Is TCS on jewellery abolished in Union Budget 2017-18 or its limit lowered?

The Union Finance Minister Mr. Arun Jaitley in the Union Budget 2017-18 has abolished TCS on jewellery.

The provisions regarding the TCS on sale of jewellery were introduced in the statute by the Finance Act, 2012 with effect from 1.7.2012. It was provided to put a check upon the black money transaction sand to collect revenue from the purchasers, as such to increase the earning of the Government.

It was specified therein that if a seller of jewellery receives sale consideration in cash and the amount received in cash is more than Rs.5 lakhs, then the seller is required to collect TCS from the purchaser at the rate of 1% of such sale consideration received in cash.

Apart from the provisions regarding TCS on jewellery, the Section 206 (1D) of the Income Tax Act, 1961 also prescribes for TCS on receipt of sale consideration in cash for bullion and other goods except jewellery.

But for those other goods the threshold limit for TCS has been fixed at Rs. 2 lakhs only as against that for sale of jewellery at Rs. 5 lakhs.

Union Budget 2017-18 has abolished TCS on jewellery

However, Union Budget 2017-18 TCS on goods and services including jewellery has been removed by an amendment. The amendment has been approved in the Lok Sabha on March, 2017.

By virtue of the amendment sub section (1D) of Section 206 has been omitted. In sub section (1D) and (1E) of Section 206 some omissions have been made whose effect is that now the word “ jewellery” shall not exist at all in the statute.

The income tax Department has been levying TCS at the rate of 1% on purchase of jewellery purchased in cash since 1.7.2012.

The new amendment also provides that no tax shall be collected at source under sub-section (1D) of Section 206 on any amount on which tax has been deducted by the payer under Chapter XVII-B.

Meaning of the term “jewellery” on which TCS had been levied:

The expression jewellery” shall have the meaning provided in the Explanation to sub-clause (ii) of clause (14) of section 2 of the Act.

Abolishing TCS- Other view of the amendment- has TCS on jewellary been removed or just the limit has been lowered:

Primarily it appears that through aforesaid amendments, the TCS in respect of sale of jewellery has been withdrawn.

However, the above proposed amendment also gives rise to another view which says that upon removal of the word “jewellery”, the items may automatically be got covered in the definition of “goods” as given under the Sale of Goods Act.the result of which may be that there may not be withdrawal of TCS provisions on jewellery and instead of that, the threshold limit for TCS on jewellery might have been reduced from Rs. 5 lakhs to Rs. 2 lakhs only.

In the Act, the term “goods” refers to all kinds of movable property other than actionable claims and money. It includes stock and shares, growing crops, etc. as well as and things attached to or forming part of the land which are under the contract of sale.

Another reason for generation of the second view is that in memorandum, nowhere it has been categorically mentioned that the TCS provisions on jewellery have been withdrawn.

Fixing of Limit of Rs 3 lakhs on Jewellary Transaction in Cash- Industry Disappointed-Effect on rural areas:

The gems and jewellery industry in India is disappointed with the Union Budget presented this year. The Budget has imposed an upper limit on cash transactions at Rs. 3, 00,000.

The government also imposed 12.5 % Countervailing Duty  on silver coins having content not below 99.9 %, semi manufactured form of silver and its related goods.

The overall applicable duty has increased to 30 %from the existing 17.5%.

The decision would affect sale of jewellery in rural areas with customers who have no cheque facility or digital compliant. It is well accepted that rural sales contribute significantly to India’s jewellery business.

Also Read- Penalties for Tax Evasion In India