Suggestions on Clause 71 of Finance Bill 2017 – Section 206C(1D) – Exclusion of specific reference to sale of jewellery, cash consideration exceeding Rs.5 lakhs -Consequent implication

Section 206C(1D) provides for TCS obligation on sale of jewellery, sale of bullion, and residuary limb being any other goods (other than bullion or jewellery) ,if the value of consideration received in cash exceeds specified limits as under:

For sale of jewellery, cash consideration exceeding Rs. 5 lakhs For sale of bullion and any other goods in residuary category, cash consideration exceeding Rs. 2 lakhs

The Finance Bill 2017 proposes to omit specific reference to jewellery’ from section 206C(1D) such that post amendment, TCS obligation would be in respect of cash sale of “bullion” or “any other goods (other than bullion)” of an amount exceeding Rs. 2 lakhs. The proposed amended provision would read as under:

“(1D) Every person, being a seller, who receives any amount in cash as consideration for sale of bullion or jewellery [or any other goods (other than bullion or jewellery) or any other goods (other than bullion)or providing any service], shall, at the time of receipt of such amount in cash, collect from the buyer, a sum equal to one per cent of sale consideration as income-tax, if such consideration,—

(i) for bullion, exceeds two hundred thousand rupees; or

(ii) for jewellery, exceeds five hundred thousand rupees; [or]

(iii) for any goods, other than those referred to in clauses (i) and (ii), or any service, exceeds two hundred thousand rupees:”

An issue arises as to whether the proposed amendment intends to take out sale of jewellery completely from TCS levy or intends to retain the TCS levy on jewellery but with lower threshold of Rs. 2 lakhs.

A plain reading of the amended s. 206C(1D) (as reproduced above) would suggest that jewellery would now be covered under residuary clause “any other goods (other than bullion)” with lower threshold of Rs. 2 lakhs. The understanding, that the proposed amendment lowers the threshold of cash sale of jewellery from 5 lakhs to 2 lakhs, is also in line with the provisions of proposed 269ST restricting the amount of receipt in cash receipt by any person in excess of Rs. 3 lakhs. There seems to be no reason to exclude cash sales of jewellery beyond Rs. 2 lakhs from out of TCS levy- more particularly, jewellery is identified as source of investing black money.

However, the Explanatory Memorandum while dealing with the proposal in the Finance Bill, 2017 on introduction of section 269ST suggests as “It is also proposed to consequentially amend the provisions of section 206C to omit the provision relating to tax collection at source at the rate of one per cent of sale consideration on cash sale of jewellery exceeding five lakh rupees.”

The Notes to Clauses also states as ‘It is proposed to omit the said clause in view of restriction on cash transaction as proposed to be provided in section 269ST.

Therefore, there exists confusion as to whether the proposed amendment intends to take sale of jewellery completely out of the purview of TCS levy or jewellery would still be covered under the residuary clause with a threshold of Rs. 2 lakhs as applicable.

Suggestions:

It is suggested that:

i. A suitable clarification on this issue (either by way of Circular or legislative amendment) may be issued.

ii. Since the value limit for bullion and the other goods both are at par (that is, Rs. 2 lakhs), the distinction is no longer

The provision may be redrafted providing levy of TCS@1 %on sale of any goods (including bullion and jewellery) or provision of services.

Source- ICAI Post-Budget Memoranda-2017

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