The Central Board of Direct Taxes (CBDT), the apex body for collection of indirect taxes in India, has clarified that no GST (Goods and Services Tax) will be levied on TCS (Tax Collected at Source) of a product. Thus going forward, the TCS component will not be part of the price of the good used for calculating GST on the supply. The CBDT has confirmed that this change will come into effect from 1st April, 2019.
What is TCS? When is it Applicable?
TCS or tax collected at source is an interim levy collected from the buyer by the government on the expected income of the seller of good/service. Subsequently, the TCS paid in lieu of goods bought is adjusted against the income tax liability of the buyer. Key goods that attract TCS include bullion purchases exceeding Rs. 2 lakhs and jewellery purchases exceeding Rs. 5 lakh.
Who will benefit from the Clarification?
This clarification regarding TCS and GST is expected to positively impact a wide range of industries especially companies in MSME segment. The biggest relief by far is however expected to be provided to the automotive sector and jewellery businesses which had reported confusion regarding a prior communication obtained from CBDT in December 2018 with respect to the relationship between TCS and GST.