ITC Eligibility on GST Charged Over TCS – Clarification Needed

[Ramanathan Seshan]

Dear Experts,

Weve procured manufacturing scrap from Company A, and noticed that GST has been charged on the TCS amount as well as per section 15(2) of CGST Act

For example:

• Scrap value: ?100
• TCS: ?1
• Taxable value considered: ?101
• GST @18%: ?18.18

In this case, can we claim ITC on the full GST amount, including the portion calculated on the TCS?

Regards,

S Ram

[Sadanand Bulbule]

Dear Sir

TCS is not a part of consideration for the supply pf goods. There is no provision to charge GST on TCS amount collected under the Income Tax Act. So only 18% ITC is to be claimed

Refer Sl No.5 of CBIC Circular No. 76/50/2018-GST dated 31/12/2018 which reads as under:

"For the purpose of determination of value of supply under GST, Tax collected at source (TCS) under the provisions of the Income Tax Act, 1961 would not be includible as it is an interim levy not having the character of tax".

[Ramanathan Seshan]

Dear sir,

As per Sl.no 5:

1. Section 15(2) of CGST Act specifies that the value of supply shall include “any taxes, duties cesses, fees and charges levied under any law for the time being in force other than this Act, the SGST Act, the UTGST Act and the GST (Compensation to States) Act, if charged separately by the supplier.”

2. It is clarified that as per the above provisions, taxable value for the purposes of GST shall include the TCS amount collected under the provisions of the Income Tax Act since the value to be paid to the supplier by the buyer is inclusive of the said TCS.

Regards,

S Ram

[Sadanand Bulbule]

Dear Sir

TCS is not a “levy” of tax. It is a statutory mechanism to track the transactions just like pulling an elephant from its tail. Hence it cannot be included in the value of taxable transactions under Section 15 of the CGST Act. 

[KASTURI SETHI]

Sh.Sadanand Bulbule, Sir is perfectly correct. Go through the corrigendum to Circular No. 76/50/2019-GST issued on 7.3.19.

[Ganeshan Kalyani]

TCS is to be calculated on Total value inclusive of GST. Accordingly, a seller has to charge GST first and then on that sum TCS to be levied. e.g. 100+ 18% GST =  118 x TCS %.

[Shilpi Jain]

Under GST input tax credit is the tax charged on the supply.

In the present case whatever the supplier has charged (right or wrong), he will pay to the exchequer.

So you should be eligible to take this credit subject to satisfying the other conditions for availng ITC in the law

AI Summary

Can Input Tax Credit Be Claimed on GST Charged Over Tax Collected at Source (TCS)? Section 15(2) Explained The discussion addresses whether input tax credit (ITC) can be claimed on GST charged over tax collected at source (TCS) under the Income Tax Act. One view holds that TCS is not part of the consideration for supply and thus GST charged on TCS is not eligible for ITC, supported by CBIC Circular No. 76/50/2018 stating TCS is an interim levy and not a tax under GST. Another perspective argues that Section 15(2) of the CGST Act requires inclusion of TCS in the taxable value since it is part of the amount payable to the supplier. However, the prevailing interpretation suggests TCS is a statutory tracking mechanism, not a tax levy, and should be excluded from the GST value for ITC purposes. Some replies note that GST should be charged first, then TCS applied on the total, and ITC eligibility depends on the tax actually charged and paid to the government, subject to other legal conditions.