Applicability of GST on TCS Collected under Income Tax Act.

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INTRODUCTION:-

Goods and Services Tax [GST] has been imposed on "supply of goods or services". That means for the purpose of imposition of GST there has to be supply, if there is no supply then no GST will be impose. Once supply is identified then next question is raised what would be the taxable value on which GST is being charged.

As per Section 15 of CGST Act, 2017 says that Taxable value shall be the "TRANSACTION VALUE".

Transaction Value:- It is a combination of three elements.

"Price actually paid or payable for the supply (+) Supplier and the recipient of the supply are not related (+) Price is the sole consideration for the supply"

Further Section 15(2) Says that Transaction Value shall include "Any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than this Act, the State Goods and Services Tax Act, the Union Territory Goods and Services Tax Act and the Goods and Services Tax (Compensation to States) Act, if charged separately by the supplier.

SUBJECT:-

Various doubts have been raised as to whether TCS collected under Income Tax Act, 1961 falls under the definition of "TRANSACTION VALUE"?

CLARIFICATION:-

Plain reading of Section 15(2) of CGST Act, 2017 it is clarify that TCS collected under Income Tax Act, 1961 shall be the part of Transaction Value.

The above clarification is also supported by Circular No. 76/50/2018-GST Dt. 31st December, 2018.

After receipt of representations from stakeholders, the matter has been re-examined in consultation with the Central Board of Direct Taxes (CBDT). The CBDT has clarified that Tax collection at source (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.

The above decision is taken wide Corrigendum to Circular No. 76/50/2018-GST.

After reading the wordings of the Corrigendum to Circular No. 76/50/2018-GST it can be understood that only Indirect Tax will be the part of Transaction Value and Direct Tax shall be out of preview of Transaction Value, because it is an interim levy not having the character of tax.

CONCLUSION:-

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 include.

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