The Central Board of Indirect Tax and Customs (CBIC) has clarified that the GST will be levied on the value of supply excluding the tax collected at source (TCS). This has come as a relief to the industries that come under TCS ambit, especially mineral firms and automakers as the tax-inclusive price to the consumer could now be lower.
The TCS levied under the Income Tax Act has the express purpose of keeping a trail on certain high-value transactions and the consumer can offset the TCS as he pays the income tax.
CBIC also brought clarity on the issue of GST levy on ‘buy one get one free’ and ‘buy more, save more’ type promotional schemes offered primarily by FMCG companies, saying that the tax would be paid on the price recovered from the customer and that the taxpayer would be liable for full input tax credit, which has so far been denied.
The CBIC said that while such schemes gave an impression that one item was being supplied free of cost or without consideration, they can be best treated as supply of two goods for the price of one.
With regard to free samples and gifts, like in the pharmaceutical industry to provide drug samples to their stockists, dealers and medical practitioners without any consideration, CBIC stated this would not be treated as supply under GST and hence will not be liable to tax. Consequently, the ITC would not be available for supplier on the inputs, input services and capital goods.
