In order to widen and deepen the tax net, the Finance Bill 2020 proposed to insert in section 206 of the Income Tax Act, sub-section (1H) to levy TCS on sale of goods. Section 206(1H) will be effective from 01st April 2020.
Section 206(1H) reads as under:
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 Rs. 50 Lakh 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% of the sale consideration exceeding Rs. 50 Lakh 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 “5%”, the words “1%” 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 section 10(20); 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 `10 crore 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.
ANALYSIS OF SECTION 206C(1H) WITH PRACTICAL ISSUES
Page Contents
- 1. Applicability of TCS on Sale of Goods under Section 206C(1H)
- 2. Collectability of TCS on Sale of Goods under Section 206C(1H)
- 3. Rate of TCS on Sale of Goods
- 4. TCS on Receipt of Consideration in Excess of Rs. 50 Lakh
- 5. TCS on Sale of Goods covered under Section 206(1)/(1F)/(1G)
- 6. Weather TCS on sales value including GST or excluding GST?
- 7. Definition of “Goods”
- 8. Exemption from TCS Collection
- 9. TCS on Export of Goods
- 10. Exclusions from “Buyer”
1. Applicability of TCS on Sale of Goods under Section 206C(1H)
- Every person being a seller, whose total sales / gross receipts / turnover exceed `10 crore during the immediately preceding financial year (FY), AND
- who receives any amount as consideration for sale of any goods of the value or aggregate of exceeding `50 Lakh in any previous year.
2. Collectability of TCS on Sale of Goods under Section 206C(1H)
Unlike other provisions of TCS, the collectability of TCS on Sale of Goods arise at the time of RECEIPT of consideration from the buyer of Goods. The collectability of TCS at the time of receipt of consideration from the buyer raises some questions which are discussed below-
(a) Weather TCS is required to be collected on trade receivable of goods standing in books as on 31st March, 2020?
=> As discussed above, TCS is applicable on event of collection against the sale made. Considering this, TCS is required to be collected on Trade Receivables stranding in books as on 31st March 2020 if the receipts from a trade receivables, considering other receipts as well, exceeds Rs. 50 Lakh during the FY 2020-21.
(b) Weather TCS shall be collected at the time of billing in case of Advance from Customer standing in books as on 31st March, 2020?
=> In this case, considering the collectability of TCS, TCS is not required to be collected as the amount is received to the person on or before 31st March 2020 and the TCS on Sales of Goods is applicable from 01st April 2020.
3. Rate of TCS on Sale of Goods
| Rate of TCS | |
| (a) PAN or Aadhaar number available of Buyer | 0.1% |
| (b) PAN or Aadhaar number NOT available of Buyer | 1% |
4. TCS on Receipt of Consideration in Excess of Rs. 50 Lakh
Every person who is required to collect TCS on Sale of Goods shall, at the time of receipt of sale consideration, collect from the buyer TCS at 0.1% / 1% of the sale consideration exceeding Rs. 50 Lakh. For instance, XYZ Ltd. received Rs. 75 Lakh from Mr. A as a sale consideration during the FY 2020-21 and turnover of XYZ Ltd is `12.5 crore during the FY 2019-20. In this case, TCS collection shall be Rs. 2500 (25 Lakh × 0.1%).
5. TCS on Sale of Goods covered under Section 206(1)/(1F)/(1G)
Section 206(1H) amply clears that TCS on sale of goods covered under section 206(1) / (1F) / (1G) shall be collected as per the provision of respective sub-sections. In other words, TCS on sale of Alcoholic Liquor for human consumption, Tendu leaves, Timber, Scrap, Minerals (Coal or lignite or iron ore), foreign remittance through LRS, overseas tour package shall be collected according to the applicable rates and provisions as mentioned under section 206(1)/(1F) /(1G).
6. Weather TCS on sales value including GST or excluding GST?
CBIC through a circular clarified that for the purpose of determination of value of supply under GST, Tax collected at source (TCS) under the Income Tax Act, 1961 would not be includible as it is an interim levy not having the character of tax.
