The tax department is now going to track high-value products above Rs 10 lakh such as luxury watches, art pieces, antiques, yachts, and collectibles by levying a 1% TCS on them. The department has expanded the scope of tax collected at source (TCS) framework and brought in more high-value goods under its purview.
The new luxury items brought under the purview of TCS include wrist watch, art objects such as paintings, sculptures, and antiques, collectible items including coins and stamps, yachts, helicopters, luxury handbags, sunglasses, footwear, high-end sportswear and equipment, home theatre systems, and horses intended for racing or polo. A notification in this regard was issued on Wednesday (April 22), effective immediately.
Tax collected at source (TCS) is levied on purchase of high-value goods in order to ensure buyers, who own these goods, do not escape from the tax net by under-reporting their income.
Amit Maheshwari, tax partner, AKM Global, says that by bringing more high-value items into the TCS framework, the government is widening the tax net beyond just motor vehicles. “This will enhance the traceability of luxury spending,” he said.
Currently, cars valued above Rs 10 lakh attract a TCS of 1%. Other high-value expenses like foreign tours and travels, education and medical treatment overseas also attract TCS at 5-20% rate.
According to Sandeep Jhunjhunwala, tax partner at Nangia Andersen LLP, the notification operationalises the government's intent to enhance monitoring of high-value discretionary expenditure and strengthen the audit trail in the luxury goods segment.
The obligation to collect TCS will be on the seller in respect of the notified goods. Sellers will now be required to ensure timely compliance with TCS provisions, while buyers of notified luxury goods may experience enhanced KYC requirements and documentation at the time of purchase.
Jhunjhunwala says although the luxury goods sector may undergo some transitional challenges, this measure is expected to promote formalisation and improved regulatory oversight over time.