Friends before going to the discussions, we have to refer the definition of TCS as per Sec.206C(1H) under Income Tax,1961. The Government of India newly introduced Tax Collection at Source (TCS) on sale of goods vide Sec. 206(1H) w.e.f.01.01.2020.

Tax Collection at Source is the tax payable by a seller which he raised bills to the buyer at the time of sale and is payable to the Government Treasury on receipt of money from the buyer. Here with I am providing true extract of Sec.206C(1H)of Income Tax Act,1961, for your ready reference.

True extract of Sub-Section(1H) as has been inserted in Sec.206C :

(1H). Every person, being a seller, who receives any amount as consideration for sale of any goods of the value or aggregate of such value exceeding Fifty lakh rupees in any previous year, other than the goods being exported out of India or goods covered in sub-section(1)or Sub-secction (1F) or sub-section (1G) shall, at the time of receipt of such amount , collect from the buyer, a sum equal to 0.1 per cent of the sale consideration exceeding fifty lakh rupees as income –tax.

Provided that if the buyer has not provided the PAN No or the Aadhaar number to the seller, then the provisions of clause(ii) of sub-section(1) of section 206CC shall be read as if for the words “five per cent” the words “ one per cent “ had been substituted.

Provided further that the provisions of this sub-section shall not apply, if the buyer is liable to deduct tax at source under any other provision of this Act on the goods purchased by him from the seller and has deducted such amount.

Explanation:– For the purposes of this sub-section:-

(a) “ Buyer” means a person who purchases any goods, but doesn’t include———–

(A) The Central Government, a State Government, an embassy, a High Commission, legation, commission, consulate and the trade representation of a foreign State; or

(B) a local authority as defined in the Explanation to clause (20) section 10; or

(C) A person importing goods into India or any other person as the Central Government may, by notification in the Official Gazette, specify for this purpose, subject to such conditions as may be specified therein.

(b) “ Seller” means a person whose total sales, gross receipts or turnover from the business carried on by him exceed ten crore rupees during the financial year immediately preceding the financial year in which sale of goods is carried out, not being a person as the Central Government may, by notification in the official Gazette, specify for this purpose , subject to such conditions as may be specified therein”.

Key features on TCS as per inserted to Sec.206C(1H) w.e.f.01.10.2020.

> TCS under Section 206C(1h) is applicable on all supply of goods except Timber, Tendu leaves, forest products, scrap , minerals i.e. Iron ore etc., because such goods are already covered under TCS as per Sub-Section (1), Sub-section(1C), Sub-Section (1F) and Sub-section (1G) of section 206C.

>New Sec. 206C(1H ) shall be only on the amount on the amount received on or after 1st October,2020 from a particular buyer from 01.10.2020 only. For Ex: If a seller who has received Rs.1Cr before 1st October,2020 from a particular buyer and receives Rs.5 Lakhs after 1st Oct,2020 would be required to collect tax on Rs.5 Lakhs only and not on 55 Lakhs i.e. Rs.1.05 Cr minus Rs.50 Lakhs (Threshold limit) by including the amount received before 1st Oct,2020.

> TCS is not applicable on export of goods to outside India.

> TCS is not applicable on Import of Goods into India.

> TCS is not applicable if the buyer is liable to deduct TDS under Sub-section (1)(1C)(1F and (1G) of section 206 of Income Tax Act 1961.

> Threshold limit to apply for TCS is Rs.10 cr. For the purpose of calculation of TCS this threshold of Rs.50 lakhs of supply of goods. The receipts from the beginning of the financial year.

> TCS will be applicable w.e.f.01.10.2020, sub-section 206C(1H) imposes responsibility of collection of TCS on every person whose total sales, gross receipts or turnover during the preceding financial year 2019-20 is more than 10 Crores. Such person is liable to collect TCS @0.1% on the amount exceeding Rs.50 Lakhs during the financial in respect of goods sold to a buyer.

> If the seller is providing his PAN & Aadhaar number, under that circumstances the TCS rate shall be applicable @1% instated 0.1%.

> For the purpose of calculating the threshold limit of Rs.10 Crore, the total turnover including gross receipts and sales is to be taken into consideration whereas for computing the threshold of Rs.50 Lakhs only sale of supply of goods under GST Law is to be considered.

> When TCS has to be collected :

The seller shall collect TCS from the buyer @0.1% of the sale consideration at the time of receipt of such amount. So, the liability to collect TCS will arise even in the case of advance payment received against supply of goods will be physically delivered at a later date. i.e. TCS shall be applicable on advance against supply of goods.

