Case Law Details

Case Name : PSN Automobiles Private Limited Vs. UOI & CBIC (Kerala High Court at Ernakulam)
Appeal Number : WP(C) No.680/2019
Date of Judgement/Order : 17/01/2019
Related Assessment Year :

PSN Automobiles Private Limited Vs. UOI & CBIC (Kerala High Court at Ernakulam)

Petitioner, has submitted that the amount of 1% the dealer collects from the purchaser of a car worth more than ten lakhs, under Section 206C(1F) of the Income Tax Act, cannot be treated as an integral part of the value of the goods and services supplied by the petitioner. According to him, the petitioner, as the dealer of the motor vehicle, acts only as an agent for the State to collect the income tax under Section 206C(1F). And that amount will eventually goes to the vehicle purchaser’s credit.

Earlier CBIC has clarified vide Circular No. 76/50/2018-GST dated 31st December, 2018 that taxablevalue 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.  Against this clarification present writ been filed and Kerala High Court has put on hold the computation of GST on TCS amount till disposal of the petition.  

FULL TEXT OF THE HIGH COURT JUDGMENT / ORDER IS AS FOLLOWS:

Section 15 of the Goods and Services Tax Act speaks of the value of goods and services, besides defining how the value of supply shall be reckoned. It says that the value of supply of goods, services, or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply.

2. Section 15(2) mandates that the value of supply shall include any taxes, duties, cesses, fees and charges levied under any other law in force.

3. As has been rightly contended by the learned Senior Standing Counsel for the Customs Department, Section 15(2)(a) is expansive. Yet Sri Gopinathan, the learned Senior Counsel for the petitioner, has submitted that the amount of 1% the dealer collects from the purchaser of a car worth more than ten lakhs, under Section 206C(1F) of the Income Tax Act, cannot be treated as an integral part of the value of the goods and services supplied by the petitioner. According to him, the petitioner, as the dealer of the motor vehicle, acts only as an agent for the State to collect the income tax under Section 206C(1F). And that amount will eventually goes to the vehicle purchaser’s credit.

4. In this context, the learned Senior Counsel has drawn my attention to the last portion of Section 15(2)(a), which emphasises “charging of tax, duties, cess or fee by the supplier”.

5. Indeed, recently a constitution Bench of the Hon’ble Supreme Court in Commissioner of Customs (Import), Mumbai v M/s. Dilip Kumar & Co. (Judgment dated 30.07.2018 in Civil Appeal No.3327/2007) has held that any ambiguity in taxing provision should be resolved in the State’s fare. Yet, in this context, to conclude either way it needs further and deeper adjudication. Thus, the petitioner has raised a prima faciee issue, which needs Court’s attention.

6. I, therefore, hold that the authority will not act on the clarification at Sl.No.5 of Ext.P1 pending the disposal of the writ petition. I, however, clarify that this arrangement shall be subject to the outcome of the writ petition and without prejudice to the rights of the Department in collecting the taxes in future if the writ outcome is adverse to the petitioner.

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6 Comments

  1. CA sunil gaur says:

    It’s a deeper legal issue. Logically TCS should be excluded from value of services as it is not being charged from customer for goods but because of a requirement of law it is being collected and deposited in the income tax account of customer. So it should be excluded. Gst act should be amended or be interpreted this way

  2. Madhusudan says:

    It is the Income Tax Department which is using the services of the dealer to collect tax on its behalf.Why shouldn’t the IT dept pay the Service Tax onunder GST.

    1. M R RAJHSHEKAR says:

      Even income tax department has given clarification with regards to TDS the amount of Indirect Taxes like Service Tax and Sales Tax to be excluded. TCS is nothing but TDS in other form of collection from person to the ITD.

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