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21-01-2019
Kerala HC stays applicability of circular providing for GST on TCS amount
HIGH COURT OF KERALA AT ERNAKULAM
PSN AUTOMOBILES PRIVATE LIMITED .. Petitioner
Versus
UNION OF INDIA, CBIC ... Respondents
Facts & Contentions: The Petition under Article 226 of Constitution of India was filed challenging the validity of Sl. No. 5 of Circular no. 76/50/2018- GST dated 31st December, 2018 which provides that GST to be charged on taxable value shall include TCS amount collected as per the provisions of Section 206C of Income Tax Act. The petitioner contends that they are dealer of the motor vehicles and while collecting TCS, they act only as the agent of the Central Government. The amount of TCS cannot be treated as integral part of the value of goods as per Section 15 of CGST Act. Further, the amount of TCS will eventually be credited to the Vehicle Purchaser’s Credit (under Income Tax).
Observation and Decision: The petitioner has raised a prima facie issue which needs Court’s attention. Therefore, the authorities (tax department) shall not act on the clarification pending disposal of the writ petition.
Let us understand the issue with the help of an illustration:
A Ltd. sells motor vehicle for an amount of Rs.11 lacs. On the sale of such motor vehicle Income Tax is required to be collected at source at 1% as per the provisions of Section 206C(1F) of Income Tax Act. The GST rate of vehicle is assumed to be 28%. Now the moot question is whether GST rate of 28% would be applied on value of motor vehicle amounting Rs.11 lacs or it would be applied on Rs.11.11 lacs (i.e. value including TCS)?
As per the above-mentioned circular, GST at the rate of 28% would be applicable on Rs.11.11 lacs. However, it is opinioned that circular does not provide for correct clarification as the TCS amounting to 0.11 lacs does not form part of the transaction value as per Section 15 of CGST Act since it is not the ‘price paid’ for supply of Car. Section 206C itself states that 1% is being collected as ‘Income Tax’. Further, TCS amount is credited to the buyer’s ledger for which it can claim credit under Income Tax Act.
Now another interesting issue which can be raised is whether TCS at the rate of 1% would be applicable on 11 lacs or it would be applicable on Rs.14.08 lacs (i.e. value including GST)?
Section 206C(1F) of Income Tax Act reads as “”Every person, being a seller, who receives any amount as consideration for sale of a motor vehicle of the value exceeding ten lakh rupees, shall, at the time of receipt of such amount, collect from the buyer, a sum equal to one per cent of the sale consideration as income-tax””.
The underlined potion makes it amply clear that TCS is required to be calculated on Rs.11 lacs being the consideration of sale of a motor vehicle.
Summing Up: In this transaction, GST would be applied on Rs.11 lacs. Similarly, TCS should also be applied on the same amount i.e. Rs.11 lacs. The circular has far reaching ill effects till it is withdrawn. |
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