BACKGROUND OF TAX COLLECTION PROVISIONS
TCS was first introduced by Central Government through Finance Act 1988 (vide Chapter XVII-BB) just to curb those sectors/ persons who are unidentified and mainly from unorganized sectors.
Section 206C (1) – EVERY PERSON being seller AT TIME OF DEBITING OF BUYER “OR” AT TIME OF RECEIPT OF SUCH AMOUNT from the buyer in CASH/ CHEUQE/ISSUE OF CHEQUE/DRAFT/ ANY OTHER MODE, which ever is earlier collect TCS at certain percentage as given below:-
(i) Alcoholic Liquor for human consumption 1%
(ii) Tendu Leaves 5%
(iii) Timber obtained under a forest lease 5%
(iv) Timber obtained by any other mode other than under a forest lease 2.5%
(v) Any other forest produce not being timber or tendu leaves 2.5%
(vi) Scrap 1%
(vii) Minerals, being coal or lignite or iron ore 1%
Section 206C(1A) Exemption is provided to those buyers who are “Manufacturer” “processing or producing article or thing” or for the purpose of generation of power and not for trading purpose based on furnishing of declaration. And such declaration shall be required to be submitted by seller to the jurisdictional commissioner.
Section 206C (1C) – levy TCS on Parking lot, Toll plaza, Mining and quarrying
Section 206C (1F) – levy TCS on sale of Motor Vehicle exceeding value Rs. 10 Lacs @ 1%
Section 206C (1G) – Authorized Dealer remitting funds on behalf of a person out of India in accordance with RBI Librelization Scheme shall be required to have TCS @ 5% above Rs. 7 Lacs in a financial year (In case of remittance is for repayment of Education Loan as defined u/s. 80E then rate of TCS @ 0.5% above Rs. 7 Lacs)
– TCS by Tour programme operator making payment out of India is required to have TCS from buyer of tour programme @ 5% (no basic exemption of 7 Lacs)
Section 206C (1H) – states that 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 lacs 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
(1) Exports are kept out from net of TCS meaning thereby Zero Rates supplies, EOU supplies, supplier to EOU provided they comply with Notification no. 48/2017-CGST and supplier to Exporter vide notification no. 40/2017-CGST shall be deemed to be treated as supplier to Exporters.
(2) Second Proviso – which states that in case BUYER has deducted TDS on payment made to Seller, then TCS will not be made by Seller.
(3) Certain further exclusion from definition of BUYER:-
(A) The central government, a State Government, an embassy, a High Commission, legation, commission, consulate and the trade representation of foreign State: or (there is no exclusion of Government Companies)
(B) A local authority as defined in the Explanation to clause (20) of Section 10; or
(C ) a person importing goods into India or any other as the Central Government may, by notification in the Official Gazette, specify for this purpose, subject to such conditions as may be specified therein;
(4) FURTHER EXCLUSION PROVIDED VIDE CBDT’S CIRCULAR NO.17 OF 2020
That CBDT vide Circular no. 17 of 2020 has come out with Guidelines for implementation of said provision wherein CBDT vide above circular has exempted below transaction from operation of above 206C (1H) as below:-
(i) Transaction in securities and commodities through recognized stock exchanges
(ii) Transaction in electricity, renewable energy certificates and energy saving certificates through power exchanges in accordance with CERC
(5) Central Government reserves the right to notify those sellers which may be kept out from above TCS Provisions but still same are not notified.
RATE OF TCS
> Rate of TCS is 0.1% (during COVID-19 period upto 31.3.2021 it is 0.075%) at which TCS to be made
> In case non providing of PAN by buyer, then rate of TCS shall be 1% (COVID-19 rate is 0.75%)
COMPUTATION OF THRESHOLD
Calculation of Limit of 10 Crore is to be checked in each and for which calculation shall be taken from previous year. And once it is ascertained that assessee is having turnover over Rs. 10 Crore in previous year, then liability shall be arise for TCS eg.
Financial year 2019-20 = Turnover Rs. 11 Crore
Financial year 2020-21 = Turnover Rs. 13 Crore (liability in the year 2020-21)
Financial year 2021-22 = Turnover Rs. 9 Crore (liability in the year 2021-22)
Financial year 2022-23 = Turnover Rs. 17 Crore (NO LIABILITY in 2022-23)
TIME OF COLLECTION AND DEPOSITION OF TCS
As per provision of Section 206C(1H) it is leviable at time of receipt of amount. Thus whenever the payment is received, it is required to be deposited.
