TCS to be Collected on Collection for the sale of goods from 01/10/2020. If Your turnover > 10 crore in FY 19-20

Here is my write up on TCS to be collected on Amount Received from SALE OF GOODS levied from 01-10-2020.  It covers – How TCS on Goods will be collected? What rate in of TCS on Sale of Goods for Fy 2020-21 & 2021-22?, How to pass an accounting entry and How to understand the limit of Rs 50 lac for FY 2020-21 & 2021-22 ?

1. What Is Provision of TCS On Sales of Goods From 01-10-2020?

Seller who receives any amount as consideration for sale of any goods aggregating to 50 Lakh Indian Rupee (INR) or more in a financial year from a buyer, at the time of receipt of such amount is required to collect tax at source (TCS) at the rate 0.075% per cent on the sale consideration exceeding INR 50 Lakh as Income‐Tax. (0.075% till 31-03-2021, after that 0.1%)

2. Exclusions from This Provision –

A. Those Parties Having Turnover Less Than 10 Crore in FY 19-20

B. Export Sales

C. Transactions on Which Already TDS Applicable or Already TCS Collected For Any Other Provision

D. Sale of Service

E. Branch Transfer

3. How to Collect TCS? 

TCS to be collected when you receive payment more than Rs. 50 lacs that means when you receive the payment. So, TCS NOT TO BE INCLUDED in INVOICE. The TCS can be collected by charging through debit note in the month end, when you receive payment.

For example,

You sold goods to amber worth Rs. 1.10 crore. AMBER ENTERPRISE makes payment of Rs. 60 lacs to you in NOV 2020.  (ASSUME YOU HAVE ALREADY COLLECTED FROM AMBER RS. 50 LAC EARLIER)

Now when you receive payment from AMBER ENTERPRISE, you have to raise A DEBIT NOTE in NOVEMBER end FOR   RS. 4500 (RS. 60 LACS X 0.075%).

4. Why Debit note is a better option?

The logic for issuance of debit note may be that debit note to be issued after the time of collection received so that it can be charged only when Condition of 50 Lac collection triggers. And no hassles of write off, kasar, bad debt, sales return, price change, credit note etc. (which would otherwise problematic if TCS charged on Invoice). Also, it will shift liability only when You receive the payment (so is the provision says)

On a month end, issue a debit note of Amount equal to TCS -à collect the amount from him —-à pay to the Government

5. How to do Accounting Entry?

i. In Above Example, On Last Day On Month When You Receive Payment From Amber Enterprise – 

 Amber Enterprise Dr RS. 4500

 To TCS Payable on Sale of Goods Rs. 4500

ii. Amber Enterprise Will Make Payment for The TCS To You

 Bank A/C DR RS 4500

 To Amber Enterprise RS. 4500

iii. When You Pay to Govt on 7th Of Next Month

When You Collect TCS From Party, You Have to Pay by Challan By 7th Of Next Month (Same Way You Pay TDS).

TCS On Sale of Goods             Dr.            Rs. 4500

To Bank A/C                           Rs. 4500

6. on which amount, TCS need to be calculated? TCS need

TCS To Be Collected Only If Collection Amount Exceeds Rs. 50 Lacs.

For, FY 20-21 Please Note That Rs. 50 Lacs Limit Runs From 01-04 – 2020

Also Make Sure That, For FY 21-22, RS. 50 LAC THRESHOLD WILL BE AVAILBE EVERY YEAR FROM 1ST APRIL. SO ONLY WHEN, RS. 50 LACS COLLECTION CROSSED, THIS TCS LEVY TRIGGERS

Also, do not get confuse about whether TCS to be collected on GST amount or not. Please be assured that TCS to be collected on Collection received from buyer. So, collection amount will naturally include GST amount also. We have to see COLLECTION. That’s it.

Check below example. It will clear your all doubts

Rs. 50 Lacs is THRESHOLD limit. If Amount exceeds Rs. 50 lacs, then on that amount only, TCS need to be collected

And this THRESHOLD WILL BE AVAILBE EVERY YEAR FROM 1ST APRIL. SO ONLY WHEN, RS. 50 LACS COLLECTION CROSSED, THIS TCS LEVY TRIGGERS

Example Total Sales During 2020-21 Total Sales Collection During 2020-21 Amount Liable for TCS in FY 20-21 Remark
01-04-20 to 30-09-20 01-10-20 to 31-3-21   01-04-20 to 30-09-20 01-10-20 to 31-3-21    
1 45 lac 30 lac 75 lac 32 lac 43 lac 25 lac TCS when 50 lac collection crossed
2 45 lac 30 lac 75 lac 32 lac 33 lac (Remaining 10 lac received in FY 21-22) 15 lac TCS when 50 lac collection crossed
3 55 Lac 20 Lac 75 Lac 20 Lac 55 lac 25 lac TCS when 50 lac collection crossed
4 65 lac 20 lac 85 lac 55 lac 30 lacs 30 lac TCS only on collection after 01-10-2020
5 20 lac 65 lac 85 lac 10 lac 75 lac 35 lac TCS when 50 lac collection crossed
6 Nil 80 Lac 80 Lac nil 80 lac 30 lac TCS when 50 lac collection crossed
7 80 lac Nil 80 Lac 80 lac nil 0 No collection after 01-10-2020
8 80 lac Nil 80 Lac 40 Lac 40 lac 30 lac TCS when 50 lac collection crossed
9 35 lac 45 lac 80 Lac 10 lac 20 lac 0 Collection not crossing Rs. 50 lacs

Extract of Press Release On 30-9-2020

It has been reported in the media that TCS has been made applicable to the amount received before 1st October, 2020. It is clarified that this report is not correct. In this connection, it may be noted that this TCS shall be applicable only on the amount received on or after 1st October, 2020. For example, a seller who has received Rs. 1 crore before 1st October, 2020 from a particular buyer and receives Rs. 5 lakhs after 1st October, 2020 would be required to collect tax on Rs. 5 lakhs only and not on Rs. 55 lakhs [i.e. Rs.1.05 crore – Rs. 50 lakh (threshold)] by including the amount received before 1st October, 2020.

7. How Will These TCS Will Be Shown In 26AS Of Buyer?

You have to FILE Quarterly Return in Form 27EQ –

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
15th July 15th Oct 15th January 15th May

Any suggestions, doubts, Mistake please feel free to contact me. Do give your Feedback.

CA HARSHIL SHETH (9879831157)

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2 Comments

  1. Sivaprakash says:

    Hello,
    If there are pending bills last year and we receive these amount(s) this year, after 01-10-2020, which might execeed Rs.50 lakhs, whether we need to collect TCS for this amount ?

  2. S. Ayanar says:

    Hi
    Please suggest how to remit TCS to govt – we are Collected from Customer and receiving TCS from the buyer. please explain by example.

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