TCS (Tax Collected at Source) On sale of Goods- New Income Tax Compliance w.e.f 01.10.2020.
With a view to widen the tax-net, the Indian government has extended the scope of Tax Collected at Source (“TCS”). The Government of India has added a new sub section (1H) in the section 206C which would be called as section i.e., 206C (1H) of the Income Tax Act, 1961 with regards to ‘Tax Collection at Source‘.
What is Section 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 50 lakh rupees in any previous year, other than the goods being exported out of India or goods covered in sub-section (1) or sub-section (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”.
That means, that Every seller who has received any amount as sale consideration above Rs. 50 lakhs (limit to calculate from 1st April 2020) has to collect 0.075% of bill amount from such buyer, collect PAN and pay as TCS every month.
Applicability of Section 206C(1H)
Applicability Date of TCS on sale of Goods under section 206C(1H)
Important Outcome of the Newly added provisions of section 206C (1H)
Buyer means a person who purchases any goods, but does not include:
1. The Central Government, a State Government, an embassy, a High Commission, legation, commission, consulate and the trade representation of a foreign State; or
2. A local authority as defined in the Explanation to clause (20) of section 10; or
3. 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.
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 the sale of goods (Sale of Services is not covered) 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.
Note: Sellers will need to add 0.075% to the total bill value and deposit with the government every month. This Tax Collected at Source rate would be 0.1% from 01.04.2021. So everyone is advised to complete accounting for half year till 30.09.2020 and separate parties with whom payment received crosses Rs. 50 lakhs.