New TCS Section 206C(1H) is made effective from 01.10.2020 vide Finance Act, 2020 and it mandates that

-A Seller of Goods is liable to collect TCS on Sale of Any Goods from Buyer

-TCS to be collected if the Value/Aggregate Value of Goods is more than 50 Lakhs

-TCS to be collected on [ Total Sale Value – Rs. 50 Lakhs]

-Rate of TCS is 1%, if PAN of buyer is available [ 1% if PAN not Available]

Definition of Seller

> A person whose Turnover/Gross Receipts in preceding Financial Year exceeds Rs. 10 Crores.

> Central Government reserves the power to notify class of persons not liable to collect TCS under this provision.

Definition of Buyer

> Any person who purchases any Goods

Exclusions:

i. Central Government, State Governments, Embassy, Consulate, High Commission etc

ii. Local Authorities

iii. Importer of Goods from outside India

iv. Any other person as may notified by Central Government in Official Gazette.

Meaning of Goods

> The Term “Goods” is not defined in the Income Tax Act, 1961.

> Therefore, the definition of Goods under GST Act may be more relevant for the purpose of this Section. As per Section 2(52) of the CGST Act, Goods’’ means every kind of movable property other than money and securities but includes actionable claims, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply.

> Therefore, any person dealing with the above is liable to comply with Section 206C(1H), subject to fulfilling other conditions.

Non Applicability of Section 206C(1H)

> If the Goods sold is already covered under Section 206C(1) or 206C(1F). In Section 206C(1) following goods are covered:

Nature of Goods TCS Rate
Alcoholic Liquor for human consumption 1%
Tendu leaves 5%
Timber obtained under a forest lease 2.5%
Timber obtained by any mode other than under a forest lease 2.5%
Any other forest produce not being timber or tendu leaves 2.5%
Scrap 1%
Minerals, being coal or lignite or iron ore 1%

> As per 206C(1F) every seller of Motor Vehicles, having value more than Rs. 10 lakhs shall collect TCS @ 1%

> If goods are exported from India to any Country outside India

> If buyer is liable to deduct TDS under any other Section of the Income Tax Act, 1961.

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3 Comments

  1. NKKUTTY says:

    Sir, Iam Working as a Accountant post of a leading Construction (p) ltd. our organisation job activity is service provider of various subject civil & mechanical executed with corporate company. sir, just i need the clarification that the new TCS 206 c (1H) is applicable on works contract

    1. Joydeb1984 says:

      If you read Section 206C(1H) it clearly states that if TDS is deductible under any other section of the Income Tax Act, 1961 then this section is not applicable. In case of construction, your customer will deduct TDS u/s 194C and so, new TCS provision shall not be applied. Further, in case of Real Estate too your customer will deduct TDS if the unit value is more than Rs. 50 Lakhs. Further if you correlate with GST provisions, then Construction/Works Contract is a Deemed Service. So, according to my understanding this New TCS provision is not applicable for Works Contract.

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