The Govt of India in the union budget had announced 1% TCS (Tax Collected at Source) to be collected from June 1 on vehicles costing over Rs 10 lakhs. This has led to lot of confusion in the industry, whether this is applicable only to new or even to the used vehicles. Initially the TCS was said to be applicable to passenger vehicles only, but now it appears to be applicable to all vehicles including trucks, buses and two-wheelers. Additionally, it is not just the end customer who will have to pay this tax, but the dealer as well. The Society of Indian Automobile Manufacturers (SIAM) is seeking clarification from the government for the same. Further, this tax will be applicable on spare parts costing over Rs 2 lakhs as well.
The Finance Bill reads, “Every person, being a seller, who receives any amount as consideration for sale of a motor vehicle of the value exceeding 10 lakh, shall, at the time of receipt of such amount, collect from the buyer, a sum equal to 1% of the sale consideration as income-tax.”
Starting from June 1, dealerships will collect an additional 1% tax for the cars costing above Rs 10 lakh and will issue a TCS certificate to the customer, and will pay the amount to the Govt. This TCS can be later claimed at the time of filing annual income tax return by showing deduction of this 1% tax cess paid for purchase of the car. The idea behind this move is said to bring those people in the tax net who never pay taxes or file returns.
However, the auto industry is not very happy about this. “From the budget speech, it was perceived that it would be implemented only on passenger vehicles priced above 10 lakh, but what has come prima facie in the language of the approved budget (Finance Bill 2016), it seems that TCS is applicable on all types of motor vehicles including trucks, buses, two-wheelers and cars sold by manufacturers, exports, dealers and government” said Sugato Sen, deputy director-general of the Society of Indian Automobile Manufacturers.
“From the budget, it was thought that it (TCS) will be collected from the end customers only. But now, it will be collected from the dealers also,” said Nikunj Sanghi, former president of the Federation of Automobile Dealers Association. He added, “The biggest problem for us is that we will have extra burden on working capital.”
Another burden on manufacturers, dealers and buyers is certainly uncalled for, feels the automotive industry.
(Source ET, BI)
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