Income tax TCS provision on sale of goods applicable from 01st Oct 2020 with FAQ

Insertion of subsection – 206 (1H) in the finance Act 2020

Section 206 (1H) read as follows

(1H) 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 rupees in any previous year, other than the 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 per cent. 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 Aadhaar number to the seller, then the provisions of clause (ii) of sub-section (1) of section 206CC shall be read as if for the words “five per cent.”, 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 provision of this Act and has deducted such amount.

Explanation.––For the purposes 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 a foreign State; or

(B) a local authority as defined in the Explanation to clause (20) of section 10; or

(C) any other 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;

(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.’;

(II) in sub-section (2), for the words, brackets, figures and letter “sub-section (1) or sub-section (1C)”, the words “this section” shall be substituted;

(III) in sub-section (3), for the words, brackets, figures and letter “sub-section (1) or sub-section (1C)”, the words “this section” shall be substituted;

(IV) in sub-section (6A), in the first proviso, for the words “in accordance with the provisions of this section”, the words, brackets, figures and letter “in accordance with the provisions of sub-section (1) and sub-section (1C)” shall be substituted;

(V) in the Explanation, in clause (c),––

(i) for the word “means”, the words, brackets, figures and letter “with respect to sub-section (1) and sub-section (1F) means” shall be substituted;

(ii) for the words, brackets, letters and figures “the monetary limits specified under clause (a) or clause (b) of section 44AB”, the words “one crore rupees in case of business or fifty lakh rupees in case of profession” shall be substituted.

1. Whom TCS is applicable ?

Only those seller whose total sales, gross receipts or turnover from the business carried on by it exceed Rs. 10 crore during the financial year immediately preceding the financial year, shall be liable to collect such TCS.

As of now the term not clearly defined to be include GST for the purpose of computation. Section denotes that a seller, who receives any amount as consideration for sale of any goods“. So GST may also consider for this purpose. However CBDT clarification is required. With that two view example are as follows

Particulars  With GST  Without GST
Sales of Goods  (A)            6,000,000          6,000,000
GST @ 18%   (B)  = A* 18%            1,080,000          1,080,000
Total Invoice value C= A+B            7,080,000          7,080,000
TCS @ 0.075% D= C*0.075%                    5,310
TCS @ 0.075% D= A*0.075%                  4,500
* Original TCS rate 0.1% , however till 31st March 2020 its 0.075%

 2. When to collect the TCS ?

TCS has to be collected at the time of receipt of such amount i.e. TCS shall be collected on Receipt Basis.

3. What is the applicable TCS rate?

Particulars  Upto 31st Mar21  From 01st Apr’21
 
PAN / Aadhaar Available
If yes 0.075% 0.1%
If No 0.750% 1.0%

4. For Whom TCS will not be applicable ?

i. Where the buyer is the Central Government, State Government, Embassy, High Commission, legation, or trade representation of a foreign state.

ii. Where any TDS provision is applicable to such goods. (refer section 206C)

iii. Where the turnover of the Seller is less than 10 crore in the preceding Financial Year.

iv. Where the goods are exported out of India.

v. Where the buyer is a local authority as per Explanation to Section 10(20).

5. Incase of Sales return, is it required to return the TCS amount?

No, Based on the Sales amount applicable TCS calculated and would have remitted to Govt  and it will appear in form 26AS of the customer account.

So customer needs to advised accordingly.

6. When the amount to be remitted to government ?

The TCS collection required to be paid in the following month on or before 07th . For example Oct 2021, Collected TCS amount  to be remitted on or before 07th November 2020.

7. Whether any Quarter return to be filed?

The Quarterly TCS return to be submitted i.e Form 27EQ. and due date of each Quarter are as follows

Quarter Due Date
April to June ( Q1 of FY) 15th July
July to September ( Q2 of FY) 15th October
October toDecember ( Q3 of FY) 15th January
January to March ( Q4 of FY) 15th May

*****

Disclaimer: The content of this document is for general information purpose only.  The Author shall not accept any liability for any decision taken based on the advice. You should carefully study the situation / or relevant section before taking any decision.

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35 Comments

  1. Achary says:

    Sir
    We have made 13.50 crores turnover for Last Year of
    2019-20 F.Year. Now current Year made turnover 8.90 Crores up to 30.09.2020. We have sold to 1 Single Party Sold 5.56 of turnover.Now from amount receivable amount of Rs.1.75 crores towards our sales as on 01..10.2020 .Now can be applied TCS to Receivable amount Of Rs.1.75 crores.we request you sir Please kindly reply
    Thank you sir.9848462091.

