Tax Collected at Source (TCS ) is the tax payable by the seller which he collects from the buyer at the time of sale , say, while purchasing a motor vehicle exceeding Rs 10 Lakhs . Budget 2020 has proposed to widen the scope by including TCS on Sale of Goods w.e.f. 01/04/2020—Sec 206(1H) .

Q 1. Who is the Seller?

Ans: Seller means a person whose total sales, gross receipts or turnover from the business carried on by him exceed Rs 10 Crore rupees during the financial year immediately preceding the financial year in which sale of goods is carried out.

Therefore, if your turnover in FY 2019-20 exceeds Rs 10 Crores, you are covered under the new TCS provisions for FY 2020-21.

Q 2. Which transactions are subjected to collection of TCS?

Ans: If the seller makes sale of goods of value or aggregate value to a buyer exceeding Rs. 50 lakhs, he needs to collect TCS at 0.10 % at the time of RECEIPT of the consideration on the amount exceeding Rs. 50 lakhs.

The TCS rate will be 1% if there is no PAN/Adhar of the buyer is available with the seller.

Examples-

1.Suppose, M/s ABC Ltd. Has turnover of Rs 15 crores in FY 2019-20 and has made sale of goods to Mr X of Rs 65 Lakhs in FY 2020-21 and receives Rs 52 lakhs as payment on 31.03.2021.

M/s ABC Ltd needs to collect TCS on Rs 2 lakhs i.e. Rs (52-50) lakhs* 0.1%.  Rs 200 needs to be collected as TCS, issue certificate to the buyer and file statement of such tax collected.

2. Continuing with the above example, if the balance of Rs 13 lakhs (Rs 65-52 lakhs) is received during the next financial year, say 05.04.2021-

M/s ABC Ltd needs to collect TCS on Rs 13 lakhs at 0.1%. Rs 1300 needs to be collected as TCS, issue certificate to the buyer and file statement of such tax collected.

Q 3. What the situations which do not attract the above provisions?

Ans: If the buyer is liable to deduct TDS or collect TCS under any other provision of the Act and has deducted/ collected such amount

  • If the buyer is the CG, SG, an embassy, a High Commission, legation, consulate, the trade representation of foreign state, local authority
  •  Or any class of person notified by the central government in the official gazette for the purpose subject to such condition as specified in that notification

Provisions of this Section which needs more clarifications from CBDT:

  •  Sellers exporting goods are not yet included in the exclusions list. Therefore, we need to hope that export goods are soon excluded from this provision to avoid unnecessary burden on businessmen. Please Note that in case of exports, higher rate of TCS i.e. 1% shall be applicable.
  • Since the collection is triggered at the point of receipt of consideration, the following query also arises- Suppose a Seller has outstanding amount from a buyer of Rs 35 lakhs on 31st March 2020, and further sell goods worth Rs. 55 Lakhs in FY 2020-21. The seller receives entire payment of Rs. 90 Lakhs. Weather TCS needs to be collected on Rs. 5 Lakhs (Rs 55-50 lakhs) or Rs ( 90-50 lakhs) is still unclear i.e. trade receivables as on 31.03.2020 needs to be considered or not.
  • Weather TCS needs to be collected on value including GST or on the value excluding GST needs clarification.

Author Bio

Qualification: CA in Practice
Company: SIMRAN & COMPANY
Location: SILIGURI, West Bengal, IN
Member Since: 12 Mar 2020 | Total Posts: 6
CA by profession and also a CS qualified, fields of expertise are taxation, financial structuring of businesses, company matters, income tax and ROC filing. View Full Profile

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5 Comments

  1. ANAND CHANDAK says:

    I AM GROCCERY TRADER MY LAST YEAR TURNOVER IS 18 CRORE . I PURCHASE FROM MANY BUYERS MORE THAN 50 LAKHS PRODUCTS ALSO SELL MANY PARTIES MORE THAN 50 LAKHS . I AM LIABLE FOR TCS

    1. SHARAD says:

      Sir,
      THE above TCS provisions are applicable to a person who is selling goods or services to a person above 50 lacs and receiving consideration. If you are maintaining B2B sales and it is above 50 lacs then you have to collect TCS.

  2. K v v satyanarayana says:

    Sir, 1)my question is if the tcs to be collected on receipt basis, how we have to collect from buyer and inform him.
    2) if tcs is exempted on goods purchased for manufacturing purpose, how to inform to seller before he deduct tcs.
    3)if i want to charge tcs in invoice itself based on rs.50 lakhs threshold limit. How to charge and when we have to deposit tcs to govt? after collection or on accrual basis?

  3. updesh kumar says:

    It is further required to be clarified whether sale of goods is aggregate of all the invoices issued during the financial year/ period under consideration or single invoice only.

  4. VIMALRAJ says:

    Hi Sir / Madam ,
    My Queries to when New TCS is applicable For 50 Lakhs Morethan time of RECEIPT is Received & it is applicable for both exempted & taxable Sale Receipts ????
    As Soon as Possible Replay me .

    Regards ,
    Vimalraj.c

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