ICAI in its -Budget Memorandum – 2014 on Direct Taxes suggested imposition of TCS @1% on sale of all motor vehicles to increase the tax base in India.
Issue/Justification
India was the sixth largest motor vehicle/car manufacturer in the world in 2012. The sales of motor vehicles have increased manifold times since 2009. In fact the domestic motor vehicle sale that has been recorded in the year 2013 is 18.10 million units in which comprise of:
Passenger Vehicles: 1.81 million units,
Commercial Vehicles: 0.69 m,
Two-wheelers: 14.36 m,
Three-wheelers: 0.50 m
It may have been noticed that the number of motor vehicles cars owned are generally not commensurate with the income of the person offered to tax. Further, possibility of use of black money to purchase high value cars also cannot be ruled out.
In order to track information about the source of the income of the person seller of high value cars, say motor vehicles of value above 10 Lakhs, may be required to collect tax at source @1%. The assessee may, however, be allowed to take credit of tax so collected in his return after furnishing details of source of income in the relevant ITR form. The procedure followed in respect of section 206(ID) i.e. TCS on jewellery and bullion may be adopted.
Suggestion – In order to prevent evasion of taxes, Tax @1% of ex-showroom price should be allowed to be collected by the seller of high value cars, say, cars having value above Rs. 10 Lakhs, from the ultimate consumer. The consumer may however, be allowed to take credit of tax so collected in his return of income after furnishing details of source of income in the relevant ITR form. The procedure followed in respect of section 206(ID) i.e. TCS on jewellery and bullion may be adopted.
(SUGGESTIONS TO INCREASE THE TAX BASE)
Source- Pre-Budget Memorandum – 2014 on Direct Taxes by The Institute Of Chartered Accountant Of India, New Delhi
whrther it require to the company (saler) to collect tds at the time of sale of second hand motor car valued 150000/-. if yes at what %
What is wrong with ICAI?
does want to divert the attention of IT department from main issue?
While TDS of 1% on sale of immovable property itself is most stupid one because there is 9% to 14% tax as stamp duty paid and the dept is given the Annual Information of all transaction above 50,000.00
Full CG tax is paid Adv tax in the quarter in which it takes place?
The entire TDS is punitive in nature.
If a prof service of 200k is given as out-sourced and then again sub sourced at 150k in first stage and 2 sub sub of 60K each will have 23.5% or 47k as TDS. It is colossal fleezing and harassment of taxable public.
And now ICAI wants to add fuel by suggesting such TCS?
It is not a good suggestion, as vehicle buyers are paying high VAT tax, life tax etc., on purchases so far. So the new proposal of TCS 1% on all motor vehicles purchases is leading to be inflation hike.
USUALLY REPRESENTATION OF ICAI (FINANCIALS) ALWAYS GOES IN FAVOUR OF ITS MEMBERS ONLY. I DO NOT KNOW WHAT IS THE HIDDEN AGENDA OF ICAI (FINANCIALS) IN THE ABOVE SUGGESTION. IE, IN WHAT WAY CA CERTIFICATES ARE INSERTED IN THE ABOVE MATTER.
@june 13
To add:
Reproduced below, is the relevant sub-rule:
(2)(i) Where tax has been collected at source and paid to the Central Government, credit for such tax shall be given for the assessment year for which the income is assessable to tax.
As pointed out, collection of 1% is on ‘an item of “expense”. NOT “INCOME”.
How then the assessment year in which credit has to be allowed is decipherable or in practice, is decided by AO by applying what the cited sub-rule (2)(i) , in terms, provides. May be helpful should ‘Experts’ who hold any definitive view, not mind but care to enlighten the taxpayers !
In this context,attention may be usefully drawn to the write-ups on this website airing own viewpoints as to why the lately introduced section 194 IA is a ‘half baked’ enactment, fraught with like difficulties in its implementation, hence need to be appropriately amended. For reasons not known, the points made do not seem to have been made a conscious note of/percolated through, much less any remedial action,- on the premise that is inevitably called for, – either urged by taxpayers or been taken by the Revenue thus far. unless both have gone to opt for and go by the practical wisdom hidden in the attitude to, – ‘let the sleeping dog lie’!
More sporadic thoughts (consider4ed worth sharing):
Reg. the seemingly serious concern aired by ICAI on possible or suspected or imagined- unwittingly or otherwise- generation of black money vis irregularities in car sales, to add with a different stroke-
It touches upon twofold angle- buyers and manufacturers. While the latter are none other companies hence necessarily governed by the Company law, the former also could be companies similarly governed. As such, by reason of the extant mandate(s) of statutory audit (s), CAs appointed and functioning as auditors, not only under the company law, but under the excise duty law and income-tax law, and the excise duty law , have enough scope so as to play an active role; and are expected to play such an important role , even in the normal course, to the end of bringing about improvements in the obtaining scenario. This , in one’s conviction,is the most essential area to which the august body will do well to concentrate and decided upon concerted action.
Re the TCS,suggested as a route or tool for taking on and tackling the largely prevailing shameful social evil of- ‘corruption’, it nonetheless needs to be borne in mind that it, unlike TDS,is prima facie obnoxious in that, what is subjected to the advance collection is not ‘income'(in any sense of the term)but is ‘expense’; so much so, the constitutional validity or propriety of the very scheme made a part of the law on ‘income-tax’ (though remaining unchallenged so far, thanks to the imbecility of one and all who should really be concerned)is highly and strongly impeachable.
Hopefully, these and other related aspects should receive due consideration by the government, besides the governed (not excluding the professional bodies) sooner than later.
(Open to be ‘edited’ by law and other experts holding the field)
This is not a good suggestion to the govt. There are lot of areas to be brought under net. example. TCS on use of excess diesal, petrol by car owners, taxi owners excluding cab operators and govt buses. TCS on excess usage of electricity, TCS on subscription paid to clubs by the so called rich. TCS on flight charges -executive class, first class etc.
I suggest to the icai members not to think narrowly.
TCS on jewellery or bullion is attracted on cash transactions; is it not ?
One suggestion. If the car is financed by any scheduled bank, the suggested TCS should not be collected, as the source of income has already been proved.
The suggestion of 1% TCS on car sales, particularly the stated reason behind, prima facie, by any yardstick, makes for a ‘mamool’ /ordinary type; not really a brainy or exemplary one, so as to deserve to be commended. Instead, that creates in one’s mind a grave doubt,- are there not adequate checks and balances already built in and in force in the excise duty law / its administration, foolproof enough to ward off or keep a tag on any such irregularity as spoken of, in sales of motor cars by its manufacturers.
It may be interesting to know what really are the other suggestions, if at all proving worth the purpose or add credence.
Does this also cover Second hand Sale of Vehicles. eg, Certified second hand vehicles sold by Maruti. also there are other small businessmen who sale second hand vehicles.
The suggestion is fair but the fact to be noted is the buyers nowadays is from those who have agricutural income who are not being taxed. Even the high value transaction in the real estate is also from those who have no taxable income. As long as there is no cap on the limit of exemption for agricultural income, collecting TCS is a process which adds work load to the IT dept to process their reimbursement!