Every person, being a seller,
who receives any amount as consideration for sale of a motor
vehicle of the value exceeding ten lakh rupees, shall at the time of
receipt of such amount, collect from the buyer, a sum equal to one
percent of the sale consideration as income tax.
In the earlier provision TCS was
only collected on tendu leaves, scrap, jwellery, bullion, parking In recent
years, the scope of TCS is being extended in an effort to curb tax evasion and
black money transactions. In 2012, certain transactions affecting
customers—receipts in cash, for sale of bullion exceeding Rs.2 lakh, and
of jewellery exceeding Rs.5 lakh—was brought within its ambit. In this
Budget, from 1 June 2016, The transactions are sale of a motor
vehicle of value exceeding Rs.10 lakh, and receipt of money for sale of
goods or provision of services exceeding Rs.2 lakh. In such cases, besides
the sale price, the seller is required to collect an additional 1% from the
purchaser, and pay it to the government.
This provision relating to vehicles
applies not only to businesses that sell goods or provide services, but to all
types of sellers. Even a salaried employee who sells a car for more
than Rs.10 lakh, would need to collect TCS. Even a vehicle manufacturer
selling vehicles to dealers, and a dealer selling those vehicles to customers,
would need to collect TCS.
It would also apply to sale to all
buyers, with certain exceptions. In case of sale of vehicles, government departments, public
sector undertakings, clubs, and some others are excluded, and do not have to
pay TCS. There is also an exclusion for a retail buyer purchasing goods for
personal consumption. It may be possible to claim that a retail buyer of a car,
buying the car for his personal use, does not have to pay the TCS.
However,
for the purchase of goods or services exceeding Rs.2 lakh in cash, these
exclusions would not apply.
The use of the term “motor vehicle”
would include all types of vehicles—two-wheelers (such as high-end motorcycles), motor cars,
SUVs, trucks and buses. Second hand sales would also be subject to TCS, if the
sale value exceeds Rs.10 lakh.
Q.1 If full value of
Sales Consideration received through cheque or mode other than Cash, whether
TCS provisions will be applicable.
A.1 Yes still, the
provisions will be applicable, particularly this section had covered every mode
of receipt and therefore receipt can be any mode for an Invoice value
exceeding Rs. 10,00,000, provisions will be applicable.
Q.2 If motor vehicle
sold of value Rs. 10,00,000/- whether TCS provisions will be applicable?
A.2 Based
on the reading of the provisions, it is inferred that TCS Provision
will not be applicable, as act uses the word exceeding Rs. Ten lakh,
however not include Rs. Ten lakh.
Act – “….value exceeding ten
lakh rupees”.
Q.3 Whether TCS to be
collected, if Motor vehicle of value exceeding Rs. 10,00,000 purchased for
personal consumption from Retail Buyer?
Yes, still Tax is to be collected at
Source; as definition of Buyer isamended for clause VII in Bill passed in
Lok Sabha, which specifically covers everyone as buyer, no one is excluded from
Scope.
Act – “ sub –section (1D) or
(1F) means a person who obtains in any
sale, goods/services of the nature specified in the said sub-section” –
Explanation 1.
Q.4 Collection of TCS to
be on Receipt basis or on Invoice basis in case Motor vehicle sold of value
more than Rs. 10,00,000?
A.4 Collection of
TCS to be on Receipt basis; the Finance Bill, 2016 as passed by the
Lok Sabha provides that tax shall be collected on sale of motor vehicle only at
the time of receipt of consideration. Earlier law was tax to be collected at
source on date or receipt or invoice, whichever is earlier, now amended.
Act – “ Every person being a
seller,…………….at the time of receipt of such amount, collect
from the buyer…………” – Sub Section 1F.
Q.5 Limit of Rs.
10,00,000/- will be considered on amount inclusive of Tax or exclusive of Tax?
A.5
For Limit, amount will be considered inclusive of VAT i.e. Sales Consideration.
Q.6 Rate of 1% for
collection of TCS to be charged on Ex-showroom Price or On-Road Price?
A.6 TCS to be
collected on Ex-showroom Price i.e. again on Sale Consideration (the Invoice
amount, which include VAT)
Act – “…….a sum equal to one percent
of the Sale Consideration as income tax”.
Q.7
Whether TCS to be collected only on sale of Passenger vehicle?
