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.
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