In a major relief to the automobile industry in the State, the Kerala High Court has granted a temporary stay on the collection of tax at source under the Goods and Services Tax ( GST ).
The provision imposing one percent GST on certain items were implemented by the Government in last October. A similar provision is there in the Income Tax Act to impose TCS on certain high-value goods including the sale of cars above Rs 10 lakh.
TCS is collected to identify purchasers of high-value goods and is adjusted to the income tax payment of these buyers. Last month, the Central Board of Indirect Taxes and Customs (CBIC) came out with a circular on imposing GST on this TCS.
The dealers approached the Court contended that TCS is not the consideration of cars and therefore, GST cannot be included in it.
GST up to 48 percent apply to luxury cars. As such, that much tax was to be imposed on TCS on these cars.
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 as a state agency as required by the specific Income Tax Act provision. This collection is one of the ways to monitor high-value transaction by the government since the buyer paying TCS can claim the credit of the same in annual Income Tax return filing.
