Kerala HC stays GST provisions on TCS

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Published: January 21, 2019 1:25:31 AM

The GST provision has hit car dealers particularly hard as they collect 1% TCS from buyers purchasing cars worth over Rs 10 lakh.

Kerala HC stays GST provisions on TCS

The Kerala High Court through an interim order has stayed the GST provision which mandates that tax collected at sources (TCS) by the supplier — according to provisions of the Income Tax Act — must be included in the value of supply for levying the GST. The court said the provision would remain suspended until it decides the writ petition challenging the same.

The GST provision has hit car dealers particularly hard as they collect 1% TCS from buyers purchasing cars worth over Rs 10 lakh. In such instances, a car dealer acts like a state agent as required by the specific Income Tax Act provision. This collection is one of ways to monitor high-value transaction by the government since the buyer paying TCS can claim the credit of the same in annual IT return filing.

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Abhishek Jain, tax partner at EY, said: “The court’s direction to stay any actions by the government on inclusion of TCS for the purpose of GST brings a significant gleam of hope for various industry players; in specific, the automotive industry. This issue gained importance after an explicit clarification was issued by the government for inclusion of TCS in the value of supply with most industry players having adopted a position otherwise.”

The indirect tax department had issued the clarification last year. It said: “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.”

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