However, in absence of any specific provision or circular or clarification by CBDT, it is unclear as to whether TCS will be levied on GST charged in invoice or not.
There are two views whether TCS on Sales value including GST or excluding GST. Both views are supported by different analysis. However, till the clarification by CBDT, it will be more appropriate that TCS should be collected on Sales Value including GST.
Example:
|
View I: TCS on Sales Value excluding GST |
View II: TCS on Sales Value including GST |
|||
| Particulars |
Rs. |
Particulars |
Rs. |
|
| Basic Value | 90,00,000 | Basic Value | 90,00,000 | |
| GST @ 18% | 1620000 | GST @ 18% | 1620000 | |
| Total Amount | 1,06,20,000 | Total Amount | 1,06,20,000 | |
| TCS @0.1% | 4,000 | TCS @0.1% | 5,620 | |
| Grand Total | 1,06,24,000 | Grand Total | 1,06,25,620 | |
7. Definition of “Goods”
TCS is required to be collected in respect of consideration received for sale of goods. Now the question arise that what will be considered as goods as the definition is not provided in section 206(1H). Further any other section of the Income Tax Act also does not provide the definition of goods.
Sale of Goods Act 1930 and Goods & Service Tax Law 2017 provides the definition of goods. In absence of definition under the Income Tax Act, definitions under either of the act will be considered.
| Explanation | |
| Sale of Goods Act 1930 |
|
| Goods and Service Tax Act 2017 |
|
A plain reading of both the definitions will demonstrate that definition of goods under both the acts is identical. It will be more appropriate if both the definitions are considered while concluding as to what constitutes goods as the definitions are identical and both the act largely deals with goods.
It’s pertinent to note that Sale of Land or Building will not attract the TCS provision as both are immovable properties. Hence Real Estate transactions is out of ambit of TCS.
8. Exemption from TCS Collection
There is no need to collect TCS under section 206(H) is both of the following conditions are satisfied-
- Buyer is liable to deducted TDS under any other provisions, AND
- Such amount has been deducted.
If either of the above conditions are not satisfied, TCS is required to be collected on under section 206(H).
Now a question arises weather requirement to collect TCS will be applicable in case Buyer has not deducted TDS on the basis of Nil / Lower TDS certificate of seller. In this case, buyer is not liable to deduct TDS under the TDS provisions. Hence 1st condition is not satisfied and, consequently, TCS is required to be collected in the instant case.
9. TCS on Export of Goods
The provision of TCS on sale of goods does not distinguish between domestic sales and export sales. This means that TCS is required to be collected when sale consideration received from export of goods. In case of export of goods-
- PAN / Aadhaar number of the Buyer will not be available and, consequently, rate of TCS will be 1%.
- Further Buyer of the goods cannot claim the TCS credit while discharging its Income Tax liability under his State’s direct tax law.
- This means that collectability of TCS @ 1% will increase the cost of export of goods. It’s depends upon the commercial decision between buyer and seller of export of goods that who will bear this 1% extra cost.
10. Exclusions from “Buyer”
Any sale of goods made by any person, being a seller, to following buyers shall not attract the applicability of TCS on sales of goods-
- Central Government, a State Government
- An embassy,
- A High Commission, Legation, Commission, Consulate and
- Trade representation of a foreign State
- A local authority as defined in the Explanation to section 10(20)
- Any other person notified by the Central Government.
Author Bio
I PURCHASED A CAR ON 14.02.2023 AND TCS WAS DEDUCTED ON THE SAME DATE WHICH IS REFLECTED IN FORM 26AS.
HOWEVER, WHILE FILING ITR FOR AY -2023-24 THE SYSTEM SHOWS YEAR OF TCS AS 2022.
