1. CONCEPT OF TCS

Govt.  is taking step for increasing tax payers base. One such major step is levy of TCS on sale of goods u/s 206C(1H). Let us understand in simple term- If turnover of business is more than 10 Crores in F.Y. 2019-20 than it has to collect TCS @ 0.075% (Due to Covid-19) on sale of goods above 50 lacs particular sale party.

2. 7 RULES FOR COLLECTION OF TCS

  • Rule No.1: Turnover of seller selling goods in previous F.Y. 2019-20 should be more than 10 Crores.
  • Rule No.2: TCS should be collected if you receive more than 50 lacs from buyer from 1st April 2020 on sale of goods. Sale of services is not included.
  • Rule No.3: TCS should be collected only from 01/10/2020. It means limit of receipt of 50lacs should be seen from 1st April 2020 but TCS should be collected from 01/10/2020 only.
  • Rule No.4: There is no relation with time of sale made. TCS should be collected when you receive the amount from party. It is applicable on Receipt basis.
  • Rule No.5: Rate of TCS from 01st October 2020 to 31/03/2021 is 0.075% i.e. for every 1lakh rupees, Rs.75/- is required to be collected. But actual rate is 0.01%. Due to Covid-19 25% rate has been reduced. If PAN is not provided by buyer, than rate of TCS shall be 1%.
  • Rule No.6: The limit of 50lacs is per year per buyer.
  • Rule No.7: TCS is to be charged on sale figure including GST.

TCS on Sale of Goods

3. LET US SEE SOME EXAMPLES-

Shankar Trading Company (STC) supplies Plastic containers to Gupta Industries(GI). Turnover of Shankar Trading Company in F.Y.2019-20 is 25 Crores.

  • Case-1: Sale made to Gupta Industries from 01/04/2020 to 30/09/2020 is Rs. 65 lakhs. STC received 55 lakhs during 01/04/2020 to 30/09/2020 and balance 10lakhs is received on 02/10/2020. Now STC has to collect TCS @0.075% on whole 10 lakhs i.e. Rs.750/- at the time of receipt of Rs.10lakhs. Therefore amount to be received from Gupta Industries is 10lakhs+750=10,00,750/-. Now this Rs.750/- is required to be deposited by STC upto 7th of Next month i.e. upto 07/11/2020 to credit of Central Govt.
  • Case-2: Sale made to Gupta Industries from 01/04/2020 to 30/10/2020 is Rs.20 lacs. STC received Rs.10 lakhs between Apr-Oct 2020 and remaining 10 lakhs is received on 02/10/2020. Then TCS is not required to be deducted because receipt during the half year does not exceed Rs.50lacs.
  • Case-3: Same as case-2 but STC received previous balance of Rs.50 lacs between Apr-Oct 2020, than TCS would be required to be deducted on 10lacs because receipt exceeded 50lacs.
  • Case-4: Receipt from Gupta Industries on account of sale of goods is Rs. 60lacs from Apr-March 2020. Advance is received of Rs. 70 lacs on further sale than also TCS is required to be deducted on 70 lacs.

4. NOT APPLICABLE

  • On exports and import of goods
  • If sale is made to Govt.

5. OUR COMMENT-

PLEASE SEE LEDGER OF PARTY EVERY TIME YOU MAKE SALE NOW.  CHECK THE AMOUNT RECEIVED.

*****

The above comments do not constitute professional advice. The Author can be reached at companyfinancialtree@gmail.com or visit website www.financialtreecompany.com . My name is CA Divya Agrawal and I am Practising Chartered Accountant, CEO and Founder of FINANCIAL TREE COMPANY (An online return filing and Tax Consultancy Company) where we have taken an initiative that allows person to Pay from Heart. We also upload educational videos in You tube and name of our channel is FINANCIAL TREE COMPANY. Our aim is to help people in improving their financial health by spreading knowledge and love. Stay Financially Fit and Healthy.

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8 Comments

    1. Divya Agrawal says:

      Dear Sir,
      The limit of 10crores is regulated by PAN Number. If you have one PAN No. for all the branches..than you need to collect tcs.

    1. Divya Agrawal says:

      Consequence for not collecting or not paying TCS-
      Interest-You need to pay interest @1% from date of default to date of deposit.
      Penalty- Penalty shall be equal to amount to tax you failed to collect. Also penalty u/s 221 shall be leived which shall be equal to demand not paid within 30 days.
      Prosecution-If failed to deposit tax than you shall be punishable with rigorous imprisonment for minimum 3 months and maximum 7 years that to with fine.

  1. Amardeep Singh Bhatia says:

    If till 30.09.2020 sales Above 50 lakh , Payment Received after 01.10.2020 , Tcs Applicable, on that Tcs Amount , GST will applicable ? ?

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