Taxable value for the purpose of GST not to include TCS amount collected under Income Tax Act, 1961

The Finance Act, 2020 has amended the provisions relating to Tax Collection at Source (“TCS”) with effect from October 1, 2020 to provide that seller of goods shall collect tax @ 0.1 per cent (0.075% up to 31.03.2021) if the receipt of sale consideration from a buyer exceeds Rs. 50 lakh in the financial year. Further, to reduce the compliance burden, it has been provided that a seller would be required to collect tax only if his turnover exceeds Rs. 10 crore in the last financial year.

From GST perspective, it is important to note that in terms of sec 15(2)(a) of the CGST Act, 2017, the value of supply includes “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”. 

But, it is clarified in Circular no. 76/50/2018 – GST dated December 31, 2018 as substituted vide Corrigendum to Circular No. 76/50/2018-GST dated March 7, 2019, that for the purpose of determination of value of supply under GST, TCS under the provisions of the Income Tax Act, 1961 would not be includible as it is an interim levy not having the character of tax.

However, before the corrigendum, the above circular provided that 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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DISCLAIMER: The views expressed are strictly of the author and A2Z Taxcorp LLP. The contents of this article are solely for informational purpose. It does not constitute professional advice or recommendation of firm. Neither the author nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon.

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6 Comments

  1. DEVENDRAN says:

    IGNOR INFORM TCS CHARGES ON SALE OF EXEMTION TURNOVIER DETAILS IN DAILY PAPER
    TO KNOWN THE DEALERS ABD ALSO PLEASE HOW TO PREPARE TCS CHARGES IN SALES AND PURCHASES

  2. suresh kumar sharma says:

    ir, In Logistics service business where
    1)GSTIN Registered is in Telangana,
    2)Supplier’s GSTIN Registered in Maharashta 3)Vehicle supplied/placed from Tamil Nadu to
    Karnataka.Then, What is the Place of supply applicable in as per GST . Kindly Advice.

  3. suresh kumar sharma says:

    Sir, In Logistics service business where
    1)GSTIN Registered is in Telangana,
    2)Supplier’s GSTIN Registered in Maharashta 3)Vehicle supplied/placed from Tamil Nadu to
    Karnataka.Then, What is the Place of supply of: applicable in as per GST . Kindly Advice.

  4. MAHESH UTTAM SHINGARE says:

    We have mapped TCS taxable inclusive of GST amount ? Does this cascading effect ? We are in dilemma which is correct. We are having 6000 crore turnover p.a. Please advice on legal point of view which is correct ?

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