CBDT rules TDS to be deducted without indirect taxes

CBDT rules TDS to be deducted without indirect taxes

This applies if the component of Value Added Tax and other taxes are indicated separately in an invoice

The Central Board of Direct Taxes (CBDT) has clarified that if components of the Value Added Tax (VAT), Central Sales Tax (CST), Goods and Services Tax (GST), sales tax and excise duty are indicated separately in the invoice, the Tax Deducted at Source (TDS) is to be subtracted without including the indirect taxes.

In the case of goods that are not within the purview of GST, such as petroleum products, various levies like VAT, excise duty, sales tax, etc. are charged. While the treatment of the GST component has been clarified in the 2021 circular, it does not mention other non-GST levies, which have been subsumed and replaced by GST.

The Board has clarified about the purchase of goods, which are not covered within the purview of GST when the tax is deducted at the time of credit of the amount in the account of the seller. It simplified that in terms of the agreement between the buyer and the seller, if the component of VAT/CST/sales tax/excise duty, has been indicated separately in the invoice, then the tax is to be deducted under the Act on the credited amount.

However, if the tax is deducted on a payment basis, if it is earlier than the credit, the tax is to be deducted on the whole amount as it will not be possible to identify the payment with tax components to be invoiced in the future.

Furthermore, in the case of purchase returns, the clarification provided in the circular shall also apply to purchase returns relating to non-GST products liable to VAT/CST/sales tax/excise duty.