Article explains Who is Liable for TDS on Goods under Section 206C(1H), From whom tax shall be collected, Timing of Collection of TCS, What is the Definition of Goods, Whether Transactions in securities through RSE is liable to TCS, TCS on Motor vehicle, TCS on Transaction in electricity, TCS on sale of Software, TCS on sale of Jewellery, TCS on resale of Goods, Additional out of pocket expense to be included, Rate of TCS, Whether TCS on value including GST, TCS on inter branch transfers and What If buyer has multiple units?
| S. No. | Question | Answer |
| 1. | Who is Liable?? | Tax is required to be collected by a person carrying on business whose total sales, gross receipts or turnover exceeds Rs. 10 crores in the financial year immediately preceding the financial year of sale.
Author Notes: Sale includes sale of goods as well as revenue from services to decide about who is liable. |
| 2. | From whom tax shall be collected? | Tax is required to collected from a buyer if following conditions are satisfied:
a) There is Sale of Goods Author Notes: Sec 206C(1H) is applicable only on sale of goods and thus not applicable on Service Providers. Consideration includes advances received for the sale of Goods. Exports and Imports have been exempted from the applicability of this section. Further no TCS liability if tax is deducted or collected under any other provision of Act. |
| 3. | Timing of Collection of TCS? | Tax should be collected at the time of receipt of amount from the buyer if the value of sale consideration received in a previous year exceeds Rs. 50 lakhs
Author Notes: Lot of Doubts have been raised on this issue. Please note only the amount of consideration received after 01.10.2020 would attract TCS liability. Amount of consideration could be advance also. Another point that merits consideration is that amount received prior to 30.09.2020 would also be considered for threshold of Rs. 50 lakhs although TCS would be collected only from the amount received after 01.10.2020. Ex: Amount received during FY 20-21 is Rs. 1 crore although Rs. 55 lakhs were received prior to 30.09.2020. Now although Rs. 45 lakhs are received post 01.10.2020 but still TCS liability would be on Rs. 45 Lakhs |
| 4. | What is the Definition of Goods? | Sale of Goods Act, 1930 is a specific statute which deals with the ‘sale of goods’ whereas the CGST Act, 2017 deals with tax on ‘supply of goods’. Thus, the definition of term ‘goods’ can be referred to from the Sale of Goods Act, 1930 for the purpose of Section 206C(1H).
Author Notes: It should be noted that Goods include only movable property. Consequently, the TCS shall not be collected from the sale of immovable property by a developer. |
| 5. | Whether Transactions in securities through RSE is liable to TCS | The CBDT has clarified that provisions of this section shall not be applicable in relation to transactions in securities (and commodities) which are traded through recognised stock exchanges |
| 6. | TCS on Motor vehicle? | There is a specific provision in Section 206C(1F) for the collection of tax on the sale of a motor vehicle. Under this provision, the tax shall be collected from every buyer who pays any amount as consideration for the purchase of motor vehicle of value exceeding Rs. 10 lakhs
Vide Circular No. 22/2016, dated 8-6-2016, the CBDT has clarified that the provisions of Section 206C(1F) will not apply on sale of motor vehicles by manufacturers to dealers/distributors. Author Notes: B2C would attract Sec 206(1F) where value of MV exceed Rs. 10 Lakhs and 206C( 1H) would apply to B2B transaction |
| 7. | TCS on Transaction in electricity? | Electricity is a GOOD as per Judicial Precedents. CBDT has clarified that TCS is required to be collected where electricity is purchased directly from electricity generation companies and not through power exchanges. |
| 8. | TCS on sale of Software | The Supreme Court in its landmark decision of Tata Consultancy Services v. State of A.P [2004] 141 Taxman 132 (SC) held that Canned software (off the shelf computer software) are ‘goods’ and as such assessable to sales tax.
If the sale of software has been treated as a sale of goods then the seller shall be liable to collect TCS subject to the fulfilment of other conditions of this provision. |
| 9. | TCS on sale of Jewellery? | Yes, if other conditions are also fulfilled |
| 10. | TCS on resale of Goods? | Business connection has to be seen i.e. if person re-selling falls within definition of sellers, then he will be liable to collect. |
| 11. | Additional out of pocket expense to be included? | If they form part of the sales invoice then TCS would be collected as it forms part of sales consideration. If separate invoice is issued then not liable.
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| 12. | Rate of TCS? | The tax shall be collected by the seller of goods at the rate of 0.1% of the sale consideration exceeding Rs. 50 lakhs if the buyer has furnished his PAN or Aadhaar, otherwise, the tax shall be collected at the rate of 1%.
Author Notes: TCS for the specified receipts have been reduced by 25% for the period from 14-05-2020 to 31-03-2021 vide The Taxation and Other Laws (Relaxation and Amendment of certain provisions) Act, 2020. Hence, the rate of TCS on sale of goods shall be 0.075% till 31-03-2021 |
| 13. | Whether TCS on value including GST? | Author Notes: It has been mentioned that TCS is on receipt basis and receipt would be inclusive of GST and thus TCS is required to be collected on the sale consideration inclusive of GST |
| 14. | TCS on inter branch transfers? | The condition of sale is not fulfilled in the context of branch transfer. Therefore, the provisions of this section shall not apply in the case of branch transfers. |
| 15. | If buyer has multiple units? | If different units of buyer are under the same PAN or Aadhaar number, the amount received from all such units shall be aggregated to compute the limit of Rs. 50 Lakhs. |
I Have tried to cover up all Important FAQs on 206C(1H) in this write up and views on author notes even if contrary are welcome.
Author: CA Rohit Kapoor – Email: connectwithcarohitkapoor@gmail.com
Author Bio
please mention the judicial precedent stating electricity is a good in income tax
I have a question..
I am working in a State Electricity Discom.
Do my Discom is applicable for TCS though the turn over of my Discom is more than 10 Cr.
I mean Electricity Discom are eligible for collection of TCS from their consumers.
For non compliance of tcs on 206c(h) pl
Please inform about TCS applicability on Sale / Purchase of unlisted shares
I have a doubt. Am working in power generation company. Turn over for PY is exceeding 10 cr. and my buyer is state govt. Do the company need to collect TCS from that buyer?
Hello Mr.Rohit,
My question is ” If the amount received as an advance with relation to the sale of goods and we collect the TCS as well as per 206C(1H). If, in the future due to any reason sale of goods was not made and the amount received in advance is returned to the buyer. Then what will be the consequences to TCS?. please suggest.
Please help on the below scenario:-
Billing to outside India but shipping to India in this case TCS u/s206c(1H) applicable or not.
Is this eligible to new born companies in this FY2020-21 and who collects the invoices amount more than Rs.50L in the mean of sale of goods ??