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1% Tax to be Levied on Car Purchase via Cash

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Tax will be imposed if payment exceeds Rs.10L or there is a cash payment of over Rs.2L

Buyers of cars and premium two-wheelers who pay more than Rs.2 lakh of purchase price in cash will be levied 1% tax as part of the government's drive to  stifle the black economy.

Finance minister Arun Jaitley had announced 1% tax collected at source (TCS) on cars costing more than Rs.10 lakh in his budget speech.

Now, Central Board of Direct Taxes (CBDT) has clarified that car dealers have to collect this tax on every motor vehicle sale to individuals where payment exceeds Rs.10 lakh or there is a cash payment of over Rs.2 lakh.

The apex direct taxes body has issued detailed clarification in form of frequently asked questions on the applicability and scope of TCS on sale of motor vehicles following an amendment in this regard in the Finance Act, 2016. The Finance Act has expanded the scope of Section 206 C of the Income Tax Act to include in its ambit sale of goods and service exceeding Rs.2 lakh and sale of motor vehicles over Rs.10 lakh.

Thus, any high-end sale of any goods or service of over Rs.2 lakh in cash would now face 1% TCS.

The move is to discourage deployment of cash in high-end purchases as part of the Narendra Modi-led NDA government's drive against black money. CBDT has said that TCS on mo tor-vehicle sale shall apply only at retail level and not on sale by manufacturers to dealers or distributors. It would apply on each sale of motor vehicle and not on aggregate value of sale made during the year by the retailer.

TCS provisions on sale of services and goods was introduced to kill the deployment of domestic black money through high-end purchases in India and therefore discourage its generation itself, said Amit Maheshwari, partner at Ashok Maheshwary & Associates LLP.
 
The Economic Times, New Delhi, 09 June 2016

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