VALUE AT WHICH TCS SHOULD BE COLLECTED
That TCS is to be made on consideration received on sale of any goods
Required to collected from those dealers whose value of supply exceeds Rs. 50 lacs in a financial year i.e. turnover of rs. 50 lacs to be counted from 1.4.2020 to till date
If already exceeds Rs. 50 lacs – then to be collected from 1.10.2020 and if not
Then as and when it exceeds Rs. 50 lacs – then it is required to be collected
Even in case of advance received against supply of goods – tcs to be made
Illustration-I (Sale after 1.10.2020)
|Illustration-I (Sale after 1.10.2020)|
|Sales dt. 01.10.2020||Rs. 60,00,000/-|
|Add: Freight||Rs. 1,00,000/-|
|Total Rs. 61,00,000/-|
|Add: GST @ 12%||Rs. 7,32,000/-|
|Add: TCS @ 0.1% on Rs. 6832000/-||Rs. 6,832/-|
|Total Rs. 68,38,832/-|
|Illustration-I (Sale after 1.10.2020)|
|Sales dt. 01.09.2020||Rs. 60,00,000/-|
|Add: Freight||Rs. 1,00,000/-|
|Total Rs. 61,00,000/-|
|Add: GST @ 12%||Rs. 7,32,000/-|
|Total Rs. 68,32,000/-|
Now at time of collection of payment TCS shall be made on Rs. 68,32,000/- and as now there is no mechanism for getting TCS collected and thus accordingly “DEBIT NOTE” in accordance with Section 34 of GST Act shall be required to be raised.
NO ADJUSTMENT OF SALES RETURN, DISCOUNT, GST
That vide circular no. 17 of 2020 (para no. 4.6) requires that there will no adjustment of SALES RETURN, DISCOUNT, INDIRECT TAXES including GST
Illustration-III of Sales Return/ discount
If there is sales return of Rs. 20,00,000/- from 60 lacs of goods supplied and remaining payment is received of Rs. 4100000 + GST 492000 = total Rs. 4592000 and now TCS will be made on Rs.4592000/-. In this case Credit Note u/s. 34 of GST and thus GST shall be issued accordingly.
NO DIFFERENTATION OF TERM “GOODS & SERVICE”
That term Goods is no where defined under Income tax Act and invariably Goods and Services are interchangeably are used under Income Tax at various other places. Whereas there is fine distinction between both the term i.e. “GOODS” and “SERVICE” under GST Law.
That w.e.f. 1.10.2020 the provision for TCS is implemented and simultaneously provision for Section 194O (tds by e commerce companies) have also been introduced. That Section 194-O is specifically talks and separately identifies the term “goods” and “service”.
Further GST is “parimateria” and where there is fine distinction between the term “GOODS” and “SERVICE”.
Goods defined u/s. 2(52) means – “every kind of movable property other than money and securities ………………………”
Service defined u/s. 2(102) means – “anything other than goods ………….. “
Thus goods and service are separately identifiable and levy of TCS is only on GOODS. Thus if this analogy is adopted than TCS u/s. 206C(1H) is treated to have been levied on Goods only and thus all items as written in Schedule-II of CGST Act as “SERVICE” shall be out from this TCS Provision.
Thus below items shall be out from TCS collection being classified as service:-
(i) Lease, tenancy, easement, licence to occupy land
(ii) Job charges
(iii) Rental of immovable property
(iv) Works contract
(v) Restaurant, catering service etc.
(vi) Construction of building, civil structure service
(vii) Transfer of intellectual property rights
(viii) Development of software
(ix) Agreeing to refrain/ tolerate an act/ situation
(x) Transfer of right to use any goods for any purpose
That at present there is no clarification from CBDT till date in this regard. However in the case of Hongo India Ltd. (Supreme Court) said that “Income tax is a complete code in itself and therefore there should be no borrow from other Acts”.
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 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.
EG. WCT made for JVVNL etc. of Rs. 11 Crore in financial year 2019-20, thus turnover is above threshold limit and assessee is covered. Now if any goods i.e. OLD USED material OR any other item to JVVNL, then TCS is required to be made.