> TCS amount is mentioned on the invoice collected from the buyer and is payable to Government account by the seller only on collection of consideration by way of money due on the bill.

> If the seller has mentioned transport charges on the invoice as per contractual obligation between buyer and seller are payable by the buyer in addition to sale consideration, Under that circumstances, while deduct TCS, transport charges amount is not considered as part of turnover. Because transport charges is not part of sale consideration as per terms and conditions of the contract between supplier and buyer.

> TCS shall be deducted on the GST amount. Because GST will also be part of sale consideration. So, TCS shall be collected on total amount of invoice excluding freight or transport charges as per contract between buyer and seller. As per (CBDT vide circular No.17, dt.29.9.20, has clarified that since the collection is made with reference to receipt of amount of sale consideration, no adjustment on account of indirect taxes including GST is required to be made for the collection of tax under this provision. Thus, TCS is required to be collected on the sale consideration inclusive of GST),

> We have to take extra care at the time of making TCS, whether a particular item of sale will be considered as goods or not.

> Regarding supply of software: Software is always a bundled service which can either be considered goods or services depending on various situations. Because there is always a confusion about software that it can be either goods or services. Hence Government had clarified that if buyer is liable to deduct TCS under I.T.Act, If TDS is applicable under I.T.Act, Buyer don’t deduct TCS. Otherwise TCS will be applicable as per Sec.206C(1H) of IT Act,1961.

> Regarding supply of Jewellery: Jewellery come under the definition of Goods. So, supply of jewellery is covered under TCS provisions. If threshold limit of Rs.10 Cr by seller and Sale consideration limit of Rs.50 Lakhs between seller and buyer in the F.Y.2018-19, TCS provisions shall be applicable on supply of Jewellery.

> TCS provisions are not applicable on the following transactions:

(i) This Section is not applicable to supply of goods to the Central Government, State Government or Local Authority, Embassy, High Commission, Consulate or a trade representation of Foreign State.

(ii) The Central Government has also power to specify any other seller or buyer who shall not be subject to provisions of above sub-section.

(iii) TCS provisions are not applicable on branch transfer of goods between Head office and Branch.

> Is TCS provision will be applicable on advances received from the buyer for supply of Goods after 1st October,2020 ?

In my opinion the seller has received any advances against supply of goods after 1st October,2020, New TCS provisions shall be applicable as per Sec.206C(1H) of the Income Tax Act,1961. The same has clarified by the CBDT in it’s circular No.17 of 2020,dated.29.9.2020.

> If TCS provisions is applicable, on what value TCS shall be collect from the buyer as per new provisions of TCS :

As per Sec.206C(1H) of the I.T.Act,1961, seller shall be collect TCS on the consideration received on sale of Goods. The collection is made with reference to receipt of the amount of sale consideration. Seller has no obligation to make an adjustment under Indirect Taxes including GST is required. The CBDT has also clarified in its circular no.17/2020 dated.29.9.2020 on this issue.

> If the buyer has branches all over India, whether supply of goods to such branches need to be aggregate by the seller?

Where tax is required to be collected at source, the buyer is required to furnish his PAN or Aadhar number to the seller falling which the tax is required to be collected at higher rate. If PAN or Aadhar number is not provide , the threshold limit of Rs.50 lakhs shall be computed in respect of each PAN or Aadhar number . So, for the purpose of compute aggregate turnover for making TCS , we have to considered all the branches are one unit only. All the branches are having single PAN No only under Income Tax Act,1961. There is no different between branches.

> Due date to deposit of TCS is 7th day of the next month in which tax has been collected.

> Due date for filling TCS return: The statement of TCS shall be filed with the Income Tax Department in FORM-27EQ on a quarterly basis.

>If seller is not follow the new TCS provisions under Sec206C(1H) of I.T.Act,1961, what shall be consequences of non-filling of TCS returns?

If the seller fails to file the TCS returns or does not file within due date, seller is liable to pay penalty of Rs.10,000/- minimum and maximum of Rs.1,00,000/- as per Sec.271H of I.T.Act,1961.

*****

Disclaimer: The contents of this article are for information purposes only and do not constitute an advice or a legal opinion and are personal views of the author. It is based upon relevant law and/or facts available at that point of time and prepared with due accuracy & reliability. Readers are requested to check and refer relevant provisions of statute, latest judicial pronouncements, circulars, clarifications etc before acting on the basis of the above write up.  The possibility of other views on the subject matter cannot be ruled out. By the use of the said information, you agree that Author / TaxGuru is not responsible or liable in any manner for the authenticity, accuracy, completeness, errors or any kind of omissions in this piece of information for any action taken thereof. This is not any kind of advertisement or solicitation of work by a professional.

