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.
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