With a view to widen the tax-net the India Government has widened the scope of TCS (Tax Collected at Source) provided under section 206C of the Income Tax Act, 1961. As per the extended scope, tax is need to be collected on foreign remittances under Liberalized Remittance Scheme (LRS) , sale of overseas tour packages and on sale of goods by specified seller (after exceeding a specified limit). Such all the scopes are applicable from 01.10.2020.

The Finance Act, 2020 has introduced the new section 206C(1H) of the Income Tax Act, 1961 for Tax Collected at Source on sale of goods. The said provisions are applicable from 01.10.2020.In this article I will discuss a brief preview of the scope of TCS on Sale of goods by specified seller.

TCS on Sale of Goods

TCS- Meaning

  • Tax Collected at Source (TCS) are provisions under the Income Tax Act for collecting tax at source on certain transactions.
  • One is required to collect additional amounts along with consideration for certain transactions.
  • E.g. X has made a scrap sale of Rs. 3,00,000/-. X needs to collect Rs. 3,03,000/- (including TCS of Rs. 3000/-) from the purchaser of Scrap.
  • Such amount of TCS is considered as payment of Income Tax and deductible from total income tax liability of purchaser at the time of filing of return of income. (Similar as TDS).

Sec- 206(1H) –Applicable from 01.10.2020 – Applicable to whom –

  • Applicable to all the sellers selling Goods.
  • Seller means a person whose total Sales, Gross receipts or turnover > Rs. 10 Crore during the immediately preceding financial year.
  • Therefore, if your turnover in the FY 2019-20 > Rs. 10 Crore, you are liable for TCS u/s 206(1H) for the FY 2020-21.
  • If any person has turnover < 10 Crore during the immediately preceding year then these provisions are not applicable. That means the applicability of provision will have to be checked every year.

Features

1) Applicable on sale of all goods except the export of goods and goods already covered under other provisions of TCS. i.e.

  • Alcoholic liquor for human consumption,
  • Tendu leaves,
  • Timber or any other forest produce,
  • Scrap,
  • Minerals, being coal, or lignite or iron ore,
  • Motor Vehicle,
  • Overseas tour package.

2) TCS provisions are applicable if the value or aggregate value of sales consideration > Rs.50 Lacs during the year.

3) TCS is applicable to the amount received in excess of Rs. 50 lacs.

4) TCS provisions are applicable at the time of receipt of consideration.

 Examples-

Suppose, M/s XYZ Ltd. has turnover of Rs 20 crores in FY 2019-20 and has made sale of goods to Mr A of Rs 70 Lakhs in FY 2020-21 and receives Rs 56 lakhs as payment on 31.03.2021.

M/s XYZ Ltd needs to collect TCS on Rs 6 lakhs i.e. Rs (56-50) lakhs* 0.1%.  Rs 600 needs to be collected as TCS, issue certificate to the buyer and file statement of such tax collected.

(But as TCS reduced till 31.03.2021 by 25%, in this case tax needs to be collected is Rs. 450 (i.e. (56-50) lakhs * 0.075%)

Continuing with the above example, if the balance of Rs 14 lakhs (Rs 70-56 lakhs) is received during the next financial year, say 10.04.2021-

M/s XYZ Ltd needs to collect TCS on Rs 14 lakhs at 0.1%. i.e. Rs 1400 needs to be collected as TCS, issue certificate to the buyer and file statement of such tax collected.

Rate of TCS

  • TCS will be @ 0.1% if the buyer furnishes PAN / Aadhar (Reduced to 0.075% till 31.03.2021)
  • TCS will be @ 1% if the buyer does not furnish PAN / Aadhar (NO REDUCTION)

Exclusion of Buyers

Section 206(1H) is not applicable to the following buyers:

  • Central Government, State Government, an Embassy, a High Commission, Consulate, and the trade representation of foreign states.
  • Local Authority
  • Person importing goods
  • Any other person as notified by the Government.

TCS Payment and Return

  • TCS collected need to be paid within 7 days of the next month.
  • Quarterly Statement: Due date to file the TCS return and issue certificate
Quarter Quarterly Return- Due Date  TCS Certificate
Apr-June 15 July 30 July
July- Sep 15 Oct 30 October
Oct- Dec 15 January 30 January
Jan- Mar 15 May 30 May

Notes:

  • TCS will also be collected on purchases by the respective seller.
  • Such TCS will be reflected in Form 26AS for the year on the filing of TCS return by the seller.
  • Such amount of TCS is considered as payment of Income Tax and deductible from total income tax liability of purchaser at the time of filing of return of income. (Similar as TDS).
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17 Comments

  1. Mohana says:

    hi mam,
    206c(1H) this provision applicable for manufacturer & traders only ?? or any other goods sale for normal persons for the above 10 core turnover is previous f.y ??

    1. CA Priyanka Sahu says:

      This section is applicable to any seller (whether manufacturer or trader) whose turnover exceeds Rs. 10cr during the immediate previous financial year.

      1. hardik patel says:

        If i have made sale of rs 56,00,000 in September but receive amount in October, should i collect TCS on such received ammount? If yes ,how?

  2. kalyan says:

    In press release dt.13 May, 2020(Point 4) stated that there shall be no reduction in rates of TDS or TCS, where tax is required to deduct or collect at higher rate due to non-furnishing of PAN/Aadhaar.
    What is the TCS rate in the above case 0.75 or 1%?

  3. Nagabhushanam says:

    Madam, we have sale of bricks scrap to customers and raised GST bill. We didn’t deduct any tcs and 4cr s our last year turnover. And we we traders.
    Now, 1.can we deduct tcs?
    2.Tcs attract manufacturing or trading ?

    1. CA Priyanka Sahu says:

      If you are selling scrap then Section 206C(1H) won’t be applicable for you..TCS u/s 206C(1H) is applicable for sellers whether they are manufacturer or trader, if conditions specified above are applicable to the seller..

  4. Pawan says:

    Dear mam,
    We are tyre manufacturer and seller. Will TCS applicable on our tyre sale @1% from 01.10.2020.
    On scrap we are collecting TCS now.
    Plz guide.

    1. CA Priyanka Sahu says:

      If your sale in the immediate preceeding Fy is more than Rs. 10crore, than TCS u/s 206C(1H) on sale of Goods will be applicable @0.1%.
      TCS on Scrap and TCS on Sale of Goods are covered under two different provisions.

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