Union Budget 2020: New TCS Provisions & Practical Issues related to Section 206C(1H) of the Income tax Act, 1961
The recent Union Budget 2020 is with regard to Tax Collection at Source (TCS) which is embedded in section 206C of the Income Tax Act-1961, has proposed to widen the TCS net with following 3 additional categories i.e.,
1. Foreign remittance through Liberalized Remittance Scheme (LRS) of RBI
2. Sale of overseas Tour Package
3. Sale of goods of any nature
Provisions related to TCS (Source tax guru)
|Nature of Transac-tion||Who will collect||When TCS will be collected||Prescribed Limit||Non – Applicability||TCS Rate||Remarks|
|Sub-section (1G) a) remittance out of India under the LRS of RBI||An Authorised Dealer||At the time of receipt of the amount, or At the time of debiting the amount payable Whichever is earlier||Seven lakh or more in a FY||1. If the buyer is liable to deduct TDS under any other provisions and has deducted
2. If a buyer is CG, SG, an embassy, a high commission, a legation, a commission, a consulate, the trade representation of a foreign state, a local authority or any other person as notified by CG
|5%||The benefit of sub-section 6A is not available|
|Sub-section (1G) b) Overseas tour program package||Seller of the package||NA||5%||The benefit of sub-section 6A is not available|
|Sub-section (1H) Sale of any goods (except goods on which TCS applicable specifically)||Seller of any goods whose turnover in the previous year exceed ten crore rupees||At the time of receipt of any amount as considera-tion for the sale of such goods||Exceeding 50 Lakh in a FY||1. If the buyer is liable to deduct TDS under any other provisions and has deducted
2. If buyer is CG, SG, an embassy, a high commission, a legation, a commission, a consulate, the trade representa-tion of a foreign state, a local authority or any other person as notified by CG
|0.1 %||1. The benefit of subsection 6A is not available
2. In the case of nonavailabil-ity of PAN or Aadhar of the buyer, TCS rate will be 1%
Key feature of section 206C(1H) are as under:
1. Every seller having turnover exceeding Rs. 10 Crore in the preceding financial year to collect Tax at Source @ 0.10% if the value or aggregate value of sale to any buyer during the year exceeds Rs. 50 Lakh. The TCS rate will be 1% if there is no PAN/Adhar of the buyer is available with the seller. TCS liability is proposed at the time of receipt of consideration from the buyers.
Practical Issues for Interstate branch transfer: –
A) GST Law & TCS Provision:-
B) TCS collection on Consideration
Sale up to Rs. 50 Lakh is not liable for TCS & will be applicable only on amount exceeding Rs. 50 Lakh of consideration received.
Under the Provision, stress is made on “Consideration received above Rs 50 Lakh.
Ex- If Opening Debtor balance is Rs 10 Crore during the FY 2020-21.Hence, the payment received during the FY 2020-21 on opening balance will have significant impact upon both parties. If “Collectee” wishes to be on safer side and has decided to discharge TCS on “Consideration/receipt basis” in order to avoid any future litigation.
C) Reconciliation of 26AS of Buyer:
In case of assessment proceeding authorities usually seek the Reconciliation of 26AS with audited accounts.
TCS would be reflected in the PAN of the buyer at the time of its payment to the seller whereas purchases would be forming the part of its financial statements at the time of purchase itself. There is high possibility that, both of this may relate to different Financial Years. Hence, a reconciliation process needed to be adopted the buyer before commencement of TCS provision.
A clarification by the appropriate authorities may resolve unnecessary disputes in future.
Disclaimer: The views and opinions expressed in this article are those of the authors. Examples of analysis performed within this article are only examples.