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42 Comments

    1. B.S.Seethapathi Rao says:

      Madam, I have referred your query. You have to calculate interest on how many days delay . As per Act you have to deposit in the Government on or before 7th of the next months, so, interest will be calculated from 8’th of next month to till date of deposit in the Government Account.

  1. Sudha says:

    Sir,
    I have a query. Where there is a group of many divisions in the same company, if a seller has sold his goods less than 50 lakhs in each company but on the whole is more than 50 lakhs, then is the TCS still applicable, irrespective of different projects handling it under the same head. Please advise

    1. B.S.Seethapathi Rao says:

      Madam, I have referred your query, TCS is applicable as per PAN Based. I understood that your organization is one PAN but having group of many companies on the same PAN. So, TCS is applicable on all the companies.

  2. P. Srikanth says:

    Dear Sir,

    We are an IT company and we are charged with TCS u/s 206C(1H). Can you please let us know what % they are charging and how frequently it will be charged. And any other important things that we need to keep in mind w.r.t this act.

    1. B.S.Seethapathi Rao says:

      Dear Sir, Thank you to refer my article. Regarding your query, here with I am providing my opinion as below.
      Q. We are an IT company and we are charged with TCS u/s 206C(1H). Can you please let us know what % they are charging and how frequently it will be charged.
      Ans: Regarding TCS is applicable on supply of goods only not on services, Further your supplier having gross turnover (Threshold limit) including receipts and sale goods in the previous financial year i.e.2019-20 is having threshold limit of Rs.10 Cr or above and total sale of goods between you and your vendor is Rs.50 Lakhs and above in the previous Financial Year TCS is applicable, other wise TCS is not applicable. (Both the Conditions are fulfil other wise TCS is not applicable),
      Regarding rate of TCS for the F.Y 2020-21 is .75% as per Government notification due to Pandemic Situation and for the F.Y 2021-22 i.e. 01.4.0201 onwards rate of TCS if @1%.
      Q.2.And any other important things that we need to keep in mind w.r.t this act.
      Ans: You have to check every year staring with your vendors whether he has crossed their gross turnover including receipts and supply of goods etc., Rs.10 Cr and more in a year. If your vendor is not having threshold limit of Rs.10 cr or transaction between you and your vendor is below Rs.50 lakhs TCS is not applicable .

        1. B.S.Seethapathi Rao says:

          Sir As per Sec.206C(1H) of the I.T.Act,1961, seller shall be collect TCS on the consideration received on sale of Goods. The collection is made with reference to receipt of the amount of sale consideration. Seller has no obligation to make an adjustment under Indirect Taxes including GST is required. The CBDT has also clarified in its circular no.17/2020 dated.29.9.2020 on this issue.
          Regarding Filling of TCS return Due date for filling TCS return, The statement of TCS shall be filed with the Income Tax Department in FORM-27EQ on a quarterly basis.

  3. Amjad Khan says:

    Dear Sir
    We had received 1.15 Cr from Buyer towards Sale till 30/10/2020. during this F.y(20-21) were as his outstanding balance for (2019-20) also included (75 lakhs).

    It means that we had received Only 40 Lakhs for F.Y 20-21 (1.15 cr-75 Lakhs)

    Were we had sold Good in this F.Y to Buyer is 1cr -40 lakhs = 60 lakhs Pending

    Is TCS is applicable on this.

    1. B.S.Seethapathi Rao says:

      Dear Sir, thank you to refer my article. Sir, you are not provide about your total turnover previous financial year 2019-20. If your Total Turnover crossed Rs.10 Cr. TCS is applicable on this buyer.

  4. Amjad Khan says:

    Hi Sir
    If Buyer has paid us 1.15Cr till 30th Oct’20 were his
    out-standing balance for last year (2019-20) also included (75 Lakhs),
    it Means for this F.Y (2020-21) we had received (40 Lakhs )
    In this F.y (2020-21) we sold him more than 1Cr Goods.

    Is Tcs is applicable for this.

    1. B.S.Seethapathi Rao says:

      Dear Sir, Thank you to refer my article. If your Total Turnover crossed Rs.10 Cr in the previous year i.e..2019-20 F.Y. TCS is applicable on this buyer.

