2019 (4) TMI 70 - HC - GST

Valuation - Inclusion of tax collected at soruce (TCS) as per income tax in the value for the purpose of GST - purchase of a car worth more than ten lakhs - Section 206C(1F) of the Income Tax Act - Held that - The authority will not act on the clarification Circular No. 76/50/2018-GST, pending the disposal of the writ petition - petition disposed off.

Summary

Issues:
Interpretation of Section 15 of the Goods and Services Tax Act regarding the inclusion of taxes in the value of supply.

Analysis:
The judgment by MR Dama Seshadri Naidu, J. of the Kerala High Court dealt with the interpretation of Section 15 of the Goods and Services Tax Act, focusing on the inclusion of taxes in the value of supply. Section 15 specifies that the value of supply of goods and services should be the transaction value, which is the price actually paid or payable for the supply. It also mandates that the value of supply must include any taxes, duties, cesses, fees, and charges levied under any other law in force.

The court considered the argument presented by the learned Senior Counsel for the petitioner, who contended that the amount collected by the dealer from the purchaser of a car under Section 206C(1F) of the Income Tax Act should not be considered an integral part of the value of goods and services supplied. The petitioner's counsel argued that the dealer acts as an agent for the State to collect income tax, and the amount collected eventually goes to the purchaser's credit.

In response to the arguments, the court referenced the expansive nature of Section 15(2)(a) and highlighted the emphasis on the "charging of tax, duties, cess, or fee by the supplier." The court also noted a recent decision by a constitution Bench of the Supreme Court, emphasizing that any ambiguity in taxing provisions should be resolved in the State's favor. However, the court acknowledged that further adjudication was necessary to reach a conclusive decision.

Consequently, the court decided that the authority should not act on the clarification at Sl. No. 5 of the Circular pending the disposal of the writ petition. The court clarified that this decision was subject to the outcome of the writ petition and did not prejudice the Department's rights to collect taxes in the future if the writ outcome favored the Department. The judgment highlighted the need for deeper adjudication on the prima facie issue raised by the petitioner, indicating that further examination was required to resolve the ambiguity regarding the inclusion of taxes in the value of supply under the Goods and Services Tax Act.