TCS ON MOTOR VEHICLE
In case of sale of Motor Vehicle (Section 206C(1F) requires that TCS to be made in case of SINGLE SALE of motor vehicle and that provision is mainly applicable for “USER” as rate of TCS was @ 1%. Now in TCS rate of TCS u/s. 206C(1H) is quiet lesser than 206(1F) and thus sale from one dealer of motor vehicle to another dealer/ agent shall be covered u/s. 206C(1H).
Now if motor vehicle exceeding value Rs. 50 Lacs is sold to USER then provision of section 206C(1F) shall be applicable. First of all qualification TEST of 206C(1F) shall be taken and if Buyer qualifies u/s. 206C(1F) then it shall be made applicable as first.
If does not qualify in that section then provision of section 206C(1H) will come into play.
Eg. A customer buys a Mercedez Benz of Rs. 70 Lacs, then Car Seller will TCS u/s. 206C (1F).
If a customer buys 6 Cars/ Vehicle each valuing Rs. 9 Lacs, then Vehicle Seller is required to have TCS at time of sale of 6th Car u/s. 206C(1H).
If a car agency dealer in routine buys car then Car Seller shall be required to have TCS on entire value of transaction in routine course u/s. 206C(1H).
INTEREST ON DELAY PAYMENT – Interest @ 1% p.m. or part of month is leviable u/s. 206C(7) after due date i.e. 7th of next month.
PENALTY FOR FAILURE TO COLLECT TCS U/S. 271CA : – Penalty non compliance of above provision of TCS, may be levied equal to tax amount and may be levied by Joint Commissioner.
TCS RETURN MECHANISM – At time of filing of TCS return the date of receipt/invoice is required to be put therein alongwith amount of TCS in quarterly return.
Government has taken power u/s. 206C(1I) and 206C(1J) to issue any guideline after getting approval from both house of Parliament for removing of difficulty in implementation of provision of Section 206C(1H) and 206C(1G).
That CBDT has issued a Circular No.4/2008 dated 28-04-2008 wherein it was clarified that tax is to be deducted at source under section 194-I of the IT Act. Further after judgment of CIT (TDS) Jaipur v. Rajasthan Urban Infrastructure (Income-tax Appeal No.235, 222, 238 and 239/2011) Raj. High Court wherein it was held that “if as per the terms of the agreement between the payer and the payee, the amount of service tax is to be paid separately and was not included in the fees for professional services or technical services, no TDS is required to be made on the service tax component u/s 194J of the Act.”
Thereafter CBDT has come out with Circular no. 1/2014 dt.13.1.2014 stating therein that “wherever in terms of the agreement/contract between the payer and the payee, the service tax component comprised in the amount payable to a resident is indicated separately, tax shall be deducted at source under Chapter XVII-B of the Act on the amount paid/payable without including such service tax component.”
No.2 PRACTICAL ASPECT OF LEVY AND DEPOSITION OF TCS ON RECEIPT BASIS
That as per section 206C(1H) is requires to get deposit TCS at time of receipt of such amount, collect from buyer and will get the same deposited. Now how far this is practicable link receipts with the invoices and fill up the details in the TCS Returns is quiet difficult. In my view in case of raise of Invoices after 1.10.2020 the TCS which is charged in the invoices should be deposited upto 7th of next month and returns should be filed accordingly. However it is not wordings and language of drafting of section.
NO.:3:- THRESHOLD OF RS. 50 LACS (WHETHER BASIC EXEMPTION EVERY YEAR ?)
Financial year 2019-20 Turnover Rs. 11 Crore (sale to A Ltd. Of Rs. 2 Crore) = NO TCS
Financial year 2020-21 Turnover Rs. 13 Crore (sale to A Ltd. Of Rs. 3 Crore), from this amount Rs. 2.5 Crore is subject to levy of TCS
Financial year 2021-22 Turnover of Rs. 15 Crore (Sale to A Ltd. Of Rs. 4 Crore), now there shall be no first 50 lacs exemption (in my opinion) as levy is on collection
NO.:4:- MULTIPLE REGISTATION OF AN ASSESSEE IN DIFFERENT STATE (HAVING DIFFERENT GSTN)
As per GST Provision assessee is required to obtain multiple GSTN with same PAN, and at time of supply of goods from one GSTN to another GSTN “Tax Invoice” is required to be issued. Whether TCS is leviable ? – In my opinion it should not be levied as there is only one PAN Number.