TCS on sale of Goods- Section 206C(1H) w.e.f. 01.10.2020 : Overview with Illustrations

To widen and deepen the scope of early collection of revenue to the Government, Finance Bill, 2020 brought in levy of TCS (0.1% or 1% in case PAN/Aadhaar not provided by Buyer) on sale of goods for which sales consideration. Sub section 1H has been inserted in Section 206C by Finance Act, 2020 for collection of TCS by the seller on sale of ANY GOODS. This means it is not applicable to any specified goods but to all goods.

Please note that TCS Rate is been reduced to 0.075% for the period from 01.10.2020 to 31.03.2021 due to the COVID-19 pandemic

WHO HAS TO COLLECT??

TCS to be collected by seller. Seller means a person whose total sales, gross receipts or turnover from the business carried on by him exceed Rs.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 Govt. may, by notification in the Official Gazette, specify for this purpose, subject to such conditions as may be specified therein

WHOM TO COLLECT TCS FROM??

TCS to be collected from such buyers to whom value or aggregate value of goods sold exceeds fifty lakh rupees in a previous year.

Note 1: For the purpose of calculating threshold of Rs. 10 crores total sales, gross receipts or turnover from the business is to be taken into consideration i.e. sale of goods and services both shall be considered for calculating threshold of Rs.10 crores.

Note 2: For the purpose of calculating threshold of Rs. 50 Lakhs only sale of goods is to be taken into consideration.

TIME OF COLLECTION OF TCS??

TCS is to be collected at the time of actual receipt of consideration by the seller.

Note 3: In my personal opinion TCS should be collected in the ‘sales invoice’ itself so as to enable buyer to know about the applicability of levy. Merely charging TCS in sales invoice does not trigger liability for payment. TCS liability is to be discharged only when the sales consideration for sales effected on or after 01-10-2020 is received.

EXCLUSION- WHEN TCS IS NOT APPLICABLE??

1) TCS provisions are not applicable on Export of Goods.

2) TCS provisions are not applicable where buyer is CG, SG, Local authority, Embassy, Commission or Consulate etc.

3) TCS provisions are not applicable on sale of goods which are already covered under other sub-sections of S.206C viz. Liquor / Scrap sales, Motor Vehicles etc.

4) TCS provisions are not applicable where buyer is required to deduct TDS on such purchases

Applicability of Provisions in Transitional period:

Before moving towards the illustrations, let us understand the Application of the provision during the transitional period

Sl. No Date of completion of sale Date of receipt of sale consideration Remarks
1 Before 1.10.2020 Before 1.10.2020 No TCS is to be collected since section 206C(1H) is made applicable from 1st October, 2020
2 On or after 1.10.2020 On or after 1.10.2020 TCS to be collected at prescribed rate subject to threshold limit
3 Before 1.10.2020 On or after 1.10.2020 Since sales were carried out in the period when provisions of section 206C(1H) were not applicable, therefore, this sub-section shall not get triggered on receipt of amount from debtors standing in books as on 30.9.2020
4 On or after 1.10.2020 Before 1.10.2020 Advance payments cannot be considered as ‘consideration for sale of any goods. Advance payments are payments received against ‘agreement to sell’ only. Section 206C(1H) will get triggered when such advance shall be appropriated against sale after completion of sale. Therefore, in this case TCS will be collected by the seller.

Illustrations: For better understanding let us take a look on the following illustrative

Seller: XYZ Manufacturing Pvt Ltd.
(Assume T/o exceeds 10 Cr in PY 19-20 and 100% Sale is on Cash Basis i.e no Credit Sale. Further receipts are on FIFO Basis)

Buyer: ABC Automobile Pvt Ltd.: Assume PAN has been provided to Seller

S. No.
Sales up to 30.9.20
Sales after 1.10.20
Sales consideration received up to 30.9.20
Sales consideration received on or after 1.10.20
Whether TCS is applicable for FY 2020-2021? (YES / NO)
Sales consideration (exceeding INR 50,00,000) on which TCS is payable
TCS Liability @ 0.075% / 0.75%
Remarks
1
18 Lac
72 Lac
15 Lac
65 Lac
Yes
27 Lac
2,025
TCS would be on Rs. 30 lacs (15+65-50)
2.
52 Lac
45 Lac
52 Lac
45 Lac
Yes
45 Lac
3,375
Limit of INR 50 Lakhs already exceeded prior to 30-09-2020. Hence, each sales consideration received for sales made after 01-10-2020 is liable for TCS.
3.
58 Lac
56 Lac
3 Lac
51 Lac
No
Receipts are from outstanding as on 30-09-2020 and consideration not received for sales effected after 01-10-2020 hence, TCS is not payable.
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13 Comments

  1. V SWAMINATH says:

    Dear Sir
    As TCS is on collection basis, if i need to raise debit note for TCS on customer, which period should i consider for raising debit note of tcs amount on customer.
    if i receive a amount relating to 17-18 during 20-21 will the amount received be under purview of tcs

  2. BANA says:

    PLEASE CLEAR MY DOUBT
    SOME BODY SAID ABOUT TCS DEDUCTION
    OF TCS
    QUEST: MY LAST YEAR TURNOVER ABOVE 10 CR. CURRENT YEAR UP TO 30.09.2020, WE HAVE NOT CROSS A PARTICULAR BUYER 50 LAC SO I CAN DEDUCT TCS ON THEM

  3. rohitkpr says:

    Please Note: CBDT has released FAQs on TCS U/s 206C (1H) which reads as under:

    1) TCS is applicable only on amount received after 01.10.2020 i.e. if recd 1cr before 01.10.2020 frm a buyer and recd 5 lac after 01.10.2020. Then TCS @ 0.1% is applicable on 5 lakh only and not on 55 lac (1.5cr- Threshold 50 lac)

    2) TCS is not appliable on all transactions and is applicable only when receipt from a buyer > 50 lacs in FY

    3) If maintaining running account with buyer then TCS would be on amount recd after 01.10 WITHOUT ANY BIFURCATION

    4) Sellers with TO in PY>10 CR are only reqd to collect

    So after there would be changes in Ilustration No. 1 (My earlier view was similar to as told by Mr. Ankit Aggarwal in comments above)

    Now TCS in Illustartion 1 would be on 30 lacs (15+65-50)

    Sale includes GST for 10cr (someone asked this doubt in comments above)

  4. Ankit Kumar S says:

    Hello Rohit..Just check.. As per my understanding Answer to Illustration 1 is 30 lakhs on which TCS should be made. Or the receipt should be 62 lakhs to match your answer. Do let me know if my understanding is wrong…

        1. Ankit Agrawal says:

          For 1st example.

          Consideration in total is Rs 80 Lakhs, Rs 50 Lakhs is limit. Therefore deduction will be on 30 Lakhs. But 3 lakhs is for before period of 30th September. Therefore the same has been reduced. So 27 lakhs.

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