All of us are well aware of TDS (Tax Deduction at Source) , wherein Buyer of goods or service has an obligation to withhold the Tax and make the remaining amount to seller of Goods and service. In another way, TCS (Tax Collected at source) will operate. Here, Seller of goods shall collect the tax from buyer of goods and service and shall remit to Government on the behalf of buyer.

In order to widen the tax base, Government of India has introduced 206C(1H), new section in Finance Act 2020.

This TCS (tax collection at source) has been introduced by Finance Act 2020. It is effective from 01.10.2020.

Provision

Seller of Goods shall collect at 0.1% TCS (subject to PAN availability) from the buyer of Goods for the sale consideration received in excess of 50 lakh in a year and remit to the government within 7th of next month to the credit of the buyer. Please note TCS Rate is reduced to 0.075% for the period from 01.10.2020 to 31.03.2021 by Finance Ministry vide a press release dated 13.05.2020.

Who is liable to do TCS?

Any person , whose sales/receipts during last year exceeds 10 crore is liable to do TCS under this provision. For FY 2020-21, we need to check sale. receipt of FY 2019-20.

Time of collection of TCS

It shall be collected on receipt basis. Unlike TDS provision, here liability to collect TCS arises, when sale consideration received in excess of 50 lakh INR in a year. Please note that liability will be triggered , even when aggregate amount received exceeds 50 Lakh in year.

On what value TCS is applicable

TCS is applicable on consideration for sale of goods i.e , all incidental taxes(GST etc) are not subject this TCS provision. Consideration received in excess of 50 Lakh is subject to TCS.

Example, Consideration received is 55 lakh, then TCS is to be collected on (55-50) 5 Lakh INR.

Exception to above provision

When we are exporting goods/ importing goods

When there is sale of pure service

When Buyer of goods is Government or any other person as notified by Income tax (not yet notified)

When seller of Goods is Government or other person as notified by Income tax(not yet notified)

When buyer of Goods is liable to do TDS under relevant provision and buyer has done it

When other TCS provision is applicable on sale of goods(tender leave, timber, scrape etc)

Due Date for deposit of TCS

TCS collected in the month shall be remitted within 7th of next month.

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3 Comments

  1. Kapil says:

    Is this applicable on supply of services also?

    If the sale to the buyer after 1-Oct-2020 is less than 50 Lakhs but the consideration received is 55 lakhs so TCS will be on 5 lakhs?

    1. Pradeep Hegde says:

      Hi Kapil,

      For first question, On sale of service, TCS is not applicable.

      For second question, TCS shall be collected on receipt basis.Hence on 5 lakh , TCS is to be collected

    2. Pradeep Hegde says:

      For First question, TCS is not applicable on service

      For Second question, tcs is applicable on receipt basis.hence 5 lakh is subject to tcs

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