TCS under Section 206C(1H) Effective from 01.10.2020

Article explains TCS related provisions under Section 206C(1H) of Income Tax Act, 1961 Effective from 1st October 2020. It explains Transaction on which TCS  under Section 206C(1H) of Income Tax Act, 1961 is aopplicable, Rate of TCS, Rate if PAN No. is not provided, Due date of payment of TCS etc.

XXXX as Buyer
Effective from 1st October 2020
Particulars		Impact	Rate		Remarks
			PAN	No PAN
Whether Turnover of the Seller exceeds Rs 10 Crores in F.Y. ended 31.3.2020	Yes	TCS is applicable on payment exceeding 50 Lakhs after 1.10.2020	0.075%	1%	CA Certificate of the Seller for turnover as per Appendix -1
Whether sale of Goods exceeds 50 lakhs in the current year	Yes	TCS is applicable on payment exceeding 50 Lakhs after 1.10.2020
Sales exceeds Rs 50 lakhs in current year but turnover is less than Rs 10 crores in Previous Year		No TCS is applicable
Sales is less than Rs 50 lakhs in current year but turnover exceeds Rs 10 crores in Previous Year		For payments above Rs 50 lakhs TCS is applicable
Whether TDS or TCS is deducted by the Seller under any other provisions	Yes	No TCS is applicable
Whether the Buyer is a Central /State Govt, Embassy, Local Authority	Yes	No TCS is applicable
Whether the goods are imported into India	Yes	No TCS is applicable
Whether InterCompany Sales transaction are also covered	Yes	TCS is applicable on payment exceeding 50 Lakhs
Goods sold prior to 1st October 2020 exceeding Rs 50 lakhs	Yes	No TCS is applicable
Goods sold prior to 1st October 2020 exceeding Rs 50 lakhs and payment made after 1st October 2020	Yes	TCS is applicable on payment exceeding 50 Lakhs

–

XXXX as Seller
Particulars	Impact	Rate		Remarks
		PAN	No PAN
XXXX’s turnover is exceeding Rs 10 crores, hence provisions of TCS are applicable to us.
Our Sales can be classified as :
1. Sales wherein TDS is deducted from the billing under other Provisions of Income Tax				1. Since most of our Clients are deducting TDS under 194 C from our Bills, we will have to obtain declaration from the Clients and no TCS will be deducted.
Other Exclusions are :				2. The Central or State government
				3. An Embassy, a High Commission, legation, commission, consulate or trade representative of a foreign State and a club
				4. Local authority [as defined in explanation to section 10(20)]
				5. A person importing goods into India or any other person as may be notified.
2. For all other Sales made by us where no TDS is to be deducted by the Clients, like RMC, aggregates etc	TCS is applicable on payment exceeding 50 Lakhs after 1.10.2020	0.075%	1%

For better understanding let us take a look at the various scenarios:

Sr. No.	Seller	Ye-ar 19-20	Ye-ar 20-21	Buyer	Selling till 30th Sep	from 1st October	TCS u/s 20-6C(1H)	Remarks
1	XYZ	12 Cr	9 Cr	XXXX	2400000	6500000	2,925	0.075% on 39 Lac (Being Excess of Rs. 50 Lac)
2	ABC	9 Cr	12 Cr	XXXX	2400000	6500000	NA	As Turnover in the FY 2019-20 not exceeding Rs. 10 Crore
3	DDD	12 Cr	18 Cr	ABC	8500000	600000	450	on Rs. 6 Lac being Turnover after 30th September
4	AIPL	12 Cr	18 Cr	Local Authority (Municipal Corporation of Mumbai)	5500000	2000000	NA	As this Clause not applicable if buyer is Local Authority
5	AIPL	15 Cr	12 Cr	XYZ  (Who is Liable to deduct TDS on the Value of Job Work	3000000	3500000	NA	As this transaction is already covered by TDS
6	XYZ (Auto Dealer)	20 Cr	15 Cr	XXXX (Buy A Car)	0	1500000	NA	As on this transaction TCS shall be Collect u/s 206C(1F)

Due dates :

The dates for paying TCS to the government are :

Collection Month	Quarter Ending	Due date of Payment	Due Date of filing return
April	30th June	7th May	15th July
May		7th June
June		7th July
July	30th September	7th August	15th October
August		7th September
September		7th October
October	31st December	7th November	15th January
November		7th December
December		7th January
January	31st March	7th February	15th May
February		7th March
March		7th April

5. Certificate of TCS

1. When a tax collector files his quarterly TCS return i.e  Form 27EQ, he has to provide a TCS certificate to the purchaser of the goods.This certificate has to be issued within 15 days from the date of filing TCS quarterly returns.

The due dates  for for generating Form 27D–

Notes :

1. Definition of Turnover :

No clarification has been provided by CBDT in this regard.

GST component is included while calculating the limit of section 44AB i.e. Tax Audit. Same interpretation is to be followed while calculating the threshold limit under this section i.e. GST component will included in sales. For eg, if Mr. A has turnover of Rs. 9cr (exclusive of GST) in FY 2021-22 and collected GST of Rs. 1.08cr, in that case total turnover for the purpose of this section is Rs. 10.08cr. Same conclusion applicable for calculating Rs. 50 lakhs threshold.