  5. Mona Agarwal says:

    Sir we had purchase from one buyer f y 19-20 Rs 76,000 approx and this year we have purchase RS 43,61,517 than also he had cut tcs under section 206 c 1h plzz say is it applicable

    1. B.S.Seethapathi Rao says:

      Respected madam, Good day to you. Thank you to refer my article, Regarding your query, here with I am providing my opinion as below:
      Q.Sir we had purchase from one buyer f y 19-20 Rs 76,000 approx and this year we have purchase RS 43,61,517 than also he had cut tcs under section 206 c 1h plzz say is it applicable.
      Ans: Madam, to apply TCS on supply of goods w.e.f.01.10.2020 depend upon to fulfil 2 conditions.
      Condition-1 is your total receipts or Rs.10 cr for the previous F.Y.2019-20 and total consideration of receipts crossed Rs.50 lakhs in the previous F.Y between buyer and seller. If any one of the ccondition is nt fulfil TCS is not applicable. So, In your case as per my personal opinion TCS is not applicable.

    2. B.S.Seethapathi Rao says:

      Respected madam, Good day to you. Thank you to refer my article, Regarding your query, here with I am providing my opinion as below:
      Q.Sir we had purchase from one buyer f y 19-20 Rs 76,000 approx and this year we have purchase RS 43,61,517 than also he had cut tcs under section 206 c 1h plzz say is it applicable.
      Ans: Madam, to apply TCS on supply of goods w.e.f.01.10.2020 depend upon to fulfil 2 conditions.
      Condition-1 is your total receipts or Rs.10 cr for the previous F.Y.2019-20 and total consideration of receipts crossed Rs.50 lakhs in the previous F.Y between buyer and seller. If any one of the condition is not fulfil TCS is not applicable. So, In your case as per my personal opinion TCS is not applicable.

  6. Sunila K S says:

    Not able to make remit the TCS collected… E taxes pay online TCS Section under nature of payment is not correct… It’s shown Section 6Cp not correct… 6CM Shown sale of goods… Totally confused
    Which one is correct?

    1. B.S.Seethapathi Rao says:

      Dear Sir/Madam, Thank you to refer my article. Regarding your query here with I am giving my opinon as below: Now NSDL has updated code 6CR – TCS on sale of goods so that people can deposit the tax collected.

    1. B.S.Seethapathi Rao says:

      Dear Sir/Madam, good day to you. Thank you to refer my article. Regarding your query here with I am providing my suggestion that you have to pay in Form ITNS Form 281. Kindly send your mail i.d. I will provide Income tax department posted procedure to pay E-Payment taxes under various heads.

    2. B.S.Seethapathi Rao says:

      Dear Sir/Madam, good day to you. Thank you to refer my article. Regarding your query Kindly send your mail i.d. I will provide Income tax department posted procedure to pay E-Payment taxes under various heads.

    3. B.S.Seethapathi Rao says:

      Dear Sir/Madam, good day to you. Thank you to refer my article. Kindly send your mail i.d. I will provide Income tax department posted procedure to pay E-Payment taxes under various heads.

    1. B.S.Seethapathi Rao says:

      Dear Sir, Thank you to read my article. Regarding your query, here with I am providing my suggestion as below: 6CR “Sale of goods” code. Kindly send your mail I.D. I will provide detailed notes published by I.T. Department on E-Payment of I.T. Taxes.

  7. Prem Kumar says:

    A NEWLY STARTED COMPANY DURING THIS YEAR SEP2020 SO PREVIOUS TURNOVER NIL SUCH CASE TCS APPLICABILITY OF CURRENT YEAR FOR ABOVE 50LACS FOR ONE PARTY IS NIL.. AM I RIGHT SIR

    1. B.S.Seethapathi Rao says:

      Dear Sir, Thank you to refer my article. Regarding your query, your observation is correct. In my opinion “Not applicable”.

    1. B.S.Seethapathi Rao says:

      Dear Sir, Thank you to refer my article. Regarding your query, here with I am providing my opinion as below,
      Q.Sir, whether ordnance factory, which is a unit under Min of defence has to pay TCS for the goods purchased.
      Ans. In your case not require. Because your client is Government department. in my opinion.

  8. Guru Prasad S says:

    Sir,

    Freight charges included in Purchase invoice towards Goods purchased.

    Please is TCS applicable for the Freight charges included in invoice?

    1. B.S.Seethapathi Rao says:

      Dear Sir, Thank you to refer my article, Regarding your query, As per my opinion liable to collect TCS on freight on also because as per your mail I understood that your price is including freight, am I correct, If responsibility to bear the fright charges is buyer’s , under that circumstances not liable to to collect TCS on freight.

  9. Muthuraj says:

    Dear Sir,

    Whether the said TCS u/s 206C(1H) applicable to Government Companies like TNEB Ltd or UPCLtd and whether they need to collect on the Electricity charges levied on the customers.

    Request you to please clarify the same.

