TCS on sale of Goods under Income Tax Act [Section 206C (IH)]

Eligibility

Sale of any goods above Rs. 50 lakhs; and

Turnover of Rs. 10 Crores and above during FY 2019-20 and onwards

Effective from

1 October 2020

Exceptions

If the buyer is liable to deduct TDS or collect TCS under any other provision of the Act and has deducted/collected such amount on the goods purchased by him from the seller; or

 

If the buyer is the Central/State Govt, an embassy, a High Commission, legation, consulate, the trade representation of foreign state, local authority; or

Any Person importing goods to India or any class of person notified by the Central Govt in the official gazette for the purpose subject to such condition as specified in that notification

Detailed Description

Every seller, whose total sales, gross receipts or turnover from the business carried on by him exceed ₹ 10 Crores during the FY 2019-20 & onwards, who receives any amount as consideration for sale of any goods (excluding exports) of the value or aggregate of such value exceeding ₹ 50 Lakhs in any previous year shall at the time of receipt of such amount collect a sum equal to 0.1% of the sale consideration exceeding ₹ 50 Lakhs as Tax Collected at Source (TCS) from the buyer

CBDT issues circular No. 17 clarifying TDS/TCS provisions which are coming in force from 1^st October’2020.

“TCS to ben collected and paid on all payment received on or after 1^st October’2020 including amount of GST and also sales made prior to 1^st Octber’2020. The threshold of Rs. 50 Lakhs is year based and hence payment received before 1^st Pctober’2020 are to be considered. However applicability shall be on payment received on or after 1^st October’2020.”

If the buyer has not provided the Permanent Account Number or the Aadhaar number to the seller, then the applicable rate of TCS will be 1 PERCENT.

Illustration

Mr. A is the seller and Mr. B is the buyer. They conduct business on regular basis. Mr. A gross receipts or turnover from the business carried on by him exceeds ten crore rupees during FY 2019-20.

 

 

Transaction: Sold and received prior to 1^st Oct’2020

 

 

Sold goods of Rs. 70 lakhs on 26^th May’2020

Mr. A     Mr. B

 

 

Receipt consideration of Rs. 70 lakhs on 14^th

June’2020

 

 

Transaction 1: Sold and received prior to 1 Oct 2020

 

No TCS will be collected by seller as the said provision is applicable from 1st October, 2020

 

 

Transaction 2: Sold and Received after 1 Oct 2020

 

 

Sold goods of Rs. 65 lakhs on 8^th Oct’2020

Mr. A     Mr. B

Receipt consideration of Rs. 60 lakhs on 25^th

Oct’2020

Aggregate value of total sales of Mr. A to Mr. B is ₹1.35 Crores (70 lakhs + 65 lakhs), exceeding the ₹50 lakhs in the FY 2020-21 Mr. A will be liable to collect TCS on ₹60 lakhs @ 0.1% when Mr. A receives the sales consideration i.e. on 25 October 2020

If Mr. B does not provide his Permanent Account Number or Aadhaar number to the seller, then the applicable rate of TCS will be collected @ 1% of ₹60 lakhs

What is the amount on which TCS is to be collected?

One of the most important distinctions of this section from other TDS/TCS provisions is its applicability solely based on a receipt and not sales. Hence, the amount of receipt post 30^th Sep 2020 shall determine the applicability of this section. Only if the seller has received an amount above Rs. 50 lakhs from a buyer on or after 1^st Oct 2020, during the same Financial Year, then these provisions shall be attracted.

 

Let us try to understand the same with a few examples.

 (amount in lakhs)

 

	Sales before 1st Oct					Sales After 1st					Receipts before 1st						Receipts after 1st						Amount for which TCS
		2020					Oct 2020					Oct 2020						Oct 2020					applicable for FY 20-21
60					20					50					30							30
20					40					6					54							10
70					0					5					65							20
30					100					130					0							0
25					35					0					30							0
0					60					60					0							0
60					0					0					60							10