There is always ambiguity regarding whether GST will be charge on TCS amount collected under Income Tax Act 1961 or not. Regarding this CBIC clarified it by issuing Circular no. 76/50/2018-GST dated 31st Dec 2018. Where it has been clarified that GST will be charge on Taxable Value, which shall include TCS.

As CBIC has gives the correct valuation methodology for ascertainment of GST on TCS under Income Tax Act 1961 by circular.

It states that as per Section 15(2) of CGST Act specifies that the value of supply shall include “any taxes, duties cesses, fees and charges levied under any law for the time being in force other than this Act, the SGST Act, the UTGST Act and the GST (Compensation to States) Act, if charged separately by the supplier.”

As it is clarified that as per the above provisions, 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.

But after receiving representations from various stakeholders. This matter again re-examined with CBDT (Central Board of Direct Taxes). 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.

After that Corrigendum to Circular No. 76/50/2018-GST issued on 7th March 2019. It has been clarified that 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 includible as it is an interim levy not having the character of tax.

Example: Purchase value of Timber Wood is ₹100000. TCS charged @2.5%. Rate of GST is 18%.

Solution: Before corrigendum to this Circular

Amount before Tax ₹100000
TCS @2.5% (100000*2.5%) ₹2500
Total Amt ₹102500
GST @18% (102500*18%) ₹18450
Grand Total ₹120950

After corrigendum to this circular

Amount before Tax ₹100000
TCS @2.5% (100000*2.5%) ₹2500
Total Amt ₹102500
GST @18% (100000*18%) ₹18000
Grand Total ₹120500

Conclusion:- Now, No GST will be charge on TCS amount under provosion of Income tax Act. As TCS is charged on Income rather than goods.

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8 Comments

  1. VIJAY GARG says:

    IN VIEW OF CORRIGENDUM TO CIRCULAR NO.76/50/2018-GST DT.07/03/2019 -NO GST ON TCS COLLECTED FROM BUYER AT THE TIME OF SALE.
    PL.CLARIFY WHETHER TCS UNDER INCOME TAX ACT IS REQUIRED TO BE COLLECTED ON TAXABLE VALUE OF GOODS EXCLUSIVE OF GST CHARGED OR TO BE COLLECTED ON AMOUNT INCLUSIVE OF GST AS PER INVOICE.

  2. vswami says:

    RIDER : As UPDATED on mar 9 > “No GST on tax collected at source levied on goods: Finance ministry”
    LESSON- A bitter one, but ALL in the name OF- ‘knowledge sharing’
    (: NOT to Post any Article; more so, comment , taking for granted that there could be no such oversight of any rethinking on the part of say, FM- AN ONGOING PROCESS !
    COURTESY

  3. Chandravijay Shah says:

    See above:

    After corrigendum to this circular:

    GST @18% (1,02,500*18%) ₹18000:

    Instead of 1,02,500, it should be 1,00,000, though GST Amt is correct.

  4. vswami says:

    IMPROMPTU

    The most stupid of all so far come across; patently founded on a convoluted thinking by the brain(s) behind. TCS , same as TDS, is a responsinbility imposed on the complier as an agent of the Government. As such, he does a thankless, job, rendering a onerous service, if so to be callerd, to the government- only to the government, none else.
    Any better reasoned view/counterview, to share ?

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