Automobile dealers exempted from paying 1% TCS

The Central Board of Direct Taxes (CBDT) has made it clear that the 1% TCS applicable on vehicles above Rs. 10 lakh will not be collected from automobile dealers. This comes as a huge relief to the dealers and manufacturers who were upset by the new added tax that could have adversely affected their profit margins. Meanwhile, dealers will need to collect the 1% tax from customers who buy cars above the price range of Rs. 10 lakh.

The 1% TCS has been made applicable from June 1, 2016, in line with this year's union budget. But this new Financial Bill 2016 had put the automobile industry in confusion, as it read "Every person, being a seller, who receives any amount as consideration for sale of a motor vehicle of the value exceeding Rs. 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." This statement meant that the dealers too would need to pay 1% TCS to the manufacturer. This would have increased the working capital costs of dealerships, thus negatively affecting their profit margins.

But the Finance Ministry has now cleared the air and has given a verbal communication to the Society of Indian Automobile Manufacturers (SIAM). A written statement will be released in a few days.

Additionally, if an individual sells his/her car in the used car market, he/she is not supposed to collect TCS from the buyers. On the other hand, commercial market players like Maruti True Value and Mahindra First Choice will have to collect the 1% TCS.

Source: ET Auto