TCS under Income Tax Act not includable in value for charging GST: Corrigendum issued by CBIC

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Earlier, the CBIC vide serial number 5 of Circular No. 76/50/2018-GST dated December 31, 2018, has clarified that the taxable value for the purposes of GST shall include the Tax Collected at Source (“TCS”) amount collected under the provisions of the Income Tax Act, 1961 as the value to be paid to the supplier by the recipient is inclusive of the said TCS.

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. Hence, a corrigendum is issued to clarify that for the purpose of determination of value of supply under GST, TCS under the provisions of the Income Tax Act would not be includible as it is an interim levy not having the character of tax.

Comparison of clarification issued earlier and now as it exists after issuing corrigendum is given as under:

S.NO. 5 Circular No. 76/50/2018-GST

As per Circular dated December 31, 2018

(Previous)

After Corrigendum dated March 07, 2019

(Now)

What is the correct valuation methodology for ascertainment of GST on Tax collected at source (TCS) under the provisions of the Income Tax Act, 1961?

1. 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 this Act, the SGST Act, the UTGST Act and the GST (Compensation to States) Act, if charged separately by the supplier.”

2. 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.

1. 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 this Act, the SGST Act, the UTGST Act and the GST (Compensation to States) Act, if charged separately by the supplier.”

2. 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.

The complete Corrigendum to Circular can be accessed at: http://www.cbic.gov.in/resources//htdocs-cbec/gst/Corrigendum_76-2018.pdf;jsessionid=0B087CB537779294C86688A04250DD4F