New TCS Provisions on Sale of Goods w.e.f. 01.04.2020

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.