PLEASE ADVISE, WHICH YEAR SHOULD BE FILLED IN ITR.
do tcs provision applicable on sale of assets of a company under liquidation? with no turnover during the last fy
if Collection is in the form of Barter or Exchange, whether TCS will be applicable or not
Dear Sir
we have received advance payment of 80 lakh till 30 sept 2020 but goods sold to party till sep 20 of 35 lacks only and balance goods sold in November
so TCS applicable or not on Bal 45 lacks
please tell
i have some questions as below
1) 4. What would be the status of the TCS Collected if it turns out to be in excess of the amount that is paid to the Government. E.g. at the time of Invoice the TCS is shown are Rs. 1,000/- but the Payment received is actually less and TCS is paid based on Payment Received (Rs. 900/- is paid) then what would be the status for the balance Rs. 100/-
2) Would be the case when Advance Payment is received. Invoice not as yet made.
3) How would Credit / Debit Note, Turnover Discounts, etc. affect TCS
4) How would TCS be collected on the Previous Year Outstanding Amt if the same exceeds Rs. 50 Lakh. Same case for Invoicing before September
5) If TCS is collected at the time of Invoicing then what would be case for Partial Applicability. E.g. If Sales till now is Rs. 48 Lakh and Invoice is raised for 10 Lakh then will the TCS be on Rs. 8Lakh or Rs. 10 Lakh.
6) What would be the status of TCS already paid if Sales Return comes into effect after the Payment was received.
Whether sale of electricity by transmission company covers under the provision of Section 206C(1H) ? Please provide your inputs
Hi, Under Sale of Goods Act, shares and securities are included in the definition of Goods. However, under GST laws, goods does not include shares and securities. Kindly clarify if TCS provisions will be applicable on sale of shares and securities??
Thanks.
If there are trade receivables as on 31st March 2021 and the amount is received on 15th December 2021, then TCS will be deducted on 15th December 2021 on the date of receipt. Hence the buyer of goods will get the credit of TCS in the month of December which would be in next financial year. Hence how can the buyer take credit in the year 2021-22 for FY 2020-21 ?
is it applicable on inter unit sales.
SIR,
IS IT APPLICABLE FOR ANY SALE TRANSACTION OF GOODS
AND LIMIT OF RS.50 LAKH IS FOR SINGLE TRANSACTION OR AGGREGATE IN WHOLE YEAR
Hello,
We are dealing in Coal and we collect TCS @1% – on coal sold to Coal traders. However IT has specificaly exempted persons who are actual user of coal (in their factories)through form 27C.
Does this section mean that actual user will also required to charge TCS @0.1%?
Please guide
Any clarification by CBDT for calculation of TCS..or stlil there can be two views..?
How TCS provision for applied for sale effected in March20 even though payment received in April20. As the provisions are applicable wef 01.04.2020 hence sales effected on or after 01.04.2020 and payment received for that has to be covered.?
Thank you for the good article, have below 2 queries
1>is the clarification received for point 2a and 2b recd
2>point 4 TCS on Receipt of Consideration in Excess of Rs. 50 Lakh – in the financial year 2020-2021 , in case a seller receives consideration excess of 50 lacs from a buyer , is that in one transaction, or will it be in aggregate of many transactions.
also if this buyer has not bought in finacial year 2019-20 will tcs needs to be collected from such a buyer
Sir, Goods here will mean only business goods or all?? like we are in service sector but we often sales scrap or old business assets can they also classified as goods.
wrt 206C, Wether TCS on sales value including GST or excluding GST? To me, it ought to be excluding GST, which is not part of sale consideration / proceeds reaching the seller. The seller is only a facilitator liable to remit to the Government, the TCS collected from buyer. Kindly clarify
Why is it mentioned that the credit of TCS can not be availed by foreign parties. Any taxes paid in India will be available as credit otherwise it will be double taxation.
A query . If i raise a sales Invoice on April 10th and receive Payment on June 10th , the triggering point of TCS is on April 10th or when buyes pays me on June 10th , is buyer suppose to deduct and Pay to GOI
Sir,
Good article
The TCS/TDS provisions are tax collection tools on taxable Incomes under IT Act. How come Export of Goods or a portion of it lead to taxable income in the hands of foreign buyer??
Kindly share your views
Is there any announcement by Fin Min of withdrawing TCS proposed on exports.
Sir,
Please advise earlier we deduct tcs above 10lakh sale value whether it is applicable or not now.