A.7 For above
question, answer is pessimistic; TCS must be collected on “sale of motor
vehicle value exceeding Rs. Ten Lakh”, not
just passenger vehicle. From the budget speech, it was perceived that
it would be implemented only on passenger vehicles priced above Rs 10
lakh, but what has come prima facie in the language of the approved
budget (Finance Bill 2016), TCS (tax collection at source) is applicable on all
types of motor vehicles including trucks, buses, two-wheelers and cars sold by
manufacturers, exports, dealers and government.
Q.8 From which date TCS
on Sale of Motor Vehicle of value exceeding Rs. Ten Lakh is applicable?
A.8
It is applicable from 1st June, 2016.
Q.9 In case Invoice
generated before applicability of law and amount received on and after 1st
June, 2016; whether TCS provision will be applicable?
A.9 No liability
arises to collect TCS; as event (Sale of Car) arises already before
applicability of law.
Example – Car Invoice generated on
25th May, 2016 (Event arises before 1st June,
2016) of Rs. 11,00,000 and Rs. 1,00,000 received on 5th June,
2016 (receipt after or in 1st June, 2016); no need to collect
TCS only collect Rs. 1,00,000/-.
Q.10 In case complete invoice amount
of Motor Vehicle, received before June, 2016 and Invoice generated on or after
1st June, 2016; whether liability to collect TCS arises?
A.10 Yes, liability to collect
TCS arises, as event – generation of invoice is during the period of
applicability of law. From customer amount of TCS is to be collected.
Example – Car’s complete invoice
amount Rs. 11,00,000/- received on 25th May, 2016 and invoice
generated on 5th June, 2016, TCS to be collected from customer
of Rs. 11,000 (1% of Rs. 11,00,000)
Q.11 Whether
Manufactures will also collect TCS?
A.11 Yes, Manufacturers will also collect
TCS from Dealers; as everyone is covered.
Q.12 Whether
supplier will also collect TCS?
A.12 Yes,
Suppliers will also collect TCS.
Q.13 Whether Inter
Dealer Seller will also collect TCS?
A.13 Yes, in
case of Inter dealer Sale TCS will be collected.
Q.14 If Ex-showroom Price of motor
vehicle exceeds Rs. 10,00,000 but after giving discount, value is less
than or equal to Rs. 10,00,000; whether TCS is to collected?
A.14 Based on the
reading of the provisions, it is inferred that No need to collect TCS, as
liability of TCS arises only if sales consideration (invoice
amount) exceeds Rs. 10,00,000, but after givingdiscount to customers the
invoice amount do not exceed Rs. 10,00,000 and hence no liability of TCS
arises.
If discount is given
through Credit Note, then liability of TCS collection arises, even though
amount to be received by the seller do not exceed Rs. 10,00,000/- (because the
seller Invoice amount exceeds Rs. 10,00,000). So only and only
if, discount is given on invoice then such discount will be
considered.
Q.15 If bill raised, for two
different parts of motor vehicle (say in case of trucks for – chasis and body)
as single invoice, whose value exceeds Rs. Ten Lakh, whether TCS provision will
be applicable?
A.15 Yes, TCS is to be
collected, as the seller create a single invoice, it can be for two different
parts of motor vehicle. So even though the individual value do not exceed Rs.
Ten Lakhs, but if the invoice amount exceeds Rs. 10,00,000, then TCS is to be
collected from customers.
Q.16 Amount of Sale Consideration
received in parts/stages, whether TCS to be collected on 1st receipt itself or
in stages?
A.16 No regards to amount
received in stages or in one pay, TCS to be collected at the time of first
receipt itself.
Q.17 Whether
amount of TCS to be collected at the time of Receipt
of Booking Amount?
A.17 Based
on the reading of the provisions, it is inferred that; yes, on first
receipt itself the TCS to be collected, which means TCS is to be collected
with booking amount itself.
But practically, it’s not possible
to collect TCS on full amount of Sales consideration, at the time
ofbooking motor vehicle of value exceeding Rs. 10,00,000,
with booking amount itself; thereforeconsidering practical life,
amount on which 1% to be charged for collection of TCS
is Booking Amount.
Further, on every second receipt of
sales consideration full amount of Tax can be collected at source less already
received at the time of booking a motor vehicle.
- See more at: http://taxguru.in/income-tax/tcs-on-motor-vehicles-wef-01-06-2016.html#sthash.0oWNAVkN.dpuf
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