1% TCS on vehicles above Rs. 10 lakh from June 1, 2016

In the union budget, the Government of India had announced that an additional 1% tax will be collected on sales of vehicles costing over Rs. 10 lakh. This is known as TCS (tax collected at source).

Dealerships will collect the tax from a customer, deposit it with the government and hand over a TCS certificate to him. This amount will be credited back to the customer at the time of filing income tax. The aim of the government behind the introduction of this practice is to get more people buying vehicles costing over Rs. 10 lakh to file their income tax returns.

However, the introduction of TCS has led to confusion in the automobile industry. It was earlier believed that TCS would be applicable to passenger cars only. Now, it appears that it will be applicable to all types of motor vehicles including trucks, buses, two-wheelers and cars sold by manufacturers, dealers and the government.

Additionally, it is not just the end customer who will have to pay this tax, but the dealer as well. Even individuals selling used cars costing over Rs. 10 lakh will have to collect 1% of the value and pay it to the government. This will make car buying and selling transactions more complicated.

Further, this tax will be applicable on purchase of spare parts costing over Rs. 2 lakh as well.

Source: Economic Times