No TCS on sale of cars exceeding Rs 10 lakh to govt dept: CBDT

Levy will also not apply to purchase of vehicles by institutions notified under the UN privileges Act and High Commissions and Embassies

1% tax collection at source (TCS) will not be levied on sale of motor vehicles of over Rs 10 lakh to government departments, distributors and dealers, the Income Tax department said on Wednesday.

CBDT, in a set of Frequently Asked Questions (FAQ), said that the 1% TCS will apply only to retail sales and has to be collected by the seller from the buyer.

"This (TCS) is brought to cover all transactions of retail sales and accordingly, it will not apply on sale of motor vehicles by manufacturers to dealers or distributors," the FAQ said.

The government has introduced 1% TCS on sale of all motor vehicles that cost over Rs 10 lakh from June 1.

The FAQ further clarified that the levy would apply to all such motor vehicles, regardless of whether these are luxury cars or not.

However, it said the levy will not apply to purchase of such vehicles by government departments, institutions notified under the UN privileges Act and High Commissions and Embassies.

Giving an example, it said the levy would apply to part-payment made at the time of booking and also at the time of final payment.

It also said TCS applicability will be based on each sale of motor vehicle and not on aggregate value of sale made during the year.

With regard to the levy of TCS on vehicles purchased in cash, CBDT clarified that 1% TCS will be applicable for any cash transaction above Rs 2 lakh.

The Income Tax Department has been levying 1% TCS on cash purchase of bullion in excess of Rs 2 lakh and jewellery in excess of Rs 5 lakh since July 1, 2012.

Finance Minister Arun Jaitley in his Budget 2016-17 imposed TCS of 1% on goods and services purchased in cash in excess of Rs 2 lakh.