Buying Rs 10 Lakh+ cars to get more complicated

In this year’s Union Budget the Indian government had decided to impose an additional tax of 1% on the sale of vehicles costing more than Rs 10 lakh. The tax collected at source (TCS), as it is being called, is said be brought in effect to promote more of such buyers to file their tax returns. The said tax will be brought into effect from June 1.

How does it work?

TCS is applicable for every vehicle costing more than Rs 10 lakh, be it a motorcycle, a passenger car, or any transportation vehicle such as trucks, buses, and cargo carriers. It even applies to used cars. TCS will always have to be collected by the selling party, which in the case of a new car would be the car dealership, and in the case of a used car can be a used car dealership or a single person. The collected tax has to be deposited to the government by the selling party only, which, in turn, will receive a TCS certificate. This certificate will be handed to the customer, which he/she would be using to file his/her income tax return.

The after-effects?

The introduction of this additional tax has already raised much confusion among the auto industry. Earlier, it was planned that TCS will only be imposed on passenger cars, but now the government has decided to include all vehicles above the Rs 10 lakh threshold. It’s only a few days’ time that this tax will be brought into effect and, initially, it may give rise to a lot of complexities. Reason being, the tax of the concerned person has to be deposited by the seller, which certainly comes as an additional responsibility. This issue is even more prone to get complicated when somebody is selling a used car, because for an individual used car seller getting streamlined with the deposition thing could be a task.

Source: Economic Times