Vide Finance Act, 2020, a new TCS provision was introduced with the insertion of sub-section (1H) to section 206C of the Income Tax Act, 1961. The said provision deals with TCS collection on the sale of goods.
The present article briefly provides an analysis of the provisions of TCS on the Sale of Goods; understanding of important terms like ‘buyer’ and ‘seller’; applicability and non-applicability of provisions of TCS on the Sale of Goods; important relevant clarification issued by the board and Frequently Asked Questions (FAQs).
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A simplified analysis of provisions of TCS applicable on the Sale of Goods covered under section 206C(1H) of the Income Tax Act is briefed hereunder –
Particulars |
Rate of TCS on Sale of Goods |
When the PAN/ Aadhaar number of the buyer is provided to the seller | 0.1% of the sale consideration exceeding INR 50 Lakhs |
When the PAN/ Aadhaar number of the buyer is not provided to the seller | 1% of the sale consideration exceeding INR 50 Lakhs |
TCS on the Sale of Goods is to be collected by the seller at the time of receipt of the amount from the buyer.
Notably, the provisions of section 206C(1H) of the Income Tax Act are made effective from 1st October 2020.
From the above analysis, it is important to note that the terms ‘buyer’ and ‘seller’ shouldn’t be interpreted in the common parlance. The terms are specifically defined under Explanation (a) and Explanation (b) to section 206C(1H) of the Income Tax Act.
Accordingly, ‘buyer’ as defined under Explanation (a) to section 206C(1H) of the Income Tax Act means a person who purchases any goods. However, the term ‘buyer’ doesn’t include the following specified categories of person –
Coming to the term ‘Seller’ as defined under Explanation (b) to section 206C(1H) of the Income Tax Act. ‘Seller’ means a person whose total sales/ gross receipts/ turnover from the business carried on by him exceeds INR 10 Crores during the immediately preceding Financial Year in which the sale is carried out.
Notably, the term ‘seller’ doesn’t include Central Government and any other notified person.
TCS on Sale of Goods provisions are applicable when the following conditions are satisfied –
Condition 1 – Seller is engaged in the sale of any goods other than export goods; alcoholic liquor; tendu leaves; timber; scrap; motor vehicles; foreign remittance; etc.
Condition 2 – Total sales/ gross receipts/ turnover from the business of the seller should exceed INR 10 Crores in the immediately preceding Financial Year;
Condition 3 – Value/ aggregate value of sale consideration for goods received from the buyer is more than INR 50 Lakhs.
TCS on Sale of Goods provisions covered under section 206C(1H) of the Income Tax Act are not applicable under the following circumstances –
1. Total sales/ gross receipts/ turnover from the business of the seller is less than INR 10 Crores in the immediately preceding Financial Year;
2. Value/ aggregate value of sale consideration received from the buyer is less than INR 50 Lakhs;
3. Export of goods out of India;
4. Sale/ supply of services;
5. Sale of goods to Government and local authority; etc.
Post implementation of TCS on the Sale of Goods effective from 1st October 2020, various representations were done before the Central Board of Direct Taxes for the removal of certain difficulties. Accordingly, circular no. 17 of 2020 dated 29th September 2020 was issued clarifying various positions. Important clarifications thereof are highlighted hereunder –
It is clarified that provisions of section 206C(1H) shall not apply to –
Particulars |
Applicability |
Sale of motor vehicles of the value of INR 10 Lakhs or less to buyer | TCS provisions under section 206C(1H) will be applicable if the receipt of the sale consideration for such vehicles exceeds INR 50 Lakhs during the previous year. |
Sale of motor vehicles of the value exceeding INR 10 Lakhs | TCS provisions under section 206C(1H) will not be applicable if the sales are subjected to TCS under provisions of section 206C(1F). |
It is clarified that as TCS on Sales of goods is collected on the receipt of the amount of sale consideration, no adjustment with regard to any discount, sales return or indirect taxes (including GST) is to be made.
It is clarified that TCS provisions of section 206C(1H) of the Income Tax Act will not be applicable in case of sale consideration received for fuel supplied to non-resident airlines at the airport in India.
Some of the important FAQs relating to provisions covered under section 206C(1H) of the Income Tax Act are highlighted hereunder –
1. Who is required to collect TCS on sale of goods?
The seller of the goods who receives any amount as consideration for the sale of any goods of the value exceeding INR 50 Lakhs is required to collect TCS on the sale of goods under section 206C(1H) of the Income Tax Act from the buyer.
2. On which amount TCS is applicable?
TCS under section 206C(1H) is applicable on total sale consideration as reduced by the threshold limit of INR 50 Lakhs [i.e. Total Sale Consideration – INR 50 Lakhs].
3. What is the section of TCS on sale of goods?
The relevant section of TCS on the sale of goods is section 206C sub-section (1H) of the Income Tax Act.
4. Is TCS applicable on the sale of goods?
Yes, TCS is applicable on the sale of goods under provisions of section 206C(1H) with effect from 1st October 2020.
5. Who is eligible for TCS on sale of goods?
TCS on the sale of goods is eligible to every seller of the goods who receives any amount as consideration for the sale of any goods of the value exceeding INR 50 Lakhs.
6. What is the new TCS rule?
The new TCS rule is introduced vide the Finance Act 2020 with the insertion of sub-section (1H) to section 206C. Accordingly, the seller of the goods who receives any amount as consideration for the sale of any goods of the value exceeding INR 50 Lakhs is required to collect TCS @ 0.1%.
7. When should TCS be deducted?
TCS is to be collected by the seller of the goods at the time of receipt of the amount from the buyer.
8. How do you record TCS on sale of goods?
Recording of TCS on sale of goods can be done by various ways depending upon the transaction. However, one of the ways is highlighted hereunder –
Buyer’s A/c. Dr.
To Sales A/c
To IGST A/c
To TCS on Sale of goods A/c
9. Is TCS collected on the GST amount?
Yes, TCS under section 206C(1H) on the sale of goods is also to be collected on the GST amount.
Hi,
Our turnover crossed INR 10 Cr In the current financial year (22-23). when we need to start collecting TCS from Apr-23 Onwards Or From Now ?
on ques no 9
TCS collected on GST
please explain with figures how to calculate tcs & gst on sales for RS 1.5 CRORE.