  2. Gagan Mohite says:

    a) Whether to charge TCS in sales bill or to collect by issuing debit note.
    b) what if we collect TCS on sale bill and create a liability in books and remit the same to govt on receipt basis.

    1. sethuxyz@gmail.com says:

      a) Whether to charge TCS in sales bill or to collect by issuing debit note.
      ans: Either way it can be done. but section says its based on the collection / receipt of the money.

      b) what if we collect TCS on sale bill and create a liability in books and remit the same to govt on receipt basis.
      Ans: Only tracking is difficulty . but section says liability arise that ,remit government based on the collection

    1. sethuxyz@gmail.com says:

      Dear sir,

      Its based on receipt. clarification provided by CBDT refer the circular no 17 of 2020 dated 29th sep.

      If your receipt from the customer exceeds Rs 50 Lakhs in the current financial year . you are required to comply the provision of TCS.
      Before that ensure your business value for the last fianncial year should be more than Rs 10 Cr
      Thanks
      Sankar

  3. Sunil says:

    Hi
    If a total transaction value for a customer is 58 lakhs for the period, TCS to be calculated for whole value of 58L or on differential 8 lakhs?
    Thanks in advance…

    1. sethuxyz@gmail.com says:

      Thanks for your query . it will help others also to understand more. if the inter division are having a same pan. That be the case, TCS not required / not applicable. if it is different legal entity having different PAN number and turnover for the period exceed Rs50 lacs . then TCS will be applicable.

  4. Rajender says:

    Respected Sir ,
    Turnover of which year to consider, means 2019-2020 Our GT was 10.00 Crore and in current year its below 5.00 Crore. In that case does we falls under TCS.

    1. sethuxyz@gmail.com says:

      Thanks for your Query. Please refer section “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..

      In this case, Section talks about Previous financial year if sales revenue exceeds 10Cr .So, you a are required to comply with the section .

  5. Lokesh Rastogi says:

    If the firm has two type of incomes – i.e. from Commission and from Sales. The combined turnover should be above Rs.10 crores or on from Sales.

    1. sethuxyz@gmail.com says:

      Thanks for your Query.

      Companies Act :
      The Term ‘Turnover’ has not been defined under the Income Tax Act, 1961. According to section 2(91) of Companies Act 2013 as amended by the Companies (Amendment) Act, 2017

      “Turnover” means the gross amount of revenue recognised in the profit and loss account from the sale, supply, or distribution of goods or on account of services rendered, or both, by a company during a financial year.

      In “Guidance Note on Terms Used in Financial Statements” published by the ICAI, the expression “Sales Turnover” has been defined as under:-

      “The aggregate amount for which sales are effected or services rendered by an enterprise. The term `gross turnover’ and `net turnover’ (or `gross sales’ and `net sales’) are sometimes used to distinguish the sales aggregate before and after deduction of returns and trade discounts”.

    1. sethuxyz@gmail.com says:

      Thanks for your query. AS of now no clarity is provided from government. So it is advisable that on a safe side, include GST also while deduct TCS. until department will come with a clear notification / direction stating that not to include GST portion.

  6. kalyan.c@gmmcoindia.com says:

    In press release dt.13 May, 2020(Point 4) stated that there shall be no reduction in rates of TDS or TCS, where tax is required to deduct or collect at higher rate due to non-furnishing of PAN/Aadhaar.
    What is the TCS rate in the above case 0.75 or 1%?

    1. sethuxyz@gmail.com says:

      Thanks for you query. As of now not a clear interpretation on this . To avoid litigation may deduct 1% incase of non availability of Aadhar or pan.

  7. Gaurav Agarwal says:

    Whether TCS will also apply on sales made on or before 30 September 2020, although sales consideration has been received on or after 1 October 2020 etc

    1. sethuxyz@gmail.com says:

      Thanks for your query. The section reads as at the time of receipt. without mentioned in invoices colleting from customer is very diffuclty. therefore TCS should be charged in the invoice raised for sale of goods. Any how CBDT may clarify in this regard advisable before its implemented.

      1. sethuxyz@gmail.com says:

        To give better clarity on the query . As practical purposes any invoices raised after 01st October . if its exceeds threshold limit then we may deduct the TCS. the liability may not arise if the invoices raised on or before 30th September. But CBDT needs to provide more clarity on this.

  8. JOTHI says:

    Sir, Thankyou for your Explanation. Kindly clarify, in Q.2 of Point 4 , you have mentioned that if already TDS applicable then TCS has not to be collected. Then for services that we gave is not applicable for TCS. May I correct. Please guide.

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