New TCS provision u/s 206C [1H] of Income Tax Act, 1961 wef 01/10/2020
Finance Act, 2020 has made the following provisions effective from 01/10/2020 relating to TCS. The provisions in the Act is as below:
Every person, being a seller, who receives any amount as consideration for sale of any goods of the value or aggregate of such value exceeding fifty lakh ruppes in any previous year, other than the goods being exported out of India or goods covered in sub-section 1 or sub-section[1F] or sub-section [1G] shall, at the time of receipt of such amount, collect from the buyer, a sum equal to 0.1 percent of the sale consideration exceeding fifty lakh rupees as income tax.
Provided that if the buyer has not provided the Permanent Account Number or the Adhar number to the seller, then the provisions of clause [ii] of the sub-section 1 of section 206CC shall be read as if for the words “ five percent “ , the words “ one per cent “ had been substituted:
Provided further that the provisions of this sub-section shall not apply, if the buyer is liable to deduct tax at source under any other provisions of this Act on the goods purchased by him from the seller and has deducted such amount.
Explanation – For the purpose of this sub-section,-
[a] “buyer “ means a person who purchases any goods, but does not include,-
[A] the Central Government , a State Government, an embassy, a high commission , legation, commission, consulate and the trade representation of foreign State: or
[B] a local authority as defined in the Explanation to clause  of section 10; or
[C] a person importing goods into India or any other person as the Central Government may, by notification in the Official Gazatte, specify for this purpose, subject to such conditions as may be specified therein:
[b] “ seller “ means a person whose total sales, gross receipts or turnover from the business carried on by him exceed ten crore rupees during the financial year immediately preceding the financial year in which the sale of goods is carried out, not being a person as the Central Government may, by notification in the Official Gazette, specify for this purpose, subject to such conditions as may be specified therein.
This is text of the provision of section 206C[1H] of the Income Tax Act, 1961. Now we will summarise this provision as below:
1] The person should be seller.
2] He should receives the amount as sale consideration for goods from buyer.
3] value or aggregate value of such sale should be exceeds fifty lakh rupees.
4] He should collect Tax at the time of receipt of such sum,
5] Tax should be collected at the rate of 0.1 percent of of the sale consideration exceeding fifty lakh rupees as income tax.
6] buyer does not include- Central Government, State Government, Local Authority, an embassy, High commission , person importing goods in to India, or any other person which Central government may notify in this regard.
7] Seller means whose total sales, turnover or Gross Receipts from the business carried on by him exceed Ten Crore during the financial year immediately preceding the financial year in which the sale of goods is carried out.
8] This provision is applicable from 01/10/2020.
So if we consider, current financial year 2020/21,following situation may be arise.
A] In the Financial year 2019/20, The total sale of the assessee was above Rs 10 crore
In this situation, the assessee is seller as definition given the section 206C[1H] . So he has to collect tax from the buyer if in the financial year 2020/21, if buyer has purchased goods more than 50 lakh rupees from him.
The sale made from 01/04/20 to 30/09/20 will not liable for TCS because above provisions is effective from 01/10/2020.
However, for counting fifty lakh limit , sale prior to 01/10/2020 will have to be considered.
The tax has to be collected on amount which in excess of Fifty lakh rupees. For E.g total sale consideration received from buyer is 70 lakh rupees , then in excess amount is 20 lakh rupees. [ 70 minus 20 lakh ] . So TCS will be collected on 20 lakh rupees in this case.
The rate of TCS is 0.1 % of the sale consideration.
The tax has to be collected at the time of receipt of sale consideration. So receipt of the amount is important event. If the amount is not received, then no liability of TCS will arise. So as per my opinion, Raising of Sale invoice will not create TCS tax liability. [ Experts should correct me, if I am wrong ] .
In counting Fifty lakh amount, only sale consideration for sale of goods has to be considered. The consideration of service provided has to be excluded. [ some time , seller is providing service also ]
In following table, I have summarized the TCS applicability :
|Sr No||Gross TO of sale of goods in FY 19/20||Gross TO of service
For fy 19/20
For fy 19/20
|Assets sold / Interest on Investment
For fy 19/20
|Gross TO / receipts from business
For fy 19/20
|TCS applicable for FY 20/21||Remarks|
|1||9.00 crore||1.50 cr||0||0||10.50 Cr||Yes|
|2||0||10.50 Cr||0||0||10.50 Cr||Yes|
|3||9.00||1.00 cr||0.50 Cr||0||10.50 Cr||Yes|
|4||8.50 Cr||1.00 Cr||0.40 Cr||0.40 Cr||10.30 Cr||Yes||See note 1|
|5||8.50 Cr||1.00 Cr||0.50 Cr||0.40 Cr [ Int on Investment ]||10.00 Cr||No||See Note 2 TCS provisions will not applicable , as the Total receipts etc from business is not exceeds 10.00 cr.|
So there will be many real life situations, which one has to find way in the light of these provisions.
The tax has to be collected at the time of receipts. So if buyer gives advance against his purchase to seller, then tax has to be collected on this advance against sale also by seller.
The other legal compliances under The Income Tax Act, 1961 are as below:
1] TCS payment in to Government Treasury :
TCS collected has to be deposit with Government Treasury within 7 days of the next month.
2] What is consequences if TCS is not collected or collected but not deposited ?
If assessee fails to collect TCS or collected TCS but not deposited in to Government treasury, then he will liable to pay interest on default amount at the rate of 1 % p m on the Tax amount for the period of failure.
3] Information of TCS returns to be file :
Every collector of TCS has to file TCS return in Form no 27 EQ on quarterly basis.
4] Penalty for non or late filing of TCS returns:
If TCS returns is not filed within due date or filed late, then late fee of Rs. 200/ per day for default period will be payable . The maximum late fee amount is TCS collected. [ Sec 234 E ].
If assessee did not filed TCS returns, then penalty of Rs. 10,000/ to Rs. 100,000/ can be imposed . u/s 271 H.
Buyer has also to take care about this provisions. He should inform his seller his PAN or Adhr no. So seller will collect TCS at the rate 0.1 % . In absence of PAN or Adhar of buyer, seller will collect TCS at the rate 1 %. So it is utmost important for the Buyer to update his PAN in seller records.
So by observing above discussion, it can be said that there is new task is imposed by Government of India on the assessee under The Income Tax Act, 1961. So assessee has to spare time and money to comply above legal provisions.
On 29/09/2020, CBDT has issued clarification relating to these new provisions. It is good initiative by CBDT on time. Hope it will useful to all concerned assesses.
Disclaimer: Above discussion is made for general information purpose. I tried to summarise issues relating to TCS. Please go through and let me know , if there is any error or omissions or other views, if possible which will helpful to all professionals. Thanks.
CA Shirish Vinchurkar, Chartered Accountants. Chalisgaon Maharashtra. Casjv12@gmail.com