    1. B.S.Seethapathi Rao says:

      Dear Sir, Thank you to referred my article, Regarding your query. here with I am providing my opinion as below:
      As per the notification No. 12/2017 (Central Rates) Dt: 28th June, 2017 as per the entry no.25 – ‘Transmission or distribution of electricity by an electricity transmission or distribution utility’ are taxable under GST @ ‘NIL’.
      So, TCS is not applicable to Government Companies .

      1. P. Srikanth says:

        Dear Sir,

        We are an IT company and we are charged with TCS u/s 206C(1H). Can you please let us know what % they are charging and how frequently it will be charged. And any other important things that we need to keep in mind w.r.t this act.

  10. Chanchal Singh Sahni says:

    Sir, will you please throw light on Section 206(C) (1G) regarding LIBERALISED Transfer Scheme wherin TCS above Rs. 7 lac is applicable. Special reference to transfer of one’s fund lto foreign country lying in NRE/NRO account.

    1. B.S.Seethapathi Rao says:

      dear sir, kindly refer the below article in TAXGURU for your query.

      Liberalised Remittance Scheme & section 206C TCS provisions on 7.10.2020 prepared by CA.Ram Varma.

  11. Krishnamoorthy Naidu says:

    > For the purpose of calculating the threshold limit of Rs.10 Crore, the total turnover including gross receipts and sales is to be taken into consideration whereas for computing the threshold of Rs.50 Lakhs only sale of supply of goods under GST Law is to be considered.
    NOT CLEAR
    1.Rs.10 Crore, the total turnover including gross receipts and sales ????
    2.Rs.50 Lakhs only sale of supply of goods under GST Law is to be considered.

    1. B.S.Seethapathi Rao says:

      Dear sir, Thank you for referred my article. Regarding your query , here with I am providing my clarification.
      1.Rs.10 Crore, the total turnover including gross receipts and sales ????
      Ans: In this regard, the TCS section says that any person (Seller) liable to collect TCS, such person’s annual gross turnover exceed Rs.10 Cr. (Gross turnover means Sales turnover plus, Gross receipts plus or turnover ) Ex: seller is having gross annual turnover of supply of goods, Supply of services, receipts against supply of goods. Some times seller has received part payments of sale consideration against supply of goods from his recipients. So, we have to refer details of gross turnover.
      2.Rs.50 Lakhs only sale of supply of goods under GST Law is to be considered.
      Ans: In this regard, The seller is having receipts against supply of goods exceeds of Rs.50 lakhs in the year2019-20 of Rs.50 Lakahs, then seller shall be liable to collect TCS.
      As per Sec.206C(1H) of TCS provisions clearly says that any seller wants to collect TCS from the buyer on receipts of consideration against supply of goods shall be follow 2 conditions. They are
      condition 1: seller is having gross turnover more than Rs.10 CR in the previous year i.e. 2019-20,
      condition.2. Total receipts against supply of goods between two parties (Seller and buyer), they TCS provisions shall be applicable other wise not applicable.
      Ex: If seller is having gross turnover below 10 CR, TCS provisions are not applicable or transactions of gross receipts against supply of goods only between seller and buyer below Rs.50 lakhs, TCS provisions are not applicable. so, If seller liable to collect TCS from the buyer, these 2 conditions are fulfil, other wise TCS provisions are not applicable. Kindly refer circular issued by CBDT vide Circular No.17/2020 dt.29.9.20. Thank you sir.

    2. B.S.Seethapathi Rao says:

      Dear Sir, Good morning. Thank you for referred my article. Regarding your query ,here with I am providing my clarification, kindly refer:
      1.Rs.10 Crore, the total turnover including gross receipts and sales ????
      Ans: Sir, In this regard, TCS provision says that, if seller is liable to collect TCS, he has crossed his annual gross turnover of Rs.10 CR ( Gross turnover means he is having turnover of sale of goods, supply of services. Consideration received against supply of goods etc., as per books of accounts and I.T.return for the F.Y.2019-20, if he is not crossed his annual T.O of Rs.10 Cr TCS provisions not applicable.
      2.Rs.50 Lakhs only sale of supply of goods under GST Law is to be considered.
      Ans: Sir, In this regard seller is having turnover of consideration received against supply of goods Rs.50 Lakhs from the buyer in the F.Y.2019-20, other wise TCS provisions are applicable.
      That means any one condition is not fulfil that means Seller is not having Gross annual T.O of Rs.10 Cr or seller is not having turnover of sale consideration against supply of goods from the buyer of Rs.50Lakhs in the F.Y 2019-20. TCS provisions are not applicable. Thank you.

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