2. Whether TCS will be collected on GST portion?

Indirect taxes like GST forms integral part of the consideration and therefore TCS is collectible on sales price inclusive of GST and other indirect taxes.

A clarification in this regard is expected from CBDT. Till then the conservative view is to collect TCS on GST component as well.

3. TCS provisions not applicable where resident buyer furnishes a declaration to the person responsible for collecting tax, to effect that, the goods referred to above are utilized for the purposes of manufacturing, processing or producing articles or things or for the purposes of generation of power and not for trading purposes

4. The person responsible forcollecting tax shall deliver one copy of such declaration to the Chief Commissioner of Income Tax (CIT) / CIT on or before the 7^th day of the month next after the month in which the declaration is furnished to him.

5. TCS should not be included in Value of Transaction for calculation of GST as CBIC has clarified through Corrigendum to Circular No. 76/50/2018-GST dated 7th March 2019 that Amount of TCS under Income Tax will not be part of Value under GST. Copy of the Circular is Appended herewith.

Appendix -1

From the Vendors of XXXX.

ON LETTERHEAD OF STATUTORY AUDITORS

To

M/s XXXX

Mumbai

Dear Sir,

Re : Confirmation of Turnover for the year ended 31.3.2020

Ref : Tax Collection at Source U/S 206C(1H)

As per the information and explanation given to us and records produced before us, We confirm that M/s. _______________________, having registered office at _________________, has achieved turnover of Rs . ___________ for the period ended 31.3.2020.

Thanking you

Yours faithfully

Place

Date

UDIN :

From the Vendors of XXXX.

ON SELLERS LETTERHEAD

To

M/s XXXX

Mumbai

Dear Sir,

Re : Confirmation of Turnover for the year ended 31.3.2020

Ref : Tax Collection at Source U/S 206C(1H)

We are enclosing herewith following :

1. Turnover Certificate for the period ended 31.3.2020

2. Since our turnover for the relevant period is below Rs 10 crores, we are not liable to collect Tax at Source for the sales made by us during the year ended 31.3.2021.

Or

3. Since our turnover for the relevant period exceeds Rs 10 crores, we shall be liable to collect Tax at Source for the sales made by us during the year ended 31.3.2021 under the provisions of Section 206 C (1H) of Income Tax Act.

Thanking you

Yours faithfully

Place

Date

Corrigendum to Circular No. 76/50/2018-GST  

F.No. 20/16/04/2018 -GST  Government of India
Ministry of Finance
Department of Revenue
Central Board of Indirect Taxes and Customs
GST Policy Wing

New Delhi, Dated the 7^th March, 2019

To,

The Principal Chief Commissioners/ Chief Commissioners/ Principal Commissioners/ Commissioners of Central Tax (All)

The Principal Director Generals/ Director Generals (All)

 Madam/Sir,

Subject: Corrigendum to Circular No. 76/50/2018-GST dated 31^st December, 2018 issued vide F.No. CBEC- 20/16/04/2018-GST- Reg.

Vide serial number 5 of Circular No. 76/50/2018-GST dated 31^st December, 2018, it was clarified that the taxable value for the purposes of GST shall include the Tax Collected at Source (TCS) amount collected under the provisions of the Income Tax Act, as the value to be paid to the supplier by the recipient is inclusive of the said TCS.

2. In the light of the representations received from the stakeholders, the matter has been re-examined in consultation with the Central Board of Direct Taxes (CBDT). The CBDT has clarified that Tax collection at source (TCS) is not a tax on goods but an interim levy on the possible “income” arising from the sale of goods by the buyer and to be adjusted against the final income- tax liability of the buyer.

3. Accordingly, in No. 5 of the Circular No. 76/50/2018-GST dated 31^st December, 2018:

5.	What is the correct valuation methodology for ascertainment of GST on Tax collected at source (TCS) under the provisions of the Income Tax Act, 1961?	1. Section 15(2) of CGST Act specifies that the value of supply shall include “any taxes, duties cesses, fees and charges levied under any law for the time being in force other than this Act, the SGST Act, the UTGST Act and the GST (Compensation to States) Act, if charged separately by the supplier.”
		2. It is clarified that as per the above provisions, taxable value for the purposes of GST shall include the TCS amount collected under the provisions of the Income Tax Act since the value to be paid to the supplier by the buyer is inclusive of the said TCS.

Read

5.

What is the correct valuation methodology for ascertainment of GST on Tax collected at source (TCS) under the provisions of the Income Tax Act, 1961?

1. Section 15(2) of CGST Act specifies that the value of supply shall include “any taxes, duties cesses, fees and charges levied under any law for the time being in force other than this Act, the SGST Act, the UTGST Act and the GST (Compensation to States) Act, if charged separately by the supplier.” 2.  For the purpose of determination of value of supply under GST, Tax collected at source (TCS) under the provisions of the Income Tax Act, 1961 would not be includible as it is an interim levy not having the character of tax.

 2. It is requested that suitable trade notices may be issued to publicize the contents of this Circular.

3. Difficulty, if any, in implementation of this Circular may please be brought to the notice of the Board. Hindi version would follow.

(Upender Gupta)
Principal Commissioner (GST)