Last year, Government implemented TCS provision u/s 206C(1H) for `Seller of Goods’ on Receipts/advance from/for Sales of Goods, exceeding Rs. 50 Lakhs as consideration, during a financial year. “Seller” means a person whose total sales, gross receipts or turnover from the business carried on by him exceeded ten crore rupees during the financial year immediately preceding the financial year in which consideration/advance exceeding Rs. 50 Lakh are received.
There were instances, where Seller Turnover is less than 10 Crore but his receipts from sales of goods to buyers were exceeding Rs. 50 Lakh. Therefore, there was no obligation to collect TCS on seller. To resolve this situation, Government has come up with a similar type of provision for Purchaser(Buyer) via TDS applicability u/s 194Q.
BOTH PROVISIONS JUXSTAPOSED:
TCS provisions are already in force and TDS provision u/s 194Q have to become effective from 01/07/2021, it would be interesting to juxtapose both provisions to study the effects:
| SECTION 194Q | SECTION 206C(1H) | |
| Meaning of Buyer | Explanation to Section 194Q(1) mentions: “buyer” means a person whose total sales, gross receipts or turnover from the business carried by him exceed ten crore rupees during the financial year immediately preceding the financial year in which the purchase of goods is carried out …… | Explanation (a) to Section 206C(1H) mentions: “buyer” means a person who purchases any goods, but does not include,- a) Government b) Local Authority c) Importer of the goods |
| Meaning of Seller | Not defined | Explanation (b) to Section 206C(1H) mentions: “seller” means a person whose total sales, gross receipts or turnover from the business carried by him exceed ten crore rupees during the financial year immediately preceding the financial year in which the sale of goods is carried out |
| Rate of TDS/ TCS | An amount equal to 0.1 per cent of such sum exceeding fifty lakh rupees as Income Tax. | A sum equal to @ 0.1 percent of the sales consideration exceeding fifty lakh rupees as Income Tax |
| Rate of TDS/TCS where PAN/Aadahr not furnished | If PAN not furnished by seller, then @ 5% in place 0.1% | If buyer does provide PAN or Aadhaar Number, the @ 5% in place of 0.1% |
| Time of Deduction / Collection | At the time of credit of such sum to the account of the seller or at the time of payment thereof by any mode, whichever is earlier | At the time of receipt of such amount, collect from buyer, a sum equal to 0.1 percen t of the sale consideration exceeding fifty lakh rupees a |
| Over-riding the other TDS/TCS Sections of the Act | Section 194Q(5) provides: The provisions of this section shall not apply to a transactions on which- a) Tax is deductible under any provisions of this Act: and b) tax is collectible under the provisions of Section 206C, other than a transaction to which sub-section (1H) of Section 206C applies | Second proviso to Section 206C(1H) provides “ 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 |
SOME TRICKY SITUATIONS:
Situations where buyer and sellers are having turnover in excess of Rs. 10 Crore in preceding financial years and are covered by the Section 194Q and 206C(1H):
| Situations | SECTION 194Q | SECTION 206C(1H) |
| Buyer has purchased goods or made advance payment | Buyer would be deducting the TDS @ 0.1% on the payment/advance made for purchase of goods after -01/07/2021 | As TDS has already been deducted u/s 194Q, seller would not collect any TCS from the buyer |
| Buyer has paid the dues out of the payble balance as on 30/06/2021 | Buyer would not deduct TDS | Seller would collect the TCS on such amount received |
| Buyer has bought the goods but returned later on without crediting in the Seller’s Account | No obligation to deduct TDS | No amount received |
| Buyer has bought the goods but returned later on after crediting in the Seller’s Account and debiting on return of the goods | TDS would have to be deducted from the credited amount despite subsequent debit by way of return of goods. Therefore, accounting entry of credit should be passed after full acceptance of the goods | No amount received |
| Buyer was liable but did not deduct TDS | Seller would be liable to collect TCS as second proviso to Section 206C(1H) fails to operate. |
GOVT NEEDS TO REMOVE THE DIFFICULTIES IN IMPLEMENTAIOTN
Provision in the present shape is going to put a number of challenges in its implementation such as:
a) How would the buyer deduct the TDS of Public Sector Companies g. Steel Authority of India Ltd.(SAIL). SAIL is collecting the TCS in their `Sale Bills’. Now, when buyer would become liable to TDS, then how would the buyer deduct TDS and make balance payment to SAIL. In most probable situation, SAIL would ask the buyers to deposit the TDS first and thereafter claim reimbursement from SAIL on the basis of form 16A
b) DISCOMs of the various states are collecting TCS in their Electricity bills as `Electricity’ is goods. How would the DISCOMs accepting `Net of TDS’ payment ? They may also follow the same route as mention in a) above.
c) How would the `Seller’ come to know that `Buyer’ is liable to deduct TDS u/s 194Q ? Income Tax Rules should bring out the form for submission to `Seller’ by buyer to this effect. Without standard format, buyers would be designing their own format. A case in point is the declarations being furnished by Transporters u/s 194C(6), where in absence of standard format, every transporter has developed the format as per their convenience.
Author hopes that Govt. would make the provisions workable for the Deductors
(Author acknowledges the contribution of Shri Ayush Jain, Articled Trainee in preparation of this article)
Author Bio
Rate of TDS/TCS where PAN/Aadahr not furnished – If buyer does provide PAN or Aadhaar Number, the @ 5% in place of 0.1%
I guess its 1% in case of TCS
Yes
crisp & very useful
Dear Mr Saraswat- Very informative and useful. Thanks for sharing.