INCOME TAX

TCS on sale of goods applicable from 1st October 2020

TCS on sale of goods under section 206C (1H) is applicable from 01.10.2020.

Who is liable to collect tax under section 206C (1H)?

Tax is to be collected by the seller from the buyer.

Seller means whose total sales, gross receipts, or turnover from the business exceeds Rs. 10 crores during the financial year immediately preceding the financial year in which the sales of goods is carried out.

Buyer means a person who purchases any goods (i.e., any other goods not covered by other provisions of section 206C) from the seller and value or aggregate value of goods during the previous year exceeds Rs 50 lakh.

When seller will be liable to collect tax?

Seller receives any amount as consideration for the sale of goods of the value exceeding Rs. 50 Lakh in any previous year from a single buyer.

TCS is to be collected at the time of receipt of such amount.

Rate of TCS

  • TCS is collected at the rate of 0.1 % of the amount in excess of Rs. 50 Lakh.
  • If the buyer does not provide PAN, then the TCS rate will be 1%.

(TCS rate will be 0.075% from 01.10.2020 to 31.03.2021)

Non Applicability of the section

  • If the amount of sale consideration during the financial year received by the seller from the buyer does not exceed Rs. 50 Lakh.
  • If the buyer is the Central Government, State Government, an embassy, a High Commission, legislation, commission, consulate, and the trade representation of a foreign State, or Local Authority.
  • If any TDS provision is applicable to such goods
  • If the seller exports the goods out of India.

Due date to deposit TCS:

The TCS collected by the seller shall be paid to the account of the Government by the 7th of the next month.

FAQ’s

Will TCS apply on the amount received before 01.10.2020?

No, TCS is applicable to the amount received on or after 01.10.2020.

Will the threshold limit of 50 lakh be counted from 01.10.2020?

No, the threshold limit of 50 lakh will be counted from 01.04.2020.

Is TCS the additional tax to the buyer?

No, TCS is the nature of advance income tax and the buyer can adjust the same with his tax liability.

Example of TCS Working:

S.N.

Seller Turnover

FY

2019-20

Buyer Sale Till Sep. 2020 Sale From Oct. 2020 TCS value @0.075%

Remarks

1 X 15 Cr. Z 25 lakh 75 lakh Rs. 3750 TCS @ 0.075% on Rs. 50 lakh
2 X 9 Cr. Y 25 lakh 75 lakh NA Turnover in FY 2019-20 less than 10 cr.
3 X 21 Cr. A 85 lakh 10 lakh Rs. 750 TCS @ 0.075% on Rs. 10 lakh being turnover after 30th Sep.
4 X 11 Cr. State Government 1 Cr. 28 lakh NA Section 206C (1H) is not applicable if the buyer is State Govt.

 

The government has issued a press release on Clarification on doubts arising on account of new TCS provisions on 30.09.2020.

Press Release: Press Release – Clarification on doubts arising on account of new TCS provisions

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