of such supplies, it said.
Tax experts have failed to understand the new clarification, claiming that excluding TCS while computing GST is an industry practice and that it will bury customers with additional taxation. Since TCS is collected by the seller and paid on behalf of the buyer, it should not ideally be subject to GST. If GST is ultimately levied on TCS, it would not only add to the total cost of the vehicle but also make the process complex for the customer.