CA Silky Khandelwal
Replies to the query relating to Selling/buying of goods and services in excess of INR 200,000/- In order to curb circulation of black money and to track down the tax evaders, the Central Board of Direct Taxes (‘CBDT’) vide Notification No. 95 dated 30 December 2015 notified that PAN is required to be quoted in all documents pertaining to the transactions of sale or purchase of goods or services (regardless of the mode of payment), if the amount of such transaction exceeds INR 2,00,000/-.
Further, vide Finance Act 2016, tax at source is required to be collected by a seller at the rate of 1%, if consideration for goods/services in cash exceeds INR 2,00,000/-. The said provisions have raised a lot of flak considering the ambiguity involved in the drafting and forced CBDT to issue time to time clarification on various issues involved. This article tries to capture and compile all the possible questions revolving the aforesaid provisions and best possible answers to such issues.
1. Whether the seller is required to quote the PAN of buyer in sale invoices and other related documents?
As per Rule 114B, every person is required to quote his permanent account number in all documents pertaining to the transactions of sale or purchase of goods or services of an amounting exceeding INR 2 Lakhs per transaction.
Therefore, on a plain reading of Rule 114B, it may be inferred that seller is only required to quote his PAN on all the documents pertaining to sale of any goods or rendering of services. However, as per the provision of sub-rule 2 of Rule 114C, the person raising bills i.e. seller in the instant case has to ensure after verification that PAN has been correctly furnished by the buyer and mentioned in such documents i.e. bills in the instant case. The relevant extract of the said Rule is as under:
(2) Any person, being a person raising bills referred to at Sl. No. 5 or 6 or 18 of rule 114B, who, in relation to a transaction specified in the said Sl. No., has issued any document shall ensure after verification that permanent account number has been correctly furnished and the same shall be mentioned in such document, or as the case may be, a declaration in Form 60 has been duly furnished with complete particulars. Accordingly, PAN of the buyer is also required to be mentioned on the sale/service invoices raised by the seller.
Accordingly, PAN of the buyer is also required to be mentioned on the sale/service invoices raised by the seller.
2. Whether the PAN of the buyer is required to be mentioned by seller on invoice where aggregate of multiple invoices (where value of individual invoice is below INR 200,000/) issued in single day or against single purchase order exceeds INR 200,000/-?
As per Rule 114B, seller is required to quote permanent account number in all documents pertaining to the transactions of sale of goods or services of an amounting exceeding INR 2 Lakhs per transaction. What would constitute a transaction has not been defined under the Rules. Accordingly, the seller may take an argument that issue of an invoice must be regarded as one transaction and in cases where the value of single invoice does not exceeds INR 200,000/- he is not required to quote PAN. CBDT, must provide necessary clarification in this regard.
3. Whether the service provider is also required to collect tax at source or there is any anomaly under the act at present?
In accordance with the provision of section 206C, “every person being a seller, who receives any amount in cash as consideration for sale of bullion or jewellery or any other goods or providing of services, shall, at the time of receipt of such amount in cash, collect from the buyer, a sum equal to one percent of sale consideration as income tax”.
On plain reading of the provision, it is clear that a seller is required to collect tax at source from the buyer. However the law maker has amended the definition of seller to include provision of service but definition of buyer does not include recipient of service. The relevant extract of definition of buyer is as under:
“buyer” with respect to—
(ii) sub-section (1D) or sub-section (1F) means a person who obtains in any sale, goods of the nature specified in the said sub-section;
Therefore, till the time the aforesaid anomaly is removed, the service provider may not collect tax at source from the service receiver even in cases where the consideration in excess of INR 200000/- is received.
4. Whether the seller is required to collect tax source in case where the consideration is in excess of INR 200,000/-but payment in cash is less than INR 200,000/-?
This matter has been recently clarified by CBDT vide circular no. Circular No.23/2016 dated the 24th June, 2016 wherein it has been stated that no tax collection at source is required if the cash receipt does not exceed two lakh rupees even if the sale consideration exceeds two lakh rupees.
5. Whether tax collection at source under section 206C (1D) will apply only to cash component or in respect of whole of sales consideration?
This matter has also been clarified by aforesaid CBDT circular, wherein it has been stated that the tax is required to be collected at source on cash component of the sales consideration and not on the whole of sales consideration. I.e. to say in case where out of total consideration of INR 500,000/- if only INR 300,000/- is received in cash, tax at source is required to be collected @ 1% on INR 300,000/- only.
(Author is associated with Lodha & Co., Delhi)
Disclaimer: The entire contents of this document have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation. The observations of the author are personal view and the authors do not take responsibility of the same and this cannot be quoted before any authority without the written permission of the author.