A simplified Goods and Services Tax (GST) return form has been issued by the Central Board of Indirect Taxes and Customs (CBIC). They have also issued clarifications relating to the tax incidence on promotional schemes such as ‘Buy One Get One Free’ and hence relieving businesses from tax litigations. These steps have been taken to ensure better compliance of rules and regulations regarding GST.
One of the clarifications relates to the applicability of GST on the component of the tax collected at source (TCS). After reconsideration of the issue consultation with the Central Board of Direct Taxes (CBDT), the board clarified that TCS will not attract GST. “The CBDT has clarified that tax collection at source is not a tax on goods but an interim levy on the possible ‘income’ arising from the sale of goods by the buyer and to be adjusted against the final income- tax liability of the buyer”, said the circular issued on Thursday.
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On Thursday night, another CBIC circular issued had clarified that the case of sales promotion schemes such as ‘Buy One, Get One Free’. It stated that taxes would be levied on the price charged from the customer and accordingly input tax credit (ITC) will be computed.
“It may appear at first glance that in case of offers like ‘Buy One, Get One Free’, one item is being ‘supplied free of cost’ without any consideration. In fact, it is not an individual supply of free goods but a case of two or more individual supplies where a single price is being charged for the entire supply. It can at best be treated as supplying two goods for the price of